On the 31st, U.S. company Nvidia announced a cooperation plan to supply a large number of the latest graphics processing units (GPUs), used as artificial intelligence (AI) semiconductors, to the Korean government and private corporations. Analysts say Nvidia, whose market share in China has shrunk due to U.S. semiconductor restrictions on China, has chosen Korea as a breakthrough. With the Korean government and private corporations signing large-scale GPU contracts with Nvidia, some say they have resolved the "GPU supply crunch" that had hampered AI model research and development (R&D), but some also argue it may be a "circular transaction," in which Korean corporations buy back GPUs with the revenue earned by selling memory semiconductors and other products to Nvidia.
Nvidia said that day it would make Korea a key base for building an "AI sovereign" and plans to supply 260,000 advanced GPUs to our government, Samsung Electronics, SK Group, Hyundai Motor Group, Naver Cloud, and LG Group. The industry estimates the scale will far exceed 10 trillion won. Based on this, Nvidia plans to expand GPU infrastructure in Korea from about 65,000 units to more than 300,000. The Korean government will support infrastructure so corporations and institutions can train AI models in their own language and with their own data, and each corporation plans to use Nvidia's advanced GPUs in line with its AI strategy.
◇ "Nvidia's China market share at 0%"… Korea rapidly emerges as a breakthrough
With Nvidia announcing an ultra-large AI project worth 10 trillion won with the Korean government and private corporations, analysts say the company chose Korea as an alternative to replace the shrunken Chinese market amid U.S.-China trade tensions. Jensen Huang, Nvidia's chief executive officer (CEO), said on the 6th (local time) at a Citadel Securities event in New York, "Due to U.S. semiconductor export controls, we can no longer sell advanced products to corporations in mainland China. Our market share for advanced semiconductors in China fell from 95% to 0%."
Kim Yang-peng, a senior research fellow at the Korea Institute for Industrial Economics & Trade (KIET), said, "There are only a few markets worldwide where the state provides full support for AI data centers, so it is a tremendous opportunity for Nvidia, which supplies AI semiconductors," adding, "As tensions over semiconductors between the United States and China have not de-escalated, Korea would have become an attractive alternative for Nvidia, which needs to develop new markets."
As demand for advanced memory semiconductors embedded in AI semiconductors surges, cooperation with Korean corporations, home to Samsung Electronics and SK hynix, the world's No. 1 and No. 2 memory semiconductor players, is becoming more important. Until now, Nvidia has reigned as a "big buyer" of high-bandwidth memory (HBM), an AI memory semiconductor, but as Google, Amazon, Meta, and OpenAI jump into developing their own AI chips, analysts say its share will gradually decline.
A semiconductor industry official said, "If Nvidia has so far held sway over the success or failure of the HBM business that led the memory semiconductor market, we cannot rule out the possibility that memory semiconductor corporations will gain the upper hand in negotiations as HBM customers diversify," adding, "Nvidia is also strengthening cooperation with Korean corporations to ensure smooth HBM supply and demand."
◇ "GPU supply crunch resolved" vs. "Selling HBM to buy GPUs"
With this announcement, some say the "GPU supply crunch" that had plagued industry and academia has been resolved. Orders concentrated on Nvidia, the No. 1 player in the AI semiconductor market, due to the global growth of the AI industry, but supply could not keep up with demand because of the limited production capacity of TSMC, the foundry (contract chip manufacturing) corporation that makes them. The IT sector had suffered from a shortage of Nvidia GPUs, to the point where some said securing Nvidia GPUs was directly tied to a nation's AI industry competitiveness.
However, some criticize the large-scale GPU purchases by Samsung Electronics and SK Group as a kind of circular transaction. Samsung Electronics and SK hynix are supplying large volumes of HBM to Nvidia, and the criticism is that they are ultimately "buying Nvidia GPUs with the revenue earned from selling HBM." An IT industry official said, "It is true that this cooperation will ease constraints on industry and academia's AI research and development projects," but added, "However, aside from Nvidia selling a large number of GPUs to the Korean side, the announcement does not include content through which the government and the private sector can generate revenue, so it will be hard to avoid criticism that parts of the announcement amount to a circular transaction."