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Navigating South Korea’s AI Infrastructure Investment: Data Centers, Compute, Networks, Storage, and Software Landscape

General Report July 1, 2025
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TABLE OF CONTENTS

  1. Data Center Market Overview
  2. Recent Expansions and Operational Facilities
  3. Sovereign AI Strategy and Policy Framework
  4. Technical Infrastructure Components
  5. Future Outlook and Planned Investments
  6. Conclusion

1. Summary

  • As of July 1, 2025, South Korea is solidifying its emergence as a central hub for AI infrastructure through various strategic initiatives. The country's data center market, valued at approximately USD 5 billion in 2024, is projected to experience substantial growth, nearly doubling to an estimated USD 9.9 billion by 2030, reflecting a compound annual growth rate (CAGR) of 12.06%. This growth trajectory is driven by the increasing demand for comprehensive data center capabilities aligned with the burgeoning artificial intelligence sector within the nation. The South Korean government's proactive policies and initiatives are pivotal in this expansion, particularly through financial backing aimed at enhancing AI capabilities and fostering investment in vital digital infrastructure.

  • Additionally, significant investments have been made in advanced facilities, exemplified by Alibaba Cloud's opening of its second AI data center in Seoul in June 2025. This facility not only caters to the rising demand for AI applications but also aligns with the South Korean government's national AI strategy, which emphasizes robust investments in various sectors to advance AI utilization. The operational capacity of existing data centers in mid-2025 has risen significantly, driven by ongoing expansions and strategic enhancements focused on optimizing data processing capabilities, showcasing the escalating importance of high-performance computing and the need for scalable solutions in the industry.

  • Furthermore, South Korea's commitment to a Sovereign AI strategy under President Lee Jae-myung emphasizes the development of a self-reliant technological ecosystem. The plans to construct a mega AI data center in Ulsan, projected to be the largest in Northeast Asia, underscore a systematic approach towards achieving AI sovereignty. With collaborative efforts between industry leaders such as SK Group and Amazon Web Services, this initiative aims to reinforce the infrastructure needed for AI model development that aligns with national legislation and ethical guidelines. As these elements converge, South Korea is demonstrating notable leadership within the global AI landscape.

2. Data Center Market Overview

  • 2-1. 2024 Market Valuation and 2030 Projections

  • The South Korea data center market was valued at approximately USD 5 billion in 2024 and is projected to reach around USD 9.9 billion by 2030, indicating a compound annual growth rate (CAGR) of approximately 12.06%. This growth trajectory is largely driven by the increasing demand for data center infrastructure, particularly due to the burgeoning artificial intelligence (AI) sector within the country. The South Korean government plays a pivotal role in this expansion with policies aimed at enhancing AI capabilities and promoting investments in digital infrastructure.

  • Furthermore, the government is implementing initiatives that align with its sustainability targets, including the aim to increase the share of renewable energy used within the data center sector to about 20% by 2030 and 35% by 2040. These efforts are aligned with the national objective of achieving carbon neutrality by 2050, positioning South Korea as a favorable environment for sustainable data center operations. As part of these efforts, private partnerships, such as the anticipated USD 2.9 billion investment for developing a national AI computing center by 2030, underscore the collaborative approach taken towards enhancing the AI infrastructure.

  • 2-2. Key Operators and Regional Distribution

  • As of mid-2025, the South Korea data center market features a diverse array of operators, including industry leaders such as Equinix, Digital Realty, and SK Broadband. The operational landscape is complemented by an emerging set of new entrants such as Empyrion Digital and Macquarie Asset Management, which have recently made significant investments in the sector. This influx has intensified competition and is fostering the growth of data center capabilities across major urban centers.

  • In terms of geographic distribution, Seoul remains the focal point for data center investments, but there is a notable emergence of facilities in other cities such as Busan and Incheon. Approximately 43 existing data center facilities have been identified, with an additional 13 planned facilities poised to enter the market. The broadening of this infrastructure across various regions will likely alleviate some of the concentration seen in Seoul, thus enhancing the resilience and capacity of the overall data center ecosystem in South Korea.

3. Recent Expansions and Operational Facilities

  • 3-1. Alibaba Cloud’s Second AI Data Center in Seoul

  • As of June 2025, Alibaba Cloud opened its second AI data center in Seoul, South Korea. This new facility is strategically positioned to cater to the burgeoning demand for AI applications in the region, augmenting the company's initial foray into South Korea that commenced in 2016. The first data center, devoted to cloud services, became operational in 2022. The new facility's focus on AI applications aligns with both regional needs and the South Korean government's commitment to enhancing AI capabilities across various sectors, including manufacturing, transportation, and technology. Alibaba's approach reflects a calculated and patient strategy of expanding its footprint in Asia, leveraging its capabilities to establish itself as a competitive player against established Western providers. The opening of this second facility aligns with South Korea's national AI strategy and significant governmental investments in industrial AI projects, which included the commitment of around 480 billion won (approximately USD 349 million) in 2025 dedicated to various AI initiatives, focusing on AI infrastructure development. This facility's launch is timed to coincide with the enactment of South Korea's AI Framework Act, set to take effect in January 2026, which will further bolster public support and funding for AI infrastructure, including data centers. As such, Alibaba's entry into the market at this juncture positions it uniquely to capitalize on these governmental initiatives.

  • 3-2. Operational Capacity Increases in Mid-2025

  • In mid-2025, several data centers across South Korea have reported increases in operational capacity as the demand for AI infrastructure continues to accelerate. This trend can be largely attributed to the strategic expansions undertaken by key players in the market, including the newly launched facilities by companies like Alibaba Cloud. The South Korean cloud market is expected to experience substantial growth, projected to increase from approximately USD 6.83 billion in 2025 to USD 19.89 billion by 2030. Factors driving this growth include government initiatives such as the 'K-Cloud Project, ' aimed at enhancing cloud adoption through supportive policies and funding, and a surge in digital transformation across multiple sectors. The expansions in operational capacity will not only serve to meet immediate market demands but also position these data centers to support emerging technologies and applications that are becoming integral within the AI landscape. By mid-2025, existing facilities have ramped up operations, optimizing their infrastructure to better serve AI workloads, thereby enhancing efficiency and response to client needs. Stakeholders can expect continued enhancements in service delivery as operational capacities are further increased and upgraded technologies are deployed.

4. Sovereign AI Strategy and Policy Framework

  • 4-1. President Lee Jae-myung’s Vision for Sovereign AI

  • As of July 1, 2025, President Lee Jae-myung has laid a comprehensive vision for South Korea's Sovereign AI initiative, which aims to position the nation as a pivotal player in the global AI landscape. Central to this strategy is the ambition to construct a mega AI data center in Ulsan, projected to be the largest in Northeast Asia, with a robust power capacity of 1GW. Partnering with industry leaders like SK Group and Amazon Web Services (AWS), this facility underscores the importance assigned by the government to create not only technologically advanced infrastructure but also a self-reliant ecosystem pivotal for achieving AI sovereignty. The vision encompasses the integration of data specific to Korea, fostering homegrown AI models that adhere to local laws, culture, and ethical standards. This initiative marks a strategic shift from simply establishing infrastructural capabilities towards nurturing a distinct identity in AI development, effectively ensuring technological independence and policy control over national data resources. Achieving AI sovereignty implies developing domestically driven models that do not rely on foreign technologies, thereby creating a competitive edge and ensuring alignment with national values.

  • Moreover, the emphasis on localization aims to leverage AI to support various sectors, including health, manufacturing, and sustainable development, fostering innovation and enhancing productivity domestically. To balance ambitions of technological advancement with sustainability imperatives, President Lee advocates for a national consensus on critical issues, such as power infrastructure and regulatory frameworks. His approach seeks to place South Korea firmly among the world's top three AI technology powers, reflecting a clear strategic goal while addressing potential challenges, including security vulnerabilities and the risks of technological isolation.

  • 4-2. Government Incentives and Regulatory Support

  • The South Korean government is actively pursuing a range of incentives and regulatory support mechanisms to bolster its Sovereign AI strategy. Encouraging investment in AI infrastructure through substantial financial backing is paramount, particularly given the ambitious scale of the planned Ulsan mega data center and the broader AI ecosystem development. President Lee has proposed a public-private joint fund aimed at facilitating AI startups, which is vital for translating his vision into tangible outcomes. This fund, supported by contributions from major conglomerates like SK Group, aims to alleviate the financial burden on the government while ensuring that funding reaches innovative AI projects that can enhance the nation’s technological capabilities.

  • Moreover, regulatory frameworks are being designed to promote AI development while safeguarding ethical standards and data security. These regulations will also outline how AI technologies can be utilized responsibly within the national framework, thus ensuring technological advancements do not occur at the expense of public trust or societal norms. The government's approach underscores the necessity of maintaining a sustainable and competitive AI environment amidst intense global rivalry, further integrating environmental considerations alongside technological progress. As initiatives such as the establishment of 'green data centers' gain traction, South Korea's regulatory landscape will likely evolve to include stringent sustainability criteria to ensure the responsible growth of AI infrastructure.

5. Technical Infrastructure Components

  • 5-1. Compute and GPU Demand Trends

  • As of July 1, 2025, the demand for compute resources, particularly Graphics Processing Units (GPUs), has surged significantly in South Korea. This trend is primarily driven by increasing investments in artificial intelligence (AI) workloads, machine learning, and high-performance computing applications. GPU utilization is pivotal for training complex AI models due to their parallel processing capabilities, which expedite data handling and computational tasks. The domestic market has seen enterprises scaling their GPU deployments to enhance performance and efficiency in data processing, with projections indicating a continuation of this demand due to the inflating volume of data generated from various sectors, including finance and healthcare. The contributions of major cloud service providers, including the installation of dedicated GPU server farms, are fostering a more robust computational infrastructure that aligns with the growing AI initiatives mandated by the government.

  • 5-2. High-Speed Network Architecture for AI

  • In the current landscape, the evolution of high-speed network architecture is essential to support the burgeoning AI infrastructure in South Korea. Enhanced bandwidth and reduced latency are critical requirements for effectively managing AI workloads that require real-time data processing and rapid communication between distributed systems. The implementation of 5G technology is a key component of this strategic upgrade. It facilitates the interconnection of edge data centers and AI-driven applications, ensuring that computational resources are utilized efficiently. Furthermore, network designs are increasingly incorporating advanced routing protocols and software-defined networking (SDN) technologies, which provide flexibility and scalability needed to accommodate fluctuating demands and heavy traffic loads associated with AI data transactions.

  • 5-3. High-Density Storage Solutions

  • The ongoing data explosion necessitates innovative high-density storage solutions capable of handling vast amounts of information generated by AI systems. As of the reporting date, South Korean enterprises are adopting cloud-based storage alongside traditional systems, enhancing their ability to scale while facilitating access to data from multiple locations. This hybrid storage paradigm also aligns with the sovereignty goals of the South Korean government, enabling firms to comply with local data regulations while still leveraging global cloud resources. Key players in the storage market are investing in solid-state drives (SSDs) and storage area networks (SANs) that offer heightened performance and reliability needed for AI applications, thereby optimizing data retrieval and processing speeds critical for operational success.

  • 5-4. AI Platform and Security Software

  • The establishment of secure AI platforms is increasingly paramount as South Korea prioritizes the integration of AI into its national infrastructure. As of mid-2025, the government has enacted initiatives like the AI Basic Act, which stresses the importance of cybersecurity alongside the deployment of AI technologies. Hence, organizations are compelled to adopt robust AI platforms that incorporate security features as foundational elements. Solutions focusing on AI orchestration and management have emerged, evaluating not just performance but also integrity, safety, and compliance with local and international standards. The rise of AI security paradigms is also critical, addressing potential vulnerabilities within AI systems that can be exploited for malicious intent. Companies are investing in tools that incorporate both AI-driven security measures and conventional cybersecurity frameworks to shield sensitive data and comply with emerging regulations.

6. Future Outlook and Planned Investments

  • 6-1. Projected Market Growth through 2030

  • As of July 1, 2025, the South Korean data center market is poised for substantial growth, with projections indicating a rise from a valuation of USD 5 billion in 2024 to approximately USD 9.9 billion by the year 2030. This represents a compound annual growth rate (CAGR) of 12.06%, demonstrating the escalating demand for data center services driven by advancements in AI and cloud computing technologies. The South Korean government's commitment to supporting the digital economy through strategic investments and initiatives is a crucial factor contributing to this expected growth. Notably, a significant initiative involves investing around USD 2.9 billion with private sector partnerships to construct a national AI computing center by 2030, which is expected to bolster the infrastructure necessary for AI integration across various industries.

  • 6-2. Upcoming Facility Launches and Capacity Targets

  • In addition to the general market growth, multiple key projects are set to enhance South Korea's data center landscape in the coming years. For example, Alibaba Cloud is set to open its second AI data center in Seoul imminently, focusing on AI application services. This expansion aligns strategically with South Korea’s national AI strategy and significant government investments, further establishing the region as a hub for AI capabilities. Moreover, plans for constructing a mega AI data center in Ulsan, which aims to achieve a power capacity of 1GW, signify a major leap in infrastructure capabilities. This center is a collaboration between SK Group and Amazon Web Services, expected to reinforce South Korea’s ambition to become one of the top three global AI technology powers.

  • 6-3. Emerging Technologies and Investment Priorities

  • Looking ahead, several emerging technologies and strategic priorities are poised to shape investment trends within South Korea's AI infrastructure landscape. The government’s initiative to transition to renewable energy sources is notable, aiming for around 20% renewable energy usage by 2030 and 35% by 2040 as part of its broader goal of achieving carbon neutrality by 2050. This focus on sustainability is expected to drive investment in green data center technologies, such as liquid cooling systems. Furthermore, with rising data privacy standards and demands for local data sovereignty, investment in systems rendering compliance to new regulations will become increasingly critical. As AI technologies evolve, South Korea places emphasis on developing locally-tailored AI models and systems that adhere to its legal and cultural context, ensuring a unique pathway towards achieving technological independence.

Conclusion

  • In conclusion, South Korea’s AI infrastructure is at a transformative epoch characterized by robust market growth, significant facility expansions, and a strategic Sovereign AI blueprint designed to position the country as a formidable player in the global AI arena. Key findings suggest a projected near-doubling of the data center market value by 2030, underscoring the success in commissioning major AI-optimized facilities that support the national strategic objectives. Moreover, the establishment of a supportive policy environment tailored to enhance AI sovereignty reflects a holistic approach in addressing both potential challenges and opportunities in the rapidly evolving technological landscape.

  • To optimize these trends, stakeholders are encouraged to accelerate the deployment of GPU-based computing resources, which are critical for scaling AI applications and systems in line with market demand. Investments in next-generation network architectures and high-density storage solutions are equally vital in ensuring resilient and efficient AI operations. Furthermore, organizations should prioritize the adoption of integrated AI orchestration and security platforms to safeguard data integrity and compliance within an increasingly complex regulatory environment.

  • Looking forward, public-private partnerships will play a critical role in advancing research and development initiatives, ensuring that workforce development aligns with the evolving demands for AI operations. Additionally, sourcing sustainable energy will be paramount in maintaining leadership in the AI infrastructure realm, particularly as South Korea aims to transition towards more environmentally-conscious practices. The confluence of these efforts will be crucial in fostering not only a competitive edge but also a sustainable path toward AI innovation and implementation in South Korea, setting a benchmark for other nations to aspire to.

Glossary

  • AI Infrastructure: AI infrastructure encompasses the combined hardware and software systems that support the development, training, and deployment of artificial intelligence applications. This includes data centers, computing resources, network architecture, storage solutions, and AI software environments. As of July 1, 2025, South Korea is significantly investing in expanding its AI infrastructure to cater to rising demands in various sectors.
  • Sovereign AI: Sovereign AI refers to a national strategy aimed at creating an autonomous and self-reliant AI ecosystem. This involves developing AI capabilities that adhere to local laws, cultural contexts, and ethical standards, ensuring data sovereignty and technological independence. Under President Lee Jae-myung, South Korea's initiative is geared toward establishing a robust framework for AI development by 2025 and beyond.
  • GPU: Graphics Processing Units (GPUs) are specialized hardware designed for processing complex graphics and performing parallel tasks, making them essential for artificial intelligence and machine learning applications. As of mid-2025, demand for GPUs in South Korea has significantly increased due to the rise of AI workloads, with many enterprises scaling their GPU deployments to enhance computational efficiency.
  • Data Center Market: The data center market pertains to the commercial sector focusing on the development, construction, and operation of facilities that house computer systems and associated components such as servers, storage systems, and networking equipment. As of July 1, 2025, South Korea's data center market is projected to expand from USD 5 billion in 2024 to USD 9.9 billion by 2030, driven by investments in AI technologies.
  • High-Performance Computing: High-performance computing (HPC) involves utilizing supercomputers and parallel processing techniques to perform large-scale computations at a significantly higher speed than traditional computers. This is crucial for processing vast datasets and running complex models in AI and machine learning, which have seen increased investment in South Korea as of mid-2025.
  • 5G Technology: 5G technology is the fifth generation of mobile network technology, providing faster data speeds, reduced latency, and improved connectivity. It is essential for supporting AI applications that require real-time data processing and communication between dispersed data centers and devices. As of July 1, 2025, its implementation is pivotal in enhancing the performance of AI infrastructure in South Korea.
  • AI Framework Act: The AI Framework Act is a regulatory piece that lays down guidelines and standards for the development and deployment of AI technologies in South Korea. Set to take effect in January 2026, this legislation aims to ensure ethical use, promote innovation, and provide governmental support for AI initiatives, thereby aligning with South Korea's strategic goals for sovereignty in technology.
  • Compound Annual Growth Rate (CAGR): CAGR is a metric used to understand the mean annual growth rate of an investment over a specified time period longer than one year. It indicates the growth of an investment assuming it had grown at a steady rate. As of mid-2025, the CAGR for South Korea's data center market is projected at 12.06%, reflecting robust growth prospects driven by AI developments.
  • Cloud-Based Storage: Cloud-based storage refers to storing data on remote servers accessible via the internet, rather than local servers or personal computers. As of July 1, 2025, South Korean enterprises increasingly adopt this solution in conjunction with traditional data management systems to comply with local data regulations while tapping into global resources.
  • National AI Computing Center: The National AI Computing Center is a key infrastructure project planned in South Korea, set to receive significant investments of around USD 2.9 billion by 2030. This center will facilitate the development and scaling of AI technologies across diverse sectors, reinforcing the nation's aim to enhance its AI capabilities in line with its Sovereign AI strategy.

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