Amazon Web Services to invest $5.8 bn in Korea over next 5 years

[Courtesy of AWS]

Amazon Web Services Inc. (AWS), the largest cloud computing service provider globally, plans to invest 7.85 trillion won ($5.8 billion) in South Korean cloud infrastructure over the next five years, triple the amount AWS invested from 2018 to 2022.

AWS’s move is part of an effort to actively respond to the surging demand for cloud services in Korea, particularly in the field of generative artificial intelligence (AI). AWS also targets going a step beyond its competitors by expanding its own data centers.

“We plan to invest 7.85 trillion won over the next five years, or by 2027, to establish and operate the AWS Seoul region’s data supply chain so that Korea can leap forward as a global digital powerhouse,” AWS Korea managing director Ham Kee-ho said in a keynote speech delivered at AWS Industry Week 2023 held at COEX, southern Seoul, on Wednesday.

AWS’ significant investment comes as Korea’s cloud market enters a phase of rapid growth.

According to Kim Young-hoon, director of policy cooperation at AWS Korea, the country has a well-established high-speed internet infrastructure but the cloud adoption rate for computing systems is at the lowest level among OECD countries, indicating a substantial growth potential in the market.

International Data Corporation Korea (IDC Korea) forecasts that the Korean cloud infrastructure market will grow at an annual average rate of 8.8 percent from 2.7 trillion won in 2023 to 3.8 trillion won in 2027.

As part of the latest investment, AWS plans to build its own data centers inclusive of the entire infrastructure such as buildings and communication networks.

Currently, the Seoul region encompasses four availability zones (AZs) that bundle multiple data centers, all of which are operated via leasing.

AWS operates regions with four or more AZs in four locations globally, including Seoul, northern Virginia and Oregon in the United States, and Tokyo in Japan.

Cloud industry insiders are pinpointing Incheon and Sejong in Korea as potential sites for AWS’s self-owned data center. An AWS official, however, noted that it “cannot confirm the details as they are still under consideration.”

But AWS has been discussing the establishment of its own data center has been discussed over the past several years.

Microsoft Corp., the second-largest player in the domestic market, opened its own data center in Busan in 2020. Major Korean players, including Naver Cloud, KT Cloud, and NHN Cloud, are also building their own data centers to strengthen competitiveness.

Naver Cloud is set to open its second self-owned data center in November, while Kakao completed its first self-owned data center in Ansan, Gyeonggi Province, in September.

Independent data centers, optimized from the design stage to system operation, maximize cloud services’ security and stability.

AWS expects the latest investment will help create 50,000 direct and indirect jobs and contribute about 15 trillion won to Korea’s gross domestic product (GDP) by 2027.

The Korean cloud industry, in the meantime, is keeping an eye on AWS’s large-scale investment as they are concerned that AWS, which holds a dominant 62.1 percent stake in the domestic market as of 2021, will further expand this dominance.

“We will leverage the Korean-specialized HyperCLOVA X to capture the diversified demands of domestic companies,” an unnamed official from Naver Cloud said.