By Hwan Kang

Elon Musk tweeted last August that AI (Artificial Intelligence) has “vastly more risk than North Korea.” So it may seem ironic to him that South Korean companies from different industries are so eager to apply AI into their services amid the ongoing missile fiasco in the North.

Major IT companies such as Naver and Kakao have announced throughout the year that the next main focal point in their businesses would be developing their own AI that can process deep learning and provide better services to the users. Naver has boasted about its devotion to AI development by acquiring Xerox Research Center Europe (now Naver Labs Europe), a leading lab in intelligence research, and aggressively investing in startups that can develop different facets of the deep learning process. On the other hand, Kakao has announced that its new subsidiary for AI research, Kakao Brain, will be personally spearheaded by Kim Beom-Soo, the visionary billionaire who founded KakaoTalk. Its plan is to catch up to the level of other leading research centers by actively recruiting developers with specialties in search patterns and natural spoken Korean.

The first tangible result from the competition in the Korean AI market is the AI speaker. Koreans are excited about the upcoming launch of AI speakers from both tech companies, who promise intelligent assistance that will integrate deeply into customers’ daily lives. These AI speakers will provide easy access to the makers’ various services through voice commands that support spoken Korean and English.

Last August, Naver got a head start on its competition when it unveiled its brand new AI speaker, “WAVE”. The speaker was met with great enthusiasm, selling its entire stock in Korea in just 35 minutes and closing pre-orders in Japan after just 5 days. WAVE uses “Clova,” Naver’s AI platform, as its operating system, and provides convenient services with smart responses. Notable functions include English speaking mode for English learners and Japanese/Chinese translation.

Kakao is also looking forward to launching its own brand of AI speakers called “Kakao Mini” later this year. Not much has been revealed about the product yet, with the website only providing a sneak peek. However, people are anticipating the speaker’s release because it’s AI program, “I”, is expected to be connected to popular Kakao services such as KakaoTalk messenger and Melon’s music app.

More intangible AI results have also been revealed to the public throughout 2017. One example is “Naver Smart Lens”, a visual AI service that can recognize letters, QR codes, and various other images. The “AiTems” system in Naver’s mobile shopping app can analyze preferences from the users’ search history and suggest certain items, even if they have not used the service before. Naver Labs has also participated in the Seoul Motor Show and announced its plans to use deep learning for autonomous cars that can use the system to learn how to detect and avoid traffic. Kakao has similarly announced its bold plan to create a “Smart Home” and apply its AI into new apartments that are under construction. It is collaborating with major construction companies such as GS and Posco to initiate its plan.

The two companies are not the only major players in the Korean AI market, though. Banks and credit card companies have emerged as participants in the market as well. Banks such as KEBHana and Woori have collaborated with telecommunication companies SKT and KT respectively to develop ChatBots. ChatBots will be able to do banking transactions and provide necessary information based on consumers’ behavior patterns. They are expected to advance non-face-to-face banking services even further. Similarly, Hyundai Card has created its own ChatBot, “Buddy,” based on IBM Watson’s natural language processing system. Jung Tae-Young, the CEO of the company, has shown his high expectations for the AI on his Facebook account, saying it will grow up and show different attitudes.

South Korea Ministry of National Defense is also considering applying AI into the country’s defense system, according to its New Year resolution for 2017. It has announced it will consider integrating AI into its cyber defenses against North Korea. In fact, the South Korean military already has something similar to AI in place. The South Korean Army has so-called “killer robots” deployed in the DMZ that work as unblinking eyes on the 38th parallel. The robots are called SGR-A1, developed by Samsung Techwin (now Hanhwa Techwin). They are considered one of the earliest autonomous robot defense systems, along with Israel’s system. Its specifications list a machine gun and grenade launcher as the robot’s primary weapons, and it is equipped with heat and motion detectors that can track down enemies without assistance from humans. They can also use a security clearance procedure with an instant shoot to kill process, but is not activated due to concerns of confusing civilians from enemies. Instead, the bots send signals back to the central base and wait for further command.

Such efforts in Korea to develop and integrate AI into various areas have many economic implications. Korean companies still lack capabilities to compete in the global market. Developing AI is therefore the smart thing to do during the so-called 4th industrial revolution, especially ones that can understand naturally spoken Korean better than their foreign counterparts.

However, Korean companies may not have the advantage of “fast followers.” According to a report from IBK Economic Institute, Korean AI products have nothing to gain from market leaders’ trial and error process because AI is so complicated and inherently closed to outside competitors. Also, since the leaders had the advantage of cornering the market on AI technology, they have had more time to reach the necessary customer base for the system to develop enough sentience, which means the market followers will have to work with the leftover margins. As a result, the major developers with more resources will have continued dominance over the AI market, which is already evident as in the cases of Apple (Siri), Amazon (Alexa) and IBM (Watson). IBM Korea has recently announced that Watson can now understand spoken Korean, so time for Korean AIs is running out fast.

Another implication has to do with an AI’s moral compass. AI programs do not have moral obligations to work for the collective good of society, but they can work to maximize a company’s profits. This means that AIs can become tools to subtly but efficiently empower companies in the market. There are already cases where pricing algorithms have been used to develop a perfect price differentiation scheme or form an indirect price cartel. The case of Dutch gas stations is an important example – different gas stations constantly changing prices in accordance with customer’s predictive needs for gas under different conditions. This was possible thanks to a “dynamic pricing” program that refreshes prices based on real time market data. What was worse was that because different gas stations used the same algorithm, it was impossible for the customers to avoid the price differentiation wherever they went, effectively forming a price cartel that maximized the company’s interest. There is no guarantee that this will not happen in Korea once AIs are set in place everywhere people go.

The vast opportunities for AI both in Korea and around the world, along with the concerns that go along with those opportunities, show clearly that we may be reaching a turning point where many conventional economic norms could change, especially for tech-savvy South Koreans.

Hwan Kang is currently an Intern at the Korea Economic Institute of America as part of the Asan Academy Fellowship Program. He is also a student of Seoul National University in South Korea. The views expressed here are the author’s alone.

Image created by Jenna Gibson, Communications Director, at the Korea Economic Institute of America from a photo by Nick Amoscato on flickr Creative Commons.