The government supported the development of the 'independent artificial intelligence (AI) foundation model', and KT and Kakao lost in the bid for the 'Korea-style AI' project. Analysts suggest that both corporations relied on collaboration with overseas big tech companies rather than developing their own AI technology, which hindered their efforts.
◇ KT and Kakao reliant on cooperation with foreign companies... was the loss expected?
According to the industry on the 5th, the Ministry of Science and ICT announced that five consortiums, including Naver, LG AI Research, SK Telecom, NC AI, and Upstage, were selected as the final contractors for the 'independent AI foundation model' project. KT and Kakao, which were strong candidates, suffered a defeat. The selected consortiums will receive a total of 200 billion won in government support, including high-performance graphics processing units (GPUs), and can publicly use the title of K-AI corporations.
Outside and inside the industry, some are saying that the loss of KT and Kakao, which have relied on cooperation with foreign companies to develop AI models, was already an expected outcome under Lee Jae-myung's government, which emphasizes 'sovereign AI' (building and operating AI systems based on domestic data and AI technology without relying on foreign cloud services or AI technologies). KT has been collaborating with Microsoft to jointly develop a Korea-style AI model, while Kakao is working with OpenAI to jointly develop a Korea-style AI service model. An IT industry insider noted, 'In the case of KT and Kakao, they focused on jointly developing AI models with overseas companies and commercializing them rather than commercializing their own developed AI models.' He added, 'When compared to Naver or LG, which have concentrated efforts on the commercialization and technological advancement of their independently developed AI models, the competitiveness gap is significant.' According to the industry, not only the technology but also commercialization experience was said to be a criterion for evaluation in this K-AI project bid.
◇ KT and Kakao lag behind in advancing their independently developed AI technology… Upstage shines
KT and Kakao developed their AI models (LLM, large language models) named 'Faith' and 'Kanana', respectively. KT was the first among the three telecom companies to create its own AI model, Faith, in 2022, and quickly pushed for commercialization, but was passive in technological advancement. When the government announced the K-AI project bid last month, KT belatedly unveiled version 'Faith 2.0'. Kakao had also released the 1.5 version of its LLM 'Kanana'. In contrast, LG has already completed technological advancement of its AI model 'Exaone' up to version 4.0, and Naver, which developed Korea's first LLM 'Hyperclova' in 2021, has progressed its technological advancement six times. SK Telecom has elevated its independently developed LLM 'A.X' to version 4.0.
A notable point is the rise of the small and medium-sized enterprise Upstage. In the recent 'intelligence index' released by Artificial Analysis, a global AI benchmarking specialist, the company's self-developed LLM 'Solar Pro 2' ranked 12th among AI models worldwide. The only Korean AI models within the top 20 globally were LG Exaone (11th) and Solar Pro. Tesla CEO Elon Musk also positively assessed Korea's Upstage through his recent social media.
◇ Kakao Healthcare teams up with 'Lunit' instead of Kakao... the impact of founder Kim Beom-soo's absence?
Some speculate that the absence of founder Kim Beom-soo's leadership is the reason for Kakao's loss. This is because Kakao Healthcare, which has strengths in medical data, partnered with another company, 'Lunit', instead of its parent company Kakao. Although Kakao could have enhanced competitiveness by promoting the development of a medical AI foundation model together with Kakao Healthcare, it did not benefit from this effect due to the departure of its subsidiary.
An insider in the platform industry stated, 'Following founder Kim's departure from Kakao management for health reasons last March, the limitations of a single leadership system under CEO Chung Shina have become apparent in leading integration among subsidiaries.' He added, 'The inability to demonstrate integration and cohesion with subsidiaries in the national project bid may have contributed to the loss.' He continued, 'Kakao Healthcare, which turned its back on Kakao, ultimately did not make it into the top 10 selected consortiums and was eliminated in the preliminaries, saying, 'Due to the absence of Kakao's leadership, we couldn't fight together and all ended up losing in individual battles.'
Another insider in the platform industry suggested, 'Kakao's reliance on foreign companies while neglecting its own AI technology development may have led Kakao Healthcare to choose alternative partners.'
In response, an industry insider knowledgeable about Kakao stated, 'Kakao Healthcare, which operates in the digital healthcare sector, may have judged it more competitive to form a consortium with Lunit, which is developing a 'medical-specialized foundation model' while leveraging its strengths.'