Mon, Dec 03, 2018 - Page 7 News List

Samsung turns its gaze north to face cloud-computing giants

By Sam Kim  /  Bloomberg

The best place to put a data center in South Korea, it turns out, also happens to be close to one of the most dangerous in the world.

Barely an hour from the border with North Korea, in what used to be a civilian shooting range, Samsung Group is building a facility with the ambitious goal of challenging well-established cloud-computing providers Amazon.com Inc, Microsoft Corp and Google.

It is a familiar position for a company that came from behind to lead the world in smartphones, televisions and memory chips.

Before setting its sights on bigger rivals, the conglomerate plans to dominate its home ground first by making customers out of its vast empire of about 60 businesses spanning electronics, construction, insurance and credit cards.

One day it might even serve as a stepping stone toward an even more audacious goal: putting data centers in North Korea, where colder temperatures can bring down the cost of keeping servers cool.

“It’s my dream to build a data center in Kaema,” said Hank Bae, an engineer leading the construction in Chuncheon, referring to the northern highland nicknamed “the roof of Korea.”

Winter temperatures there can go down to minus-20°C.

“I’d go anywhere if it’s cool, but for now, this is our best bet for a data center,” Bae said.

Chuncheon, where Samsung is building the cloud-computing center, boasts natural advantages.

The Y-shaped building, sitting on a hill surrounded by a Buddhist temple, pine trees and an army base, is situated in the least earthquake-prone region of South Korea. The average temperature is 2°C lower than in Seoul, helping to cut cooling costs as much as 80 percent.

The flip side of the location is that it is about 50km away from the border with North Korea, where hundreds of thousands of troops are stationed.

As relations between Seoul and Pyongyang continue to improve, some at Samsung hold out the hope that data centers could be located in North Korea, beyond the demilitarized zone, if the countries are reunified.

Maybe someday it might happen.

Samsung Electronics Co vice chairman Jay Y. Lee in September visited North Korea as part of a business delegation led by South Korean President Moon Jae-in.

With the smartphone market slowing and expectations that the boom in memorychip prices might be over, cloud offers an appealing option for Samsung. Not only is it growing, with the market for infrastructure services forecast by research company Gartner to more than double to US$83.5 billion by 2021, but arms of Samsung already make key parts such as data storage technology.

“The era of cloud is coming, so if we don’t do it, we’re going to be weeded out of business,” said Kim Ho, vice president of Samsung SDS Co, the group’s software and cloud-business arm that is leading the project.

Lee is the biggest individual shareholder in SDS.

The company already has several data centers at home, used to keep track of the products it sells around the world, but none of them are tailored for external customers like the Chuncheon center.

As it looks for an edge to win clients, Samsung is targeting the more than 80 percent of large enterprises that use multiple cloud providers with a service that lets them manage their data as if they were a single cloud.

“This is not a bad strategy for Samsung, indeed perhaps the only one that they can try right now given the maturity of the market,” Deloitte Consulting chief cloud strategy officer David Linthicum said. “However, they are really in the managed services provider world, with hundreds of companies currently playing in that space. While Samsung should be able to scale better, they need to do some things that are more creative and innovative to stand out.”

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