In the game industry, competition for research and development (R&D) to secure new intellectual property (IP) and advance artificial intelligence (AI) technology is intensifying. Game companies with solid results are sharply expanding R&D investment based on cash on hand, and even firms with weak results are pushing expense efficiencies while not cutting R&D. It is a strategy of betting on technology and competitiveness in new titles over immediate profitability.
On the 31st, according to the Financial Supervisory Service's electronic disclosure system, the game company that increased its R&D expense the most in the first half of this year was Krafton. Krafton invested 426.8 billion won in R&D in the first half. That is up 49.2% from the same period a year earlier (286.1 billion won). During the same period, sales rose more than 73% to 2.6616 trillion won. As a result, even with a sharp expansion of R&D investment, the ratio of R&D expense to sales came to 16.0%. Based on steep sales growth, the company absorbed the expense burden from increased investment.
Krafton is expanding research that applies AI not just as a game-making assist tool but to content and systems themselves. It is developing game-specialized Reinforcement Learning, local large language models (LLM), interactive story generation, persona-based chatbots, and a Generative AI game engine and world model–based prediction technology. In addition, under its "big franchise IP" strategy, Krafton is discovering new IP and expanding proven IP. As full-scale production of new titles slated for sequential release through 2027 gets underway, related investment has also grown.
Pearl Abyss, which unveiled this year's most talked-about title, "Crimson Desert," also sharply expanded R&D investment. First-half R&D expense was 79.7 billion won, up 30.2% from a year earlier. However, the ratio of R&D expense to sales fell to about half, at 15.3%, from 37.5% a year earlier. That is because Crimson Desert, the first major new title in 11 years since Black Desert, became a hit, sending first-half sales surging 339.3% to 521.1 billion won. While R&D investment increased, sales climbed even faster, reducing the expense burden.
Pearl Abyss's R&D is focused more on advancing its in-house game engine and new title development technology than on AI. Key research tasks also center on improving performance in the next-generation game engine "Blackspace Engine," including ray tracing technology for PS5, rendering quality enhancements, and implementing in-game physical phenomena. At its headquarters, "Home One," the company has built a motion capture room and a 3D scanning studio, and it also operates an audio room with a separate art center and an in-house Foley studio.
NCSOFT's first-half R&D expense was 212.9 billion won, up 32.2% from a year earlier. While concentrating investment on new titles and upgrading existing IP, the company is also pushing to commercialize AI technology independently through NCSOFT AI, which it established by physically spinning off its in-house AI unit in Feb. last year. During the same period, Netmarble's R&D expense was 296.9 billion won, down 2.2% from a year earlier, but the second largest after Krafton. Netmarble is developing AI technologies centered on its "AI & Tech Lab," including game art and animation generation, play bots, and quality assurance (QA) automation.
Game companies with declining sales also maintained or expanded R&D investment. Kakao Games' first-half R&D expense was 80.8 billion won, down 3.1% year over year. Considering that sales in the same period plunged 33.8% from 238.7 billion won to 157.9 billion won, R&D investment effectively stayed at last year's level. NEXON Games expanded R&D investment despite a sales decline and an operating loss. First-half R&D expense was 45.2 billion won, up 12.0% from a year earlier. In contrast, sales during the same period fell 7.7% to 89.9 billion won.
Behind Korean game companies' expansion of R&D is the judgment that they must secure new growth engines. As global competition intensifies, securing differentiated technology and content has emerged as essential for survival. In particular, in the global game market, development and service environments are changing rapidly with the advancement of Unreal Engine 5 and Unity-based rendering technology and the spread of cloud gaming. As development cycles for new titles lengthen and users' demands for graphics and content rise, investment in in-house engines and AI technology is seen as a necessity, not a choice.
A game industry official said, "To secure competitiveness in the global market, we must continue R&D investment without being swayed by short-term results," adding, "In particular, how quickly we graft innovative technologies such as Generative AI onto game development and services will determine game companies' future competitiveness."