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[Magnifying Glass] AI is the future but path ahead uncertain

Investing is important, but much turns on U.S.-China relations.
Jan 01,2020
It’s been 11 years since the arrival of the iPhone, which has revolutionized the way we live in Korea. And now we’re in the second phase of a life-changing evolution.

No one can argue that the key industry for future this year is artificial intelligence (AI). As such, the Korean government is banking on the development of the technology.

Korean Minister of Science and ICT Choi Ki-young on Tuesday said in his New Year’s speech that the government will offer its full support in building Korea as an AI powerhouse.

“With the foundation of the world’s best information and telecommunication infrastructure, we will expand the education and vocational training so that anyone in the country could learn and utilize AI,” Choi said. “We will give full support to AI developers and companies with leading technologies to expand in the global stage.”

The minister said the government is investing 24 trillion won ($20.8 billion) in AI research and development (R&D).

Even the CES, which is to be held in Las Vegas next week, has put AI at the forefront, as this year’s theme is “AI in everyday life.”

And why not?

AI is the key foundational technology that powers so many of the so-called fourth industrial revolution technologies, from automated vehicles to robotics and big data analysis.

A forecast by market research firm Tracitica estimated that last year’s global market for AI software expanded 154 percent to $14.7 billion. And this year and in 2021 it is expected to increase 154 percent each year.

The competition between leading countries is expected to intensify, especially with China planning to invest $70 billion this year in AI research development.

Recognizing the changes, Samsung Electronics in August 2018 announced the investment of 25 trillion won in developing future growth engines, including AI. It currently operates seven AI centers in five countries - Korea, the United States, Britain, Canada and Russia.

The rapid development of AI technologies is likely to contribute to Korea’s overall economic growth as it would increase demand for high-quality computer chips.

Finance Minister Hong Nam-ki on Monday cited the rising demand for semiconductor chips as one of the key factors that will help increase Korea’s economic growth from this year’s 2 percent to 2.4 percent next year.

However, in order to achieve this goal, the biggest obstacle that needs to be resolved is the trade tensions between the United States and China.

China’s Huawei happens to be one of the biggest customers of Samsung Electronics. China eclipsed the United States as Samsung’s largest customers in the first half of 2018.

In 2018, China accounted for 18 percent of Samsung’s total revenue. Huawei alone accounts for 3 percent of Samsung’s revenue.

But since the U.S. government placed the Chinese company on its Entity List, Samsung’s revenue has been heavily affected.

Samsung’s China revenue as of the third quarter in 2019 fell to 28.3 trillion won from 43.4 trillion won a year earlier.

Samsung isn’t the only company suffering, as SK has also heavily relied on China’s purchase of its computer chips.

Revenue made from China accounts for 39 percent of SK Hynix’s earning, while Hauwei takes up 12 percent.

Huawei’s growth is expected to accelerate this year.

Eric Xu, the rotating chairman of Hauwei, said in a New Year’s message that despite the U.S. restrictions, the company’s revenue is estimated to have increased 18 percent in 2019 compared to the previous year to top 850 billion yuan ($122 billion).

He also unveiled this year’s plans for speeding up the company’s digital transformation businesses, including 5G, cloud computing, AI and blockchain.

Although he acknowledged the difficulty of being on the U.S. Entity List and that the company may not continue to enjoy the rapid growth that it did through the first half of 2019, he said Huawei will undoubtedly continue to expand in 2020 due to the “sheer momentum in the market.”

What stood out the most is the company’s ambition this year to develop the Ascend 910, the world’s fastest AI processor.

This is a double-edged sword for Korean companies like Samsung.

If Huawei succeeds in developing its own AI processor, it could heavily affect Samsung’s future.

On the other hand it could also serve as an opportunity.

Last month’s announcement that Samsung is partnering with Baidu to developing Kunlun, a cloud-to-edge AI chip, is an example of expanding business partnerships.

AI is no longer a fiction. And it would be dumb not to explore the possibilities that AI could bring.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]