KT, Microsoft form alliance to boost AI and cloud initiatives

• The two companies will together develop AI and cloud services for the South Korean market
• KT would like to benefit from Microsoft’s AI capabilities
• The deal will also allow Microsoft to play a bigger role in South Korea’s booming AI ecosystem  

Leading South Korean service provider KT and tech giant Microsoft have come together to jointly develop artificial intelligence (AI), cloud computing and IT services for the Korean market. 

Pareekh Jain, CEO and Lead Analyst at PareekkhConsulting, told Fierce the partnership is an “interesting move” from the companies.

“South Korea is an important market for cloud and AI, as it is home to many global firms such as Samsung, Hyundai, LG and POSCO etc. South Korea is an early adopter of technology, with one of the highest R&D to GDP ratios in the world,” he noted. “Additionally, it has the highest industrial robotics density globally.”

“In this market, local partnerships are crucial, so this KT partnership could give Microsoft a competitive advantage, especially as GenAI is gaining momentum,” Jain added.

As part of the agreement, the two companies will invest in building AI Graphics Processing Unit (GPU) farms and data centers. KT and Microsoft indicated they will reveal more details about their collaboration in September. 

KT will also leverage Microsoft’s tech expertise to build sovereign AI and cloud projects. The pair also plan to set up an AI and Cloud Innovation Center in South Korea to develop AI services and train AI specialists. 

“We have been discussing cooperation with Microsoft for half a year since the end of last year, and it is meaningful that we have become a strategic partner rather than just a technical collaborator,” a KT official said, according to local media.

Who gains what from the agreement? 

While Microsoft has taken a lead in AI by investing in ChatGPT creator OpenAI and pushing its Copilot strategy, KT has also made strides in the AI realm with the launch of its own large language model family called Mi:dm in October 2023. Mi:dm was trained on over one trillion tokens. 

KT could benefit from the ability to tap into Microsoft’s AI expertise and strength in the enterprise market. On the flip side, South Korea is an important market for Microsoft because it is a technologically advanced market and a country that is investing heavily in AI. 

Earlier this year, the South Korean government announced an investment of $7 billion by 2027 to retain its competitive edge in the AI chips market. The country is also aiming to become one of the top three countries in AI technology. 

South Korea is investing heavily in AI R&D, with plans to pour 1.8 trillion won ($1.35 billion) into research this year. That marks an increase from 500 million won ($364 million) last year.

Interestingly, earlier this year, KT partnered with Microsoft rival Amazon Web Services (AWS) to build generative AI and  offer private wireless services for business customers.

Could that eat into whatever competitive advantage Microsoft hoped to gain through the deal? We’ll have to wait and see!