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Analysis of AI Growth Strategies in South Korean Telecommunications Companies

GOOVER DAILY REPORT August 3, 2024
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TABLE OF CONTENTS

  1. Summary
  2. LG Uplus's AI Growth Strategy 'All in AI'
  3. Comparative Analysis of AI Strategies Among SK Telecom, KT, and LG Uplus
  4. Analysis of AI Contact Center (AICC) Market
  5. Key Developments in AI Data Centers
  6. AI Applications and Innovations in Telecommunications
  7. Global Perspective on AI Market and Technological Trends
  8. Conclusion

1. Summary

  • The report titled 'Analysis of AI Growth Strategies in South Korean Telecommunications Companies' delves into the AI strategies of SK Telecom, KT Corporation, and LG Uplus. The primary focus is on AI applications, including data centers, AI-based business solutions, and collaborative efforts with international partners. LG Uplus has highlighted its aggressive AI-centric 'All in AI' strategy, aiming to heavily invest in AI infrastructure and develop diverse AI applications to enhance its B2B market presence. The comparative analysis reveals that SK Telecom and KT also leverage AI in call centers and customer service enhancement. Key technologies such as AI Contact Centers (AICC) and AI Data Centers are discussed, showcasing their potential to streamline operations and improve efficiency. Partnerships with global tech firms are a common strategic move to bolster AI capabilities. The report outlines the competitive positioning of these companies in both domestic and international markets while pointing out the increasing importance of AI in telecommunications.

2. LG Uplus's AI Growth Strategy 'All in AI'

  • 2-1. Announcement of 'All in AI' strategy

  • LG Uplus announced its AI-centric B2B growth strategy 'All in AI' on July 2, 2024, during a press conference held at their headquarters in Yongsan, Seoul. The strategy aims to enhance their business through technological innovations in infrastructure, platforms, and data, targeting a revenue of 2 trillion KRW in the B2B AI market by 2028.

  • 2-2. Investment in AI infrastructure and data centers

  • LG Uplus is heavily investing in AI infrastructure, including AI Data Centers (AIDC) and on-device AI. They currently operate three hyperscale data centers, which are unique in South Korea. These centers are equipped with large server capacities and advanced cooling systems to maximize AI server operational efficiency for global companies. On-device AI endeavors include collaborations with semiconductor design company Deep X to introduce AI semiconductors incorporating LG Uplus's sLLM, ixi-GEN.

  • 2-3. Development of AI applications (AICC, SOHO, mobility)

  • LG Uplus is focusing on developing four major AI applications: AI Contact Center (AICC) aimed at B2B customer engagement, AI solutions for small and home offices (SOHO), enterprise communication tools, and mobility services. These applications leverage innovations in AI infrastructure to enhance service efficiency, stability, and competitive advantage.

  • 2-4. Revenue goals and partnerships to expand market presence

  • To achieve their ambitious revenue goals, LG Uplus is strengthening its 'two-track' strategy. This involves enhancing technological capabilities and forming partnerships with leading domestic and international enterprises. The use of advanced AI semiconductors and unique cooling technologies is expected to attract more clients and expand market share.

  • 2-5. Risk management and future challenges

  • While LG Uplus has made significant progress with its 'All in AI' strategy, they also face risks and future challenges. Rapid technological changes and the necessity to continually upgrade infrastructure pose ongoing challenges. Effective risk management strategies will be essential to address these issues and sustain growth.

3. Comparative Analysis of AI Strategies Among SK Telecom, KT, and LG Uplus

  • 3-1. AI application in call centers and business solutions

  • SK Telecom, KT, and LG Uplus have all implemented AI technologies in their call centers to enhance their customer service capabilities. SK Telecom entered the AI-based call center market in 2021, utilizing its AI model 'NUGU' to launch voice bot services. It partnered with Genesys to introduce the 'SKT AICC' service, aiming to lead the cloud contact center market by 2024. KT has developed the 'KT AICC' service and set a revenue target of 300 billion won for the next year. LG Uplus launched 'U+AICC' in 2023, which has resulted in cost savings and higher service quality, and its enterprise segment grew by about 10% over the previous year. Overall, the use of AI technology in call centers has led to significant enhancements in customer satisfaction and operational efficiency for these companies.

  • 3-2. Customer service enhancement through AI

  • AI agents are being increasingly adopted to improve customer interactions and internal operations. KT has focused on the commercialization of AI agents, creating the 'KT AI Tech Lab' and planning to apply this technology to IPTV and mobile devices. SK Telecom launched the 'A.' AI agent in 2023, which includes features like call recording summaries and real-time translation, while LG Uplus released 'Chat Agent' in 2024, which assists with various functions like handling customer inquiries, recommending products, and providing solutions for business markets. These AI agents help automate customer support tasks, reduce human error, and increase responsiveness.

  • 3-3. Partnerships with global tech firms to boost AI capabilities

  • South Korean telecommunications companies have forged alliances with global tech firms to strengthen their AI capabilities. SK Telecom has invested $200 million in Smart Global Holdings (SGH) to enter the global AI market and build AI data centers. KT has partnered with Microsoft to co-develop AI and cloud services and aims to build an AI-Cloud Innovation Center. LG Uplus is working with companies like DeepX and AWS to develop AI semiconductors and AI cloud services. These partnerships allow the companies to leverage international expertise and technology, advancing their positions in the AI landscape.

  • 3-4. Competitive positioning in domestic and global markets

  • SK Telecom, KT, and LG Uplus are employing strategic measures to improve their competitive edge both domestically and internationally. SK Telecom is accelerating its transformation into an AI company and has launched AI data centers in collaboration with global entities. KT is expanding its B2B AI market by integrating large-scale language models and forming strategic alliances with Microsoft. LG Uplus has announced the 'All in AI' strategy to enhance its B2B offerings and AI infrastructure. These strategies are designed to capitalize on the growing market demand for AI solutions and strengthen their market positions globally.

4. Analysis of AI Contact Center (AICC) Market

  • 4-1. Market growth and financial projections for AICC

  • The AI Contact Center (AICC) market, both globally and domestically, has experienced significant growth and is projected to continue this trend. According to research, the global AICC market size was valued at $15.5 billion in 2020 and is expected to grow at a compound annual growth rate (CAGR) of 25%, reaching $36.1 billion by 2025. Domestically, the South Korean AICC market was valued at $42.14 million in 2020, with a projected CAGR of 23.7%, reaching $350.88 million by 2030. This growth is fueled by increasing demand for cost-efficient and productive customer service solutions leveraging AI technologies.

  • 4-2. Strategies and technologies used by major telecom companies

  • South Korean telecommunications companies, including SK Telecom, KT, and LG Uplus, have adopted various strategies and technologies to leverage the benefits of AICCs. SK Telecom launched its AICC service using its AI model 'NUGU' in collaboration with leading contact center solutions provider Genesys. They aim to be the market leader in cloud-based contact centers by 2024. KT has focused on integrating AI to enhance customer service through real-time voice recognition, natural language processing, and voice synthesis. LG Uplus launched 'U+AICC,' leveraging AI to manage customer interactions across multiple digital channels. These companies invest heavily in AI capabilities to reduce operational costs, enhance service efficiency, and improve customer satisfaction.

  • 4-3. Efficiencies and cost savings from AI contact centers

  • AICCs provide significant efficiencies and cost savings by automating repetitive tasks and reducing the need for human agents. For instance, SK Telecom's introduction of the AICC service using 'NUGU' has improved its enterprise segment's performance by approximately 10%. KT's AI-enhanced contact centers aim to reduce labor costs while offering high-quality customer service. LG Uplus' implementation of AICCs has resulted in notable operational efficiencies and increased enterprise market sales. By leveraging AI for functions such as real-time voice recognition, natural language processing, and voice synthesis, these companies can handle customer inquiries more efficiently, leading to substantial cost reductions and improved service quality.

5. Key Developments in AI Data Centers

  • 5-1. Infrastructure Investments by Major Tech Firms

  • Major tech firms have significantly invested in AI data center infrastructure to enhance their B2B AI business operations. For instance, LG Uplus has developed AI Data Centers (AIDC) with large-scale server capacity and advanced cooling systems, aimed at maximizing the operational efficiency of AI servers for global enterprises. They house a total of three hyper-scale data centers in South Korea, making them a unique player in this market.

  • 5-2. Technological Advancements in AI Data Centers and Semiconductors

  • LG Uplus is focusing on technological advancements in their AI data centers and semiconductors. They have collaborated with domestic semiconductor design company DEEPEX to introduce AI semiconductors equipped with their proprietary small language model (sLLM) named ixi-GEN. This initiative aims to reduce commercialization time and lower costs compared to existing AI semiconductors. Additionally, LG Uplus has implemented AI technology into various devices such as telecommunications equipment, AICC, SOHO, robotics, and mobility services to enhance their service competitiveness. Moreover, the company is leveraging AI data centers and on-device AI to bolster the stability and efficiency of their AI application services.

  • 5-3. Strategic Importance of AI Data Centers in Business Operations

  • The strategic importance of AI data centers in business operations is highlighted by the need for high-speed data processing and operational stability. LG Uplus aims to maintain server stability and energy efficiency through advanced cooling technologies optimized for their clients' computing environments. They also emphasize the direct role of AI data centers in expanding the B2B AI business revenue. Their two-track strategy includes enhancing the technology for AI application services and increasing the infrastructure's direct revenue through collaborations with leading domestic and international companies.

6. AI Applications and Innovations in Telecommunications

  • 6-1. SK Telecom's AI efforts and new business models

  • SK Telecom has been actively strengthening its AI strategy, with CEO Jung-ho Park emphasizing the importance of AI profitability. Over the past three years, SK Telecom has been solidifying its AI pyramid strategy and is now focusing on monetizing AI applications. Key areas include enhancing AI data centers (AI DC), B2B AI applications including AICC (AI-based contact centers), energy solutions, and vision AI. The company has made significant investments, such as a $200 million investment in Smart Global Holdings (SGH), and plans to collaborate with the Global Telco AI Alliance to further enhance its capabilities. In the B2C sector, they aim to elevate the functionality of their personal assistant service, 'A.Dot', to apply AI across their diverse service areas including media, communication, and mobility. The core tasks highlighted by CEO Park include focusing on a business portfolio centered around telecommunications and AI, enhancing both telecommunications and AI competitiveness, and fostering a flexible yet robust corporate culture.

  • 6-2. KT's AI apps and internal innovation challenges

  • KT has been concentrating on developing its own large language model 'Faith' (LLM), with an investment between 300 to 400 billion KRW. Despite facing challenges due to company governance issues, resulting in delays of new feature rollouts from May to July, the company continues to push for innovation in AI applications. KT achieved international cybersecurity certification ISO/SAE 21434 for its software-based mobility solutions, highlighting its commitment to ensuring security in automotive software design. Additionally, KT has implemented advanced AI data analysis for various mobility and traffic management solutions.

  • 6-3. LG Uplus's new AI products and services

  • LG Uplus has introduced innovative AI services targeting both domestic and international markets. They recently launched a 'RoamingPass Sharing' promotion allowing their users to share roaming data among family members and friends during travels. LG Uplus is working on enhancing AI-driven customer services with plans to introduce more AI-based personal assistants to improve user experience in data management and communications. This aligns with their strategy to leverage AI for better customer engagement and service optimization in their telecom operations.

7. Global Perspective on AI Market and Technological Trends

  • 7-1. Growth potential in AI-based telecommunications services

  • According to the provided data, the AI-based telecommunications services exhibit significant growth potential. SK Telecom, a leading company in South Korea, has solidified its AI pyramid strategy over the past three years and has confirmed intentions to enhance the profitability of AI by strengthening competitiveness in various AI growth sectors such as AI data centers and the transformation of traditional telecommunications business models to AI-driven models.

  • 7-2. Challenges and opportunities in AI adoption

  • The data outlines several challenges and opportunities faced by South Korean telecommunications companies in AI adoption. For example, SK Telecom emphasizes the necessity of enhancing the company's inherent competitiveness, especially through investment in AI infrastructure such as AI computing, software, and immersion cooling systems. Opportunities for growth include investing $200 million in AI-related ventures and expanding cooperation with global telco AI alliances.

  • 7-3. International cooperation and market expansion

  • International cooperation and market expansion have been pivotal for South Korean telecommunications firms. SK Telecom's efforts in partnering with global big-tech companies and reinforcing synergies within the SK group highlight a dual strategy of internal strengthening and external collaboration. This approach is crucial for expanding their market presence both domestically and internationally.

8. Conclusion

  • The AI growth strategies employed by SK Telecom, KT Corporation, and LG Uplus illustrate a significant dedication to technological innovation and market leadership. By investing heavily in AI infrastructure, such as AI Data Centers and AI Contact Centers (AICC), these companies aim to improve customer service efficiency and operational excellence. The initiatives like LG Uplus' 'All in AI' strategy and KT's focus on AI agents reflect a robust approach to leveraging AI for business growth. Despite these advancements, the companies face challenges like rapid technological changes and market uncertainties. It is crucial for them to adopt effective risk management strategies to sustain growth. Their competitive positioning is strengthened through strategic partnerships, both domestically and internationally, enhancing their AI capabilities. The future prospects involve further integration of AI in various service areas, aiming for increased market share and improved service quality. The practical applicability of these strategies is seen in their potential to considerably reduce costs and enhance customer satisfaction, indicating a promising trajectory for the AI-driven transformation in telecommunications.

9. Glossary

  • 9-1. LG Uplus [Company]

  • A leading South Korean telecommunications company with key initiatives in AI-driven B2B and customer service solutions under the 'All in AI' strategy, aiming for market expansion and revenue growth.

  • 9-2. SK Telecom [Company]

  • South Korea's largest wireless carrier, emphasizing AI-based customer service, market expansion, and new business models. Known for its AI-driven call centers and significant investments in AI infrastructure.

  • 9-3. KT Corporation [Company]

  • A major South Korean telecom company, focusing on AI agent development and internal innovation programs. Engaging in strategic partnerships to bolster AI capabilities and customer service quality.

  • 9-4. AICC (AI Contact Center) [Technology]

  • An AI-based customer service technology implemented by major telecom companies to improve customer interaction efficiency, reduce costs, and enhance service quality.

  • 9-5. AI Data Center [Infrastructure]

  • Advanced data centers implementing AI technology to enhance data processing and storage capabilities. Central to telecom companies' strategic efforts in managing and expanding their AI services.

  • 9-6. All in AI [Strategy]

  • LG Uplus's comprehensive AI growth strategy focusing on infrastructure, platform, and data innovation to boost AI applications and market presence.

10. Source Documents