{"id":2208145,"date":"2025-01-29T14:48:19","date_gmt":"2025-01-29T05:48:19","guid":{"rendered":"https:\/\/koreapro.org\/?p=2208145"},"modified":"2025-01-30T15:21:21","modified_gmt":"2025-01-30T06:21:21","slug":"deepseek-disruption-and-us-tariffs-could-sideline-south-korea-from-ai-revolution","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2025\/01\/deepseek-disruption-and-us-tariffs-could-sideline-south-korea-from-ai-revolution\/","title":{"rendered":"DeepSeek disruption and US tariffs could sideline South Korea from AI revolution"},"content":{"rendered":"

The rise of China\u2019s DeepSeek, the return of U.S. protectionism and political instability at home are reshaping South Korea\u2019s artificial intelligence (AI) and semiconductor future.\u00a0<\/span><\/p>\n

As global supply chains realign around AI, South Korea risks being reduced to a mere supplier of chips for foreign tech giants \u2014 forfeiting its ambition to lead the AI revolution.<\/span><\/p>\n

REMAPPING THE SEMICONDUCTOR MARKET<\/b><\/p>\n

DeepSeek<\/span><\/a>, a cutting-edge Chinese AI company, has quickly emerged as a formidable competitor in the global AI sector. The company developed a large language model (LLM) that rivals OpenAI\u2019s GPT series at a fraction of the cost.\u00a0<\/span><\/p>\n

DeepSeek researchers behind the company\u2019s LLM, R1, <\/span>claim<\/span><\/a> it cost $6 million to train. For comparison, training ChatGPT-4 <\/span>reportedly<\/span><\/a> cost OpenAI $63 million.<\/span><\/p>\n

Although the U.S. continues to lead the global AI sector with companies like OpenAI, Nvidia and Google, DeepSeek\u2019s rise will likely drive unprecedented demand for AI semiconductors, such as high-bandwidth memory chips and graphics processing units.<\/span><\/p>\n

This demand will likely boost sales and profits for South Korean companies that have traditionally dominated in chip manufacturing. However, this demand alone doesn\u2019t guarantee South Korea\u2019s long-term relevance in the sector.<\/span><\/p>\n

Growing <\/span>trade tension<\/span><\/a> between the U.S. and China has forced companies and governments to rethink their supply chains. But if DeepSeek accelerates China\u2019s drive to dominate the global AI market, U.S. firms may prioritize domestic suppliers or shift contracts to TSMC in Taiwan, reducing their reliance on South Korean chips.<\/span><\/p>\n

If South Korea fails to secure a unique position in this shifting global landscape, it risks being pushed out of the AI-driven semiconductor market entirely.<\/span><\/p>\n

\"\"

U.S. President Donald Trump signs an executive order, Jan. 21, 2025 | Image: White House<\/em><\/p><\/div>\n

TRUMP\u2019S TARIFFS THREAT<\/b><\/p>\n

U.S. President Donald Trump\u2019s return has reignited fears of protectionism. His <\/span>pledge<\/span><\/a> on Tuesday to impose up to 100% tariffs on foreign semiconductors could force South Korean companies to accelerate their plans to relocate production to the U.S., where higher labor costs and regulatory burdens would erode their competitive edge.<\/span><\/p>\n

If the U.S. implements these tariffs, South Korea\u2019s ability to compete globally will be severely weakened, as domestic production costs surge and firms are forced to navigate an increasingly hostile trade environment.<\/span><\/p>\n

South Korean tech companies, such as <\/span>Samsung Electronics and SK Hynix<\/span><\/a>, have already invested heavily in U.S.-based fabs, driven by incentives from the CHIPS Act. However, these facilities are not yet sufficient to meet demand for advanced semiconductors, particularly AI chips.<\/span><\/p>\n

Relocating more production would disrupt their research and development pipelines and divert resources away from next-generation technologies, such as 2nm chips. This could slow innovation, making it even harder for South Korean firms to compete with their Taiwanese and Chinese rivals.<\/span><\/p>\n

Further, South Korean chip manufacturers are not in the position to take advantage of China\u2019s AI growth. Turning to China as an alternative market could violate U.S. export controls, cutting South Korean firms off from critical American technology. This would leave them technologically stranded, unable to access essential tools and materials needed for next-generation chip development.<\/span><\/p>\n

For South Korea\u2019s semiconductor industry, this is an impossible dilemma: bend to U.S. protectionism and lose profitability, or turn to China and risk complete isolation from Western technology.<\/span><\/p>\n

\"\"

South Korea Ulchin Nuclear Power Plant, Feb. 25, 2013 | Image: IAEA Imagebank<\/a> via Flickr<\/a> (CC BY-SA 2.0<\/a>)<\/em><\/p><\/div>\n

SOUTH KOREA\u2019S ENERGY INSTABILITY<\/b><\/p>\n

Semiconductor fabs are among the most energy-intensive facilities in the world, requiring stable and continuous power to operate. The proposed <\/span>Yongin semiconductor cluster<\/span><\/a>, set to become the world\u2019s largest chip hub, is projected to consume vast amounts of electricity.<\/span><\/p>\n

President Yoon Suk-yeol\u2019s administration had planned to meet this demand through <\/span>nuclear power<\/span><\/a>, ensuring both reliability and cost efficiency. However, Yoon\u2019s <\/span>impeachment<\/span><\/a> and <\/span>arrest<\/span><\/a> have thrown this energy strategy into question.<\/span><\/p>\n

If the main opposition Democratic Party takes power, it will likely pivot toward <\/span>renewable energy<\/span><\/a>. While such a move would align with global climate goals and South Korea\u2019s broad ESG commitments, renewables may struggle to provide the stable, high-output power needed for semiconductor production and AI data centers.<\/span><\/p>\n

South Korea\u2019s grid infrastructure, already stretched thin, could face significant challenges in supporting both green energy expansion and the energy demands of advanced technology.<\/span><\/p>\n

Additionally, energy costs play a pivotal role in determining the global competitiveness of semiconductor manufacturing. Taiwan\u2019s TSMC benefits from a relatively stable energy supply, while the U.S., bolstered by its CHIPS Act incentives, is building a robust energy infrastructure to support semiconductor fabs.<\/span><\/p>\n

Without similar guarantees, South Korea risks being left behind in this crucial race. Energy-intensive industries require clear, long-term planning, and an abrupt policy shift could undermine investor confidence in the ROK\u2019s ability to remain a major semiconductor hub.<\/span><\/p>\n

A failure to secure stable, affordable energy could also have ripple effects on the country\u2019s broader tech ambitions. AI model training, data center operations and cloud computing all require massive energy inputs.<\/span><\/p>\n

If electricity becomes more expensive or unreliable, South Korea\u2019s ability to scale its AI industry will suffer, reinforcing its dependency on foreign AI software rather than fostering domestic innovation.<\/span><\/p>\n

\"\"

Samsung’s new semiconductor research and development center, New Research & Development \u2013 K, in Yongin, Nov. 18, 2024 | Image: Samsung Electronics<\/a><\/em><\/p><\/div>\n

LEADER OR SUPPLIER STATE?<\/b><\/p>\n

While South Korea excels in AI chip production, its AI software ecosystem remains underdeveloped. Naver\u2019s <\/span>HyperCLOVA X<\/span><\/a>, though promising, pales in comparison to OpenAI\u2019s GPT models or DeepSeek\u2019s R1.\u00a0<\/span><\/p>\n

This is evident in <\/span>performance benchmarks<\/span><\/a>, where ChatGPT-4 consistently outperforms HyperCLOVA X, and in <\/span>adoption rates<\/span><\/a>, with DeepSeek\u2019s R1 gaining significant traction in global markets. Additionally, DeepSeek has demonstrated superior efficiency in AI model training, achieving high performance allegedly at a fraction of the cost.\u00a0<\/span><\/p>\n

Moreover, South Korea\u2019s AI startups face significant funding and scaling challenges, limiting their ability to compete globally. As the U.S. and China continue to shape AI standards and dictate the future of artificial intelligence, the ROK finds itself without a seat at the table.<\/span><\/p>\n

South Korea\u2019s lack of data sovereignty compounds these challenges. Unlike the U.S. or China, which have access to vast domestic data sets, South Korea\u2019s limited population limits domestic AI firms from training large-scale models with diverse and representative datasets, hindering their competitiveness against AI giants in the U.S. and China.<\/span><\/p>\n

Further, the country\u2019s data regulations have historically been fragmented, with overlapping laws such as the <\/span>Personal Information Protection Act<\/span><\/a>, the <\/span>Network Act<\/span><\/a> and the <\/span>Credit Information Use and Protection Act<\/span><\/a> governing different sectors. Although <\/span>recent reforms<\/span><\/a> have aimed to streamline data protection, sector-specific rules still create regulatory inconsistencies that complicate AI development and data utilization.<\/span><\/p>\n

Compounding this issue is the lack of an AI ecosystem that supports both hardware and software innovation. South Korea\u2019s government has expressed interest in bolstering AI capabilities, but the country\u2019s AI strategy has been hindered by a lack of long-term vision and inconsistent government initiatives.<\/span><\/p>\n

\"\"

President Yoon Suk-yeol meets with OpenAI CEO Sam Altman, June 9, 2023 | Image: ROK Presidential Office<\/a><\/em><\/p><\/div>\n

For instance, the <\/span>National AI Committee<\/span><\/a> has faced bureaucratic hurdles and struggles to implement policies that match the scale of investments seen in the U.S. and China.<\/span><\/p>\n

Additionally, South Korea\u2019s private sector has focused on AI hardware rather than software leadership. HyperCLOVA X remains the only major domestic LLM.<\/span><\/p>\n

Unlike China, where AI development is heavily state-backed, or the U.S., where private capital drives innovation, South Korea has struggled to define a coherent AI development path. Existing government incentives are reactive, responding to foreign competition rather than setting an independent vision.<\/span><\/p>\n

Without targeted investments in AI model training, improved data accessibility and further streamlined regulations, South Korea risks being left behind in the global AI race.<\/span><\/p>\n

THE CLOCK IS TICKING<\/b><\/p>\n

The AI race is transforming the global tech landscape, and South Korea\u2019s position is far from secure. While its semiconductor giants are indispensable today, rising U.S. protectionism, China\u2019s AI acceleration and domestic political instability threaten its long-term competitiveness.<\/span><\/p>\n

If South Korea fails to act decisively, it risks becoming nothing more than a supplier of AI hardware, with little control over the future of AI itself.<\/span><\/p>\n

Edited by Alannah Hill<\/span><\/i><\/p>\n

Business & Economy<\/span><\/a>Domestic Politics<\/span><\/a>Inter-Korean & Foreign Relations<\/span><\/a>Technology & Cyber<\/span><\/a><\/div>","protected":false},"excerpt":{"rendered":"

The rise of China\u2019s DeepSeek, the return of U.S. protectionism and political instability at home are reshaping South Korea\u2019s artificial intelligence (AI) and semiconductor future.\u00a0 As global supply chains realign around AI, South Korea risks being reduced to a mere supplier of chips for foreign tech giants \u2014 forfeiting its ambition to lead the AI […]<\/p>\n","protected":false},"author":10407,"featured_media":2208146,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[21],"tags":[24,27,28,29],"class_list":["post-2208145","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-analysis","tag-business-economy","tag-domestic-politics","tag-inter-korean-foreign-relations","tag-technology-cyber"],"yoast_head":"\nDeepSeek disruption and US tariffs could sideline South Korea from AI revolution - Korea Pro<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/koreapro.org\/2025\/01\/deepseek-disruption-and-us-tariffs-could-sideline-south-korea-from-ai-revolution\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"DeepSeek disruption and US tariffs could sideline South Korea from AI revolution - 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