South Korea plans to allocate 4.7 trillion won, equivalent to $3.49 billion, toward developing a domestic frontier artificial intelligence model as part of its proposed 2027 budget. Parliament must still approve these funds before the government can proceed with the initiative. A second track of funding will support the adoption of Korean-built systems across the national economy. The two finalists from a current competition between LG AI Research, SK Telecom, and Upstage will not automatically receive this new money. Instead, officials are launching an open competition where startups can also enter. Government sources have stated that Korea cannot compete with the largest American companies but aims to match leading open models from China. When the current competition began, the state pledged 530 billion won to five selected companies. The new proposal roughly multiplies that figure by nine. For context, Google, Amazon, Microsoft, and Meta are planning combined investments of around $725 billion for 2026 alone, mostly for AI data centers. South Korean industry is already pouring money into more compute capacity. In October 2025, Samsung and SK struck a deal with OpenAI to expand AI infrastructure in the country. Then in June, Samsung, SK Hynix, and the government announced a $590 billion push to scale up chip production. So far, Korean consumers have been paying mostly foreign providers for AI services. In December 2025, they spent more on ChatGPT and similar subscriptions than on Netflix.
This strategy matters because it shifts the focus from merely consuming foreign technology to building local alternatives that reduce reliance on external vendors. The government recognises that matching China’s open-source capabilities is a more realistic target than competing directly with US tech giants. Success would allow Korean businesses to deploy models trained on local data without sending it abroad. It also creates a domestic market for Korean chipmakers and cloud providers who currently sell hardware to overseas clients. The open competition format ensures smaller firms have a chance to win contracts alongside established corporations. This approach could lower costs for local enterprises by keeping data and compute within national borders.
* The funding is contingent on parliamentary approval of the 2027 budget.
* Startups can now enter the competition alongside the two leading finalists.
* Korean consumers currently spend more on foreign AI subscriptions than on streaming services.
