South Korea's Digital Infrastructure Resilience: Navigating Risks and Opportunities in the Data Center Sector

The South Korean data center market is undergoing a transformative phase, driven by surging demand for cloud computing, artificial intelligence (AI), and 5G infrastructure. According to a Mordor Intelligence report, the market size is projected to grow from 1.44 thousand megawatts (MW) in 2025 to 2.64 thousand MW by 2030, reflecting a compound annual growth rate (CAGR) of 12.88%. This expansion is underpinned by government initiatives such as the National AI Committee and a USD 2.9 billion investment in a national AI computing center by 2030, as noted in a W.Media analysis. However, the sector faces significant investment risks, including regulatory hurdles and public opposition, which demand careful navigation by stakeholders.

Drivers of Growth: Government Policy and Technological Demand

South Korea's digital infrastructure resilience is bolstered by strategic government interventions. The Ministry of Science and ICT (MSIT) has prioritized AI and digital transformation, with plans to achieve carbon neutrality by 2050 and increase renewable energy use to 20% by 2030, as highlighted in the Mordor Intelligence report. A USD 91 million investment in cloud computing announced in March 2024 further underscores this commitment. Additionally, the colocation market is expanding rapidly, with revenue expected to rise from USD 2,637.7 million in 2024 to USD 7,228.5 million by 2030, at an 18.6% CAGR, a trend detailed in the W.Media analysis.

Private sector participation is equally robust. SK Group's partnership with Amazon Web Services (AWS) to build a 1 GW hyperscale AI data center in Ulsan represents one of the largest investments in the country, according to the W.Media analysis. Global operators like Equinix and Digital Realty are also expanding their footprint in Seoul, while new entrants such as Empyrion Digital and Macquarie Asset Management are driving innovation, as noted in the Mordor Intelligence report.

Investment Risks: Regulatory Complexity and Public Perception

Despite these opportunities, the sector is not without challenges. Regulatory changes in Q3 2025 have introduced barriers to entry. The Special Act on the Promotion of Distributed Energy, effective since June 2024, has made it nearly impossible to secure permits for new data centers in metropolitan areas due to power supply constraints, according to a Business Korea article. This has led global tech giants like Amazon, Google, and Microsoft to redirect investments to Japan, Singapore, and Southeast Asia, as reported in the Business Korea article.

Public opposition also poses a significant hurdle. Data centers are often perceived as "NIMBY facilities" due to concerns over electromagnetic waves and urban heat islands, a trend described in the Business Korea article. To mitigate these risks, the government has implemented stricter disaster management obligations for operators, including decentralization and redundancy requirements for servers and power supplies, as outlined in a Kim & Chang insight. While these measures enhance service stability, they increase operational complexity and costs.

Recovery Opportunities: Innovation and Strategic Locations

The market's resilience lies in its adaptability. For instance, the Busan Data Center Campus of OneAsia Network, set to use immersion cooling technology, exemplifies innovation in energy efficiency and is highlighted in the Mordor Intelligence report. Similarly, the shift toward Tier 4-certified data centers—expected to grow at a 27% CAGR from 2024 to 2029—reflects a demand for uninterrupted services driven by cloud and AI adoption, as discussed in the Kim & Chang insight.

Strategic locations like Greater Seoul and Busan are emerging as key hubs. Seoul's 31 colocation facilities are driving the data center boom, while Busan's coastal location offers advantages for cooling and connectivity, observations reported by Business Korea. These regions benefit from robust infrastructure and government incentives, making them attractive for both domestic and foreign investors.

Conclusion: Balancing Risks and Rewards

South Korea's data center sector presents a compelling mix of growth potential and challenges. While regulatory and public perception risks are significant, the government's focus on AI, renewable energy, and digital stability creates a favorable long-term outlook. Investors must prioritize partnerships with local players, leverage technological innovations, and engage proactively with communities to mitigate NIMBY concerns. As the market evolves, strategic locations and Tier 4 infrastructure will likely define the next phase of recovery and expansion.