Nam Hyun-woo has worked as a staff writer at The Korea Times since 2013, mostly covering business and politics. He currently belongs to the Business Desk where he covers topics such as emerging tech, AI, ICT and Korea's chaebol community. Prior to joining the team, he was the paper's correspondent for the presidential office of Korea during the Yoon Suk Yeol and Moon Jae-in administrations.
National AI computing center loses momentum amid profitability concerns
A cover image for the Ministry of Science and ICT's request for proposals for national artificial intelligence computing center project / Courtesy of Ministry of Science and ICT
By Nam Hyun-woo
A government project to establish a national artificial intelligence (AI) computing center is at risk of stalling, as the bidding process to select an operator ended without a single applicant.
The government plans to reopen bidding on Monday, but AI firms have shown little enthusiasm, citing concerns about the project’s profitability.
The Ministry of Science and ICT said Friday that bidding for the national AI computing center project closed at 5 p.m., with no participants.
As the tender has failed, the ministry said it will restart the bidding process on Monday, and run for at least 10 days without changes to the original terms for the project. If even a single consortium places a bid during the new bidding process, the applicant will be awarded the project.
The project was announced on Jan. 22 as part of the government’s plan to have the public and private sectors working together to secure critical infrastructure and computing resources, such as graphics processing units (GPUs) or other AI accelerators, for the AI transformation.
Under the project, the government plans to establish a national AI computing center with a capacity of at least one exaflop (a measure of performance for a supercomputer), potentially requiring up to 2 trillion won ($1.45 billion) in investment.
The project will be carried out through a public-private special-purpose company. It will be 51 percent owned by the public sector — the government and state-run banks — and 49 percent by the private sector, which will be a consortium selected through the bidding process.
An official from the Ministry of Science and ICT introduces the government's national artificial intelligence computing center project during a presentation event at Korea Federation of Banks headquarters in central Seoul, Feb. 7. Yonhap
The government planned to begin evaluation processes for bidders this month and wrap up the selection by the end of August, then sign an agreement with the selected bidder in October and start the center’s operation in November. Municipalities also launched their campaigns to host the center. As the tender failed, however, changes to all of these plans are likely.
Though the government is set to restart the bidding process, industry officials anticipate lukewarm participation because of questions about the profitability of the project.
Despite the government’s plan to support the project with low-interest policy loans and direct public-sector GPU demand to the center, companies point out that the 51:49 shareholding structure favors the public sector and raises concerns about the lack of a clear path to profitability for private participants.
“Despite its huge volume, the project’s business model remains unclear,” an IT industry official said asking not to be named. “The 51:49 shareholding structure poses limitations on operational autonomy, and the burden of potential failure would effectively fall entirely on the private bidder.”
While the project’s publicly available proposal paper does not include any monetization plans, reports indicate the detailed bidding guidelines provided only to companies that submitted a letter of intent included provisions on liability for potential losses.
In the run-up to the bidding process, rumors have spread that a consortium comprised of Samsung SDS, Naver and other companies would place their bids, and other telecom companies were showing interest. However, it turned out that none of those companies have offered bids.
“Since the new bidding comes with no changes to the original terms, it’s unlikely that many companies will show interest,” the industry official said. “There could be more interest when the project offers a clearer blueprint for profit and eases the burden on private participants.”