Amazon bets big on Korea digital transition with new spending

Amazon Web Services Inc. (AWS), the world's largest cloud platform provider, said on Wednesday it will nearly triple its investment in South Korea to $5.9 billion through 2027, compared to the past five years, in what would be its second-largest average annual spending in one country after India.

The investment reflects AWS' determination to gain the upper hand in South Korea's digital transition, far slower than the average of the Organisation for Economic Co-operation and Development (OECD).

Between 2018 and 2022, it poured a total of $2.04 billion into South Korea to build cloud computing infrastructure.

Cloud computing is the on-demand delivery of IT resources over the internet. It is essential in processing a vast amount of data, particularly for generative artificial intelligence.

From this year, AWS will spend $5.9 billion by 2027 to build its own data centers, secure generative AI chipsets and offer maintenance services.

If AWS's investment is converted to an annual average, it amounts to $1.18 billion, compared with its annual spending of $1.59 billion in India on average. 

Including its spending on software development, AWS will likely put an additonal amount of money into Korea.

South Korea's cloud market is being flooded not only by foreign companies such as AWS and Google, but also domestic heavyweights such as Naver Corp., Kakao Corp., KT Corp. and NHN Corp.

Nevertheless, AWS' decision to make a full-scale investment underscores its confidence that it can gain the upper hand by offering a broader array of cloud services and support for customers' overseas expansion.

“The speed of transition to the cloud has been slow in Korea due to security concerns in both the private and public sectors,” said Kim Young-hoon, a vice president of AWS Korea.

“But now as the industry adopts generative AI technology, the speed of transition will accelerate.”

AWS provides over 200 types of cloud-related services, including voice AI translation services.

It has been also collaborating with Korean companies, including game developer NCSOFT Corp. and Kookmin Bank to develop a large language model and a super app, respectively.

It also agreed in May to team up with Yanolja, the country’s No. 1 hotel booking app, to develop AI services.

AWS also has been expanding investments in AI startups.

Last month, it announced the investment of up to $4 billion in Anthropic, which competes with OpenAI, a developer of the AI-powered language model ChatGPT. With the investment, AWS will become Anthropic’s primary cloud provider.

AWS forecasts South Korea's cloud computing market to generate about 102 trillion won ($76 billion) in economic value over the next six years through 2028.

The 2018-2022 spending is estimated to have contributed $3.67 billion to South Korea’s gross domestic product (GDP) and created about 3,600 jobs annually, the company said.

Its investment between 2023 and 2027 is expected to contribute $11.28 billion to the domestic GDP by 2027 and create 12,300 jobs annually in full-time equivalent (FTE) terms, a measure of full-time hours worked by all employees.

“With the investment of $5.9 billion through 2027, we will help Korea leap forward as a global digital powerhouse,” AWS Korea Chief Executive Ham Kee-ho said in a statement. 

Write to Ju-Hyun Lee at 2juhyun@hankyung.com
 


Yeonhee Kim edited this article.