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Korea falling behind in critical data center race as AI drives demand, report warns

Published: 14 Jul. 2025, 18:09 Updated: 14 Jul. 2025, 19:24

Lee Jae Myung delivers remarks during the launch ceremony for the Ulsan AI Data Center, part of the “AI Highway” initiative, at the Ulsan Exhibition and Convention Center on June 20. [JOINT PRESS CORPS]

As generative AI accelerates global demand for data centers, Korea is falling behind major economies in both the number of facilities and investment volume, data indicated Monday. Experts warn that the country needs to adopt a comprehensive strategy to develop data centers as an export-driven industry.

The data center market is growing at a blistering pace, according to a report released by the Korea International Trade Association’s Institute for International Trade on Monday.

From 2003 to 2021, the average annual growth rate of data center investments by leading global companies was 21.1 percent. That figure surged to 169.4 percent between 2022 and last year, when generative AI became a dominant theme. The global data center market, valued at $372.8 billion in 2023, is projected to reach $624.1 billion by 2029, a jump of 67.4 percent.

Governments worldwide are actively nurturing their data center industries. The United States classifies data centers as national security facilities and is pushing next-generation energy policies, such as using small modular reactors, to ensure stable power supplies.

Japan has established a cross-ministerial headquarters to coordinate data center site selection, energy supply and technology demonstrations through a fast-track system. Vietnam and China have eased regulations to allow 100 percent foreign ownership, aggressively seeking to attract data center investments.

Korea, by contrast, lags far behind. The country hosts just 84 data centers, ranking 22nd globally. The United States tops the list with 3,811 facilities, followed by Germany with 456, China with 362 and Japan with 186.

Over the past five years from 2020 to 2024, Korea invested $400 million in overseas data centers, ranking 29th, and attracted $8.5 billion in foreign investment, placing 10th. Led by Big Tech, the United States ranked first in both outbound investment and inbound capital.

Korea’s overseas investment accounted for only 0.12 percent of U.S. levels, while inbound investment amounted to just 5.95 percent. Among Asian peers, Singapore ranked fifth with $17.2 billion; India placed 6th with $17 billion; and Malaysia 9th with $9.3 billion, all surpassing Korea in attracting data center investments.

LG Electronics on July 8 unveiled its business strategy for its ES Business Division and introduced HVAC solutions for AI data centers during a press briefing at LG Science Park in Magok, western Seoul. The photo shows the firm's Coolant Distribution Unit, an AI data center liquid cooling solution. [LG ELECTRONICS]

The report identified several weak spots for Korea: a heavy concentration of data centers in the greater Seoul area that strains the power grid, low use of domestically produced equipment and insufficient tax and land incentives.

To overcome these challenges, it recommended leveraging Korea’s strengths in AI chips, power infrastructure and cooling systems.

It highlighted two key opportunities as niche markets Korea could target: Environmentally friendly hyperscale data centers for high-power computing and edge data centers based on low-power AI neural processing units developed by local startups.

The report also stressed the need to evolve from exporting hardware alone to offering integrated services covering design, operation and maintenance.

Policy support is equally urgent to establish data centers as a national strategic industry.

The report proposed measures such as designating data centers as “digital export strategic industries and infrastructure," setting up a governmentwide command center, recognizing them as “national strategic technology commercialization facilities” eligible for higher tax credits, building a standard Korean export model, and creating environmentally friendly data center clusters outside the capital area.

“The United States and China are aggressively developing data centers as strategic national assets,” said Jin Sil, a senior researcher at the trade association.

“We also need to see data centers as the core foundation of Korea’s digital capabilities and a strategic security asset, and actively work to enhance our export competitiveness.”

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY CHOI SUN-EUL [[email protected]]