Korean telcos decrease AI investments in 2024 to date

[Photo by Yonhap]

South Korea’s three telecom majors have seen a sharp decline in their investments in startups in 2024, which contrasts with the combined 300 billion won ($219 million) they have poured into the sector over the past two years.

According to startup information company The VC and multiple sources from the mobile industry on Thursday, the country’s three biggest telecom companies’ investments in domestic AI startups totaled a mere 10 billion won in the year to date.

The three telcos are SK telecom Co., KT Corp., and LG Uplus Corp.

The only exception was LG Uplus Corp.’s equity investment in 42Maru Inc. in January 2024. SK telecom and KT have not made any new investments in AI startups in the year to date, in stark contrast to the previous year.

SK telecom invested $100 million in U.S. startup Anthropic PBC in 2023, as well as 15 billion won in local startup Scatter Lab Inc. and 5 billion won in Persona AI, totaling 166.4 billion won. KT also invested about 50 billion won in local startups that year, including 15 billion won in Moreh, 10 billion won in Mathpresso, 10 billion won in Upstage, and 20 billion won in Rebellions.

These were significant increases following investments totaling 6 billion won in 2021 and 31.7 billion won in 2022, when LG Uplus invested $2.6 million in U.S. startups Humane and $3 million in Inworld AI.

“From the second half of 2021 to 2023, there was an AI investment boom where companies were rushing to invest in promising AI startups before others,” an industry insider said. “But telecom companies have recently decreased their investments after carefully considering whether the AI startup can create synergy with their own AI service lineup.”

Sources noted that telecom companies have no choice but to focus on strengthening cooperation with big tech rather than startups. With the scale of cooperation with big tech generally amounting to trillions of won, this focus reduces the capacity for startup investments.

[Graphics by Song Ji-yoon and Lee Eun-joo]

For its part, KT announced the commercialization of its own hyper-scale AI Mi:dm and applied it to AICC in 2022 as it actively promotes its AI business. But as big names such as Meta Platforms Inc. and Google LLC begin to form global strategic alliances aimed at AI technology hegemony, the Korean teleco is known to have shifted its strategy to partner with Microsoft Corp.

Although KT did not disclose the specific scale of the investment cooperation, it is expected to be around several trillion won. The two companies will jointly develop Sovereign AI.Cloud through the agreement.

AI startups’ poor performance is another reason for the investment decrease. Upstage recorded 4.6 billion won in operating revenue last year, down 1.3 billion won from 2022.

“Although AI startups sprung up very quickly within a short period of time, the AI startup market will eventually be made up of companies with technological competitiveness,” an industry insider said.