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

South Korea wants to develop a homegrown frontier model through government-backed equity investments of 4.7 trillion won ($3.49 billion). The funding is part of the proposed 2027 budget, though parliament still needs to approve it. A second funding track would support the adoption of Korean-built models across the country's economy.

The two finalists in the current competition between LG AI Research, SK Telecom, and Upstage won't automatically receive additional funding. Instead, the government is launching an open competition that startups can enter too. Officials have acknowledged that Korea can't compete with the largest US companies but can match leading open models from China.

When the current competition kicked off, the government pledged 530 billion won (about $390 million) to the 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 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.

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