South Korea bets $3.49 billion on building a homegrown frontier AI model to rival China's best

South Korea intends to develop a homegrown frontier AI model using government-backed equity investments totaling 4.7 trillion won ($3.49 billion). The funding is included in the proposed 2027 budget, which still requires parliamentary approval.

A second funding track would support the adoption of Korean-built models across the country's economy. The two finalists in the current competition—LG AI Research, SK Telecom, and Upstage—will not automatically receive additional funding. Instead, the government is launching an open competition that startups can also enter.

Officials have acknowledged that Korea cannot compete with the largest US companies but can match leading open models from China. When the current competition began, the government pledged 530 billion won (about $390 million) to five selected companies; the new plan 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 investing in more compute capacity. In October 2025, Samsung and SK struck a deal with OpenAI to expand AI infrastructure in the country. In June, Samsung, SK Hynix, and the government announced a $590 billion push to scale up chip production.

So far, Korean consumers have mostly paid foreign providers for AI services. In December 2025, they spent more on ChatGPT and similar subscriptions than on Netflix.