Namyangju City's data center construction policy has fallen out of sync, putting Kakao in a difficult position.
The Namyangju Wangsuk Urban Advanced Industrial Complex is the area where Kakao, Woori Financial Group, and Shinhan Financial Group announced plans to invest several hundred billion won in data centers. While reviewing building permits for data centers that applied for site acquisition to expedite construction, Namyangju City is also re-examining the feasibility of data center construction from scratch. This follows an order by Namyangju Mayor Choi Hyeon-deok, who took office last July, to conduct a "re-examination from scratch."
Kakao now finds it difficult either to withdraw its investment plan or to actively push forward while ignoring the mayor's re-examination order. The Namyangju data center is essential infrastructure for Kakao's dual data center setup and the full-scale launch of its AI business.
In 2022, a fire broke out at the data center Kakao had been leasing from SK C&C, causing a "service outage" that halted services such as KakaoTalk messaging and taxi hailing. Kakao plans to secure two self-owned data centers to dualize its server infrastructure. The first data center in Ansan was decided for investment in March 2021, with construction starting the same year; it was completed in September 2023 and has been operational since January 2024.
For the second data center, an MOU was signed in 2022 to build it within Seoul National University's Siheung campus, but the agreement ultimately fell through at the end of 2023. Namyangju City was found as an alternative. If the Namyangju data center also fails, the plan for the second data center will return to a blank slate after three years. This would be one year and four months after signing an MOU with Gyeonggi Province, Namyangju City, and Korea Land and Housing Corporation in June of last year.
For Kakao's AI business, which it has positioned as its future growth engine, the sooner the Namyangju data center is built, the better. The first data center in Ansan operates GPUs but was not designed from the outset as an AI data center specialized for high-performance AI computing. Leasing and using an AI data center increases business uncertainty and costs.
Lee Jae-seong, a professor in the Department of AI at Chung-Ang University, explained, "Companies that own their own AI data centers gain 'timeliness' in their business because they can immediately calculate or secure the required capacity." He added, "There is also the issue that using an external AI data center requires paying higher costs than using a self-owned data center."
Some critics argue that policy continuity has been damaged by the change in mayors. Namyangju City officials stated, "The intent is truly to re-examine from scratch, not to arbitrarily overturn projects of the previous mayor," adding, "We plan to continue the project if we determine it will benefit citizens."
Mayor Choi proposed attracting content, IT, and future advanced energy companies as an alternative to data centers, but has not yet announced a specific alternative investment plan. It is reported that Mayor Choi intends to reach a conclusion by the end of this month.
in TECH
