South Korea is one of the most technologically advanced and digitally connected countries in the world with constant innovations that make it a perfect place to set up a data center.

Don’t believe us? South Korea has the fastest local Internet speeds in the world with almost 90% of the population having access. 

The country is also the number one producer of mobile phones and semiconductors and is ranked first in the world in Bloomberg’s 2019 Innovation Index for the sixth year running.

And the innovations are expected to continue, as businesses are forecast to spend US$3 billion on cloud services and the Government is investing heavily in innovative technologies to boost infrastructure and economic growth in the age of the Fourth Industrial Revolution.

All these advancements are increasing the need for data centers to keep South Korea digitally alive by storing and processing an extraordinary amount of data.

Data center competition is heating up in South Korea

South Korea is seeing an increase in data center investments from global tech giants and data center providers, with even more expected from the increasing requirements brought by demand for cloud services and mobile technology.

A total of 16 data centers are scheduled to come online in 2020, adding to the 155 existing facilities in the country.

With all this progress, Cushman and Wakefield ranked South Korea twelfth in the world for data center growth and market size in 2019. The country’s ICT adoption is also ranked top in the world by the World Economic Forum in 2019.

As a result, South Korea is forecast to be one of the five leading revenue generators for APAC that, together, will produce 80% of the overall data center revenue amounting to US$32bn in the region by 2023.

But what makes it such an attractive place to do business?

Location, Location, Location

Seoul is the fourth-largest metropolitan economy in the world with more than 25 million living in the country’s capital – that’s almost half of South Korea’s population! It is also known for its powerful and stable IT infrastructure, with a strong potential talent pool from top universities in the city.

Following a rush to build data centers in South Korea last year, an unnamed Seoul-based IT company said to The Korea Times: “Korea and China are geographically close, which will make it easier to make inroads into the market there … Korea is relatively safe from natural disasters such as earthquakes compared to Japan.”

The country is a perfect place to set up data centers, as it is in an opportune location to provide connection points to both China and East Asia with low risk of natural disasters and at an affordable price compared to other markets in Asia Pacific.

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On average, electricity prices cost between US$0.10 to US$0.12 per kilowatt hour, with an estimated capital expenditure of US$8-10k kWh.

It is no surprise that with all that South Korea has to offer, it has produced global market leaders like Samsung, Hyundai, Kia Motors and LG Electronics.

Explosive growth in cloud computing drives up data center demand

South Korea’s public cloud market is forecast to double in size over the next four years to an astounding US$3.1 billion and an annual growth rate of 15%. The country also moved up to fifth place from seventh place in the 2020 Cloud Readiness Index by The Asia Cloud Computing Association.

Companies like Samsung, LG and 11 affiliates of CJ Group as well as organisations in e-commerce, online gaming and financial services are all looking to transition to the cloud to take advantage of cloud computing service providers in the near future.

This explosive growth is likely to increase the demand for data centers in South Korea, as cloud service providers look to lease data center space to empower companies that are looking to sell their own data centers and migrate to the cloud.

Huge investments in the Fourth Industrial Revolution pushes data centers into the future

On top of significant investments to support cloud computing services, the South Korean Government is set to funnel billions of dollars into 5G, artificial intelligence, the Internet of Things and big data.

At the start of the year the Government announced it would spend US$3.9 billion on innovative technology to boost research and development as well as another $2.1 billion on semiconductors, bio-health and “future car technology”. 

Then, once the global pandemic hit and President Moon Jae-in was re-elected, the Government would spend US$62 billion on a ‘new deal’ that largely focuses on the power of technological innovation to reshape the post-pandemic economy.

And by 2022, the country hopes to create one of the first hyper-connected cities by harnessing an enterprise-grade city-wide Internet of Things network.

But there are hitches along the way. Despite being a leader in 5G with now more than 6 million subscribers, users in South Korea have complained of difficulties staying connected to the fifth-generation wireless network.

Professor Yunmook Nah, a board member of Korea Data Center Council, said: “The rapid expansion of AI-based applications and their big data sources in all areas of society will surely increase computing and storage requirements, which will require much more cloud computing resources and data centers.”

Inevitably, both the advancements and challenges brought by the Fourth Industrial Revolution innovations will push data center demand into the future to keep users connected and sustain the exponentially growing amount of data being produced in South Korea.

Overcoming the challenges of expanding into the South Korea data center market

Like any country, setting up a data center in South Korea comes with its challenges. 

One of the biggest hurdles to jump over for data center providers is finding available greenfield or brownfield sites with reliable power supplies. To overcome this, data center providers are building upwards with multi-storey data centers.

To solve the problem of powering new data centers, Joon-hwa Song, Team Lead for the Korea Data Center Council (KDCC), said operators are signing power supply contracts through individual negotiations with the Korea Electric Power Corporation.

The KDCC also looks to address power supply demand by appealing to the Government about the national importance of data centers and its industrial growth.

Another challenge identified by the KDCC is the shortage of data center operators to sustain the rise in facilities. To rectify this, KDCC is preparing to operate a specialist training programme.

Despite the growing appetite for cloud computing in South Korea, the country’s strict data localisation rules may slow down the availability of cloud services and the ability of data centers to enable adoption, particularly those provided by international organisations based outside of South Korea.

Regulations in the country state that only Korean companies operating servers in Korea are allowed to provide services to public institutions.

The Asia Cloud Computing Association recommended countries like South Korea that have ‘Cloud First’ policies to focus on making them a reality and implement policies that allow data-driven businesses to thrive without having to choose between innovation and disruption.

South Korea also recently amended the Network Act and Personal Information Protection Act to streamline and harmonise the use of personal information as well as facilitate a level of protection similar to GDPR in Europe, which could restrict the free flow of data.

But Professor Nah said: “Data 3 Act will promote wide spread use of personal data in alias form or anonymised form, enabling new businesses to utilise public big data in areas such as healthcare, finance and digital government. This Act will definitely accelerate the adoption of data economy.”

Despite the challenges, South Korea’s digital future is clearly bright, as they lead the way in technological innovations. 

If these challenges are overcome, then the country may be a force to be reckoned with for years to come and an inspiration to emerging markets looking to harness the power of data centers to empower digital transformation and adoption of innovations from the Fourth Industrial Revolution.