South Korea invests $390 million in sovereign AI

From Seoul’s largest conglomerates to ambitious startups, South Korean players are racing to develop large language models (LLMs) tailored to their own language, culture, and industries — setting the stage for a high-stakes contest against global heavyweights like OpenAI, Google, Anthropic, and Meta.

Last month, South Korea launched its most ambitious sovereign AI initiative yet, pledging ₩530 billion (about $390 million) to five domestic companies developing large-scale foundation models. The initiative underscores the government’s drive to reduce dependence on foreign AI technology, bolster national security, and keep tighter control over data in the AI era.

The Ministry of Science and ICT selected LG AI Research, SK Telecom, Naver Cloud, NC AI, and startup Upstage for the program. Every six months, progress will be evaluated, underperformers cut, and funding redirected to frontrunners — until just two companies remain to lead the nation’s sovereign AI future.

LG AI Research: Efficiency Over Scale

LG AI Research, the R&D arm of the LG Group, is betting on its flagship Exaone 4.0 hybrid reasoning model. Instead of chasing sheer scale, LG emphasizes smarter data curation and efficiency.

“Our fundamental approach is making the entire process more intelligent,” said Honglak Lee, co-head of LG AI Research. By leveraging deep access to industry-specific datasets — from biotech to advanced materials — and focusing on efficient GPU use, LG aims to deliver practical, domain-specific value beyond what general-purpose models can provide.

Exaone 4.0 already performs competitively on global benchmarks and is expected to climb further as LG refines its models using real-world data from its API-driven services.

SK Telecom: AI Meets Everyday Life

SK Telecom (SKT), South Korea’s largest telco, is building on its A. (A-dot) personal AI service with its new LLM, A.X 4.0, released in July. Built on Alibaba Cloud’s open-source Qwen 2.5, the model comes in both 72B and 7B parameter versions.

SKT claims A.X 4.0 processes Korean inputs 33% more efficiently than OpenAI’s GPT-4o, underscoring its local advantage. Its A. service, offering AI call summaries and note-taking, already counts 10 million subscribers.

The telco’s edge lies in real-world integration: tapping into its telecom network to embed AI in navigation, mobility, and customer service. SKT is also investing heavily in infrastructure, from GPU-as-a-service to a hyperscale AI data center with AWS, while collaborating with global institutions like MIT on applied AI research.

“SK Telecom’s role is to act as a bridge between cutting-edge research and real-world impact,” said Taeyoon Kim, head of its foundation model office.

Naver Cloud: Building a Full AI Stack

As South Korea’s leading internet company, Naver Cloud brings a unique advantage: it controls an entire AI stack, from data centers and cloud services to applications and consumer platforms.

Its flagship model, HyperCLOVA X, powers products like the CLOVA X chatbot and Cue search engine, positioning it against Google Search and Microsoft Bing. Naver also unveiled HyperCLOVA X Think, a multimodal reasoning model, this year.

By embedding AI directly into services like maps, shopping, and finance, Naver leverages massive streams of real-world data. For example, its AI Shopping Guide generates product suggestions based on user preferences. The company also develops B2B solutions, such as CLOVA Studio and CLOVA Carecall, which supports elderly citizens living alone.

Naver says competing globally hinges less on scale than on sophistication: “Perfecting our recipe for models and securing capital to scale them are the two keys,” a spokesperson explained.

Upstage: The Startup Challenger

The only startup in the cohort, Upstage, is already punching above its weight. Its Solar Pro 2 model, launched last year, became the first Korean model recognized as a “frontier model” by benchmarking firm Artificial Analysis — putting it in the same league as OpenAI and Google.

At just 31B parameters, Solar Pro 2 outperforms larger models on Korean benchmarks and is significantly more cost-effective.

“Solar Pro 2 has outperformed global models on major Korean benchmarks. With this project, we aim to achieve a Korean language performance of 105% of the global standard,” said Soon-il Kwon, EVP at Upstage.

Rather than chase scale, Upstage focuses on specialized models for industries like finance, law, and medicine, while championing an “AI-native” startup ecosystem in Korea.

The Stakes for South Korea

With billions at stake and the government steering the initiative toward just two eventual winners, South Korea’s sovereign AI race is shaping up to be one of the most closely watched national tech projects in the world.

Whether its players can outsmart — rather than outspend — Silicon Valley and Shenzhen remains to be seen. But with homegrown strengths in efficiency, domain expertise, and real-world integration, South Korea’s AI champions are determined to make their mark on the global stage.