South Korea

Intelligence for Better Decision Making

KT Advances Semantic Communication for 6G Through AI Integration and Partnership with Nokia Bell Labs

July 1, 2025 | Technology & Innovation

Semantic communication promises to transform next-generation networks by embedding artificial intelligence directly into data transmission processes.

KT focuses on developing semantic communication as a cornerstone for 6G networks. This technology uses AI to extract and transmit only the essential meaning of data instead of sending all raw elements, mirroring human conversational efficiency. By integrating AI throughout the communication process, KT aims to redefine network infrastructure roles from end to end.

**Since October 2024, KT’s Future Network Research Institute has demonstrated semantic communication with high-bandwidth video and voice applications.**
These trials preserved original message quality while dramatically reducing data volumes compared to conventional methods. The technology maintained stable, high-quality media even under network congestion or limited bandwidth conditions, such as satellite links.

**Semantic communication is expected to support advanced 6G services, including fully autonomous driving, remote robot control, and immersive holographic communication.**
By transmitting only core information, it can meet the strict latency, reliability, and bandwidth demands of these applications across urban cellular networks, remote sites, and airborne platforms.

**In early 2025, KT formalized a cooperation agreement with Nokia Bell Labs to accelerate semantic communication development and commercialization.**
The partnership began with joint workshops—most recently held at Bell Labs headquarters in May—to align technological visions and roadmaps. Collaborative efforts will focus on creating semantic transmission algorithms, conducting end-to-end performance verification, and demonstrating practical use cases to advance market readiness.

**KT and Nokia Bell Labs plan to contribute algorithmic specifications and performance data to international 6G standardization bodies.**
KT aims to secure global leadership in 6G technology by influencing the ecosystem of operators, equipment vendors, and standards organizations through semantic communication. Nokia Bell Labs will leverage its expertise in semantic research and validate use cases in collaboration with KT.

**Lee Jong-sik, head of KT’s Future Network Research Institute, emphasized that embedding AI into communication technologies lies at the heart of network evolution.**
He described semantic communication as a fundamental innovation that enhances efficiency and reshapes network roles by integrating AI capabilities directly into data transmission.

South Korea Faces Critical US Tariff Waiver Talks Amid Broader Trade and Security Pressures

July 1, 2025 | Geopolitics & Defense

South Korea and the United States are engaged in high-stakes talks to extend mutual tariff waivers and address broader trade and security demands.

With the US mutual tariff waiver expiring on July 8, growing concerns in Seoul center on the possibility that South Korea may lose eligibility for renewal. Washington has signaled it will only extend waivers for countries that demonstrate sincerity in meeting its demands—particularly those with trade deficits. Seoul finds the situation unpredictable and alarming, especially since US requirements now encompass a wider package that includes defense cost-sharing commitments and the removal of non-tariff barriers such as platform regulations.

**On June 27, President Trump announced plans to dispatch letters within ten days to finalize cost-sharing and tariff arrangements, suggesting a potential unilateral decision on the waivers’ future.**
This stance diverges from earlier statements by the White House and Treasury, which had hinted at possible extensions and negotiations running until September 1. In response, South Korean officials are bracing for the waiver’s non-renewal and devising urgent strategic measures amid lingering uncertainty within the US administration.

**The scope of trade talks has expanded beyond steel and automobiles to encompass beef and rice trade conditions, platform legislation and digital taxes.**
After the US threatened retaliatory measures against Canada over its digital service tax on American tech firms, South Korean authorities have grown wary of facing similar threats. They warn that non-tariff barriers—especially proposed platform regulations—could spark significant trade friction and undermine the domestic economy.

**South Korea is also watching the recent NATO summit, where European allies agreed to allocate at least 5 percent of GDP to defense spending under US pressure.**
President Trump’s calls for enhanced defense cost-sharing from Seoul and Tokyo add another layer of complexity, as Washington links security contributions to trade concessions.

**On June 30, the Ministry of Trade, Industry and Energy convened a public hearing under the Act on the Conclusion Procedure and Implementation of Commercial Treaties to refine South Korea’s negotiation strategy ahead of formal discussions.**
Trade experts and stakeholders received updates on current consultations, and the Korea Institute for International Economic Policy presented a feasibility study assessing potential outcomes.

**Since February 2025, Seoul has negotiated with Washington to finalize a comprehensive package before the 90-day pause on US reciprocal tariffs expires on July 8.**
South Korea aims to secure a full exemption or reduction of the 25 percent US reciprocal tariffs on steel, automobiles and other imports. The discussions also address American concerns about South Korea’s sizable trade surplus and non-tariff measures, including the import ban on US beef from cattle over 30 months old, proposed online platform regulations and restrictions on exporting high-precision location data.

**The feasibility study estimated that resolving tariff disputes could reduce the negative impact on South Korea’s real GDP by 0.427 to 0.751 percentage points compared with scenarios in which the higher tariffs apply.**
It modeled a 25 percent national tariff alongside elevated item-specific duties on steel, aluminum, automobiles, semiconductors and pharmaceuticals, as well as stringent non-tariff measures. Depending on the negotiation outcomes, consumer welfare losses could range from $9.664 billion to $17.021 billion.

**Following the hearing, the government will comprehensively review the input and integrate it into its negotiation strategy, which it will report to the National Assembly.**
Deputy Minister Park Jong-won stressed a coordinated, cross-ministry approach and affirmed that South Korea will prioritize its national interests in the upcoming full-scale tariff talks with the United States.

### IMPACT ANALYSIS
**From this Development, various impacts could cascade through the system, to a lesser or greater extent, depending on the severity and criticality of the shocks.**

Domain	Causal Chain	Possible Outcome
Competitiveness	(Trade-openness & preferential access ↓ → Current-account balance (% GDP) ↓ → Terms-of-trade index ↓ → Real GDP growth ↓)	Loss of preferential access and higher tariffs will depress exports, worsen the trade balance and terms-of-trade, and shave off real GDP growth.
Competitiveness	(Non-tariff measure coverage ratio ↑ → Customs compliance cost per shipment ↑ → Ease-of-doing-business percentile ↓ → High-value-added export share ↓)	Escalating non-tariff burdens will raise exporters’ costs, weaken Korea’s ease-of-doing-business ranking, and erode high-value-added exports.
Competitiveness	(Trade-facilitation implementation gap ↑ → Logistics-performance (customs + infrastructure) ↓ → Export-market share shift ↓ → Export sophistication (EXPY) delta ↓)	Delays in trade facilitation will erode logistical efficiency, cost market share, and reduce export sophistication, weakening long-run competitiveness.
Information Dynamics	(Digital-services export restrictiveness index ↑ → Digital & knowledge-intensive industry share of GDP ↓ → Total-factor productivity level vs frontier ↓)	Stricter digital-services barriers will shrink the knowledge-intensive sector’s share, stifle innovation, and depress total-factor productivity.
Information Dynamics	(Data-privacy regulation robustness ↓ → Data-localisation compliance cost ↑ → IT-sector productivity ↓ → TFP three-year growth deviation ↓)	Weaker privacy rules and higher data-localisation costs will curb IT productivity and slow three-year total-factor productivity growth.
Geopolitics & Defense	(Military-expenditure share of GDP ↑ → Defense-sector equity volatility jump ↑ → Sovereign spread over risk-free rate ↑)	Higher defense spending will amplify defense-sector financial volatility and push up sovereign borrowing costs.
Geopolitics & Defense	(Alliance interoperability score ↓ → Forward-deployed troop surge ↑ → Escalation probability estimate ↑)	Reduced interoperability and more forward deployments will heighten the risk of inadvertent military escalation on the peninsula.
Geopolitics & Defense	(Strategic-competition intensity index ↑ → Sanctions breadth index ↑ → Supply-chain relocation cost (% GDP) ↑ → Global competitiveness index rank ↓)	Intensifying great-power competition and broader sanctions will spur costly supply-chain relocations and erode Korea’s global competitiveness rank.
Macroeconomics & Growth	(Terms-of-trade index ↓ → Real-effective exchange-rate (REER) gap ↑ → Exchange-rate CPI passthrough coefficient ↑ → Inflation volatility ↑ → Consumer-confidence diffusion index ↓)	Worsening terms-of-trade and currency misalignment will fuel inflation volatility and undermine consumer confidence.
Households	(Median real household income ↓ → Consumer-confidence index ↓ → Private consumption growth volatility ↑ → Poverty head-count ↑)	Falling real incomes and confidence will make consumption more volatile and push more households below the poverty line.

### BOTTOM LINE

- South Korea’s exporters risk losing duty-free access to the US market on steel, automobiles and other goods if the July 8 tariff waiver is not renewed, threatening to reduce trade openness, weaken the current‐account balance and shave off real GDP growth.

- Washington’s insistence on linking tariff relief to higher defense cost‐sharing and the removal of non‐tariff barriers such as platform regulations and beef and rice import curbs has broadened negotiations into a mixed trade‐security bargaining package, introducing new compliance costs and political sensitivities.

- President Trump’s June 27 announcement of a rapid, potentially unilateral decision process for waiver extensions, in contrast with earlier US Treasury signals of prolonged talks, has created pronounced policy uncertainty in Seoul and accelerated contingency planning.

- A Korea Institute for International Economic Policy study warns that reimposing 25 percent reciprocal tariffs plus stringent non‐tariff duties could cut South Korea’s real GDP by 0.43–0.75 percentage points and inflict $9.7–17.0 billion in consumer welfare losses, emphasizing the economic stakes of unresolved negotiations.

- If South Korea retains its existing non‐tariff measures under US pressure, exporters will face higher customs‐compliance costs per shipment, a poorer standing in global ease‐of‐doing‐business rankings and a decline in high‐value‐added exports such as semiconductors and biotech.

- Delays or reversals in trade‐facilitation reforms—driven by uncertainty over waiver status—would slow customs clearance and logistics performance, leading trading partners to shift orders elsewhere and reducing South Korea’s export sophistication over time.

- Threats of retaliatory measures on digital services and demands to lift data‐localization restrictions risk raising Korea’s digital‐service restrictiveness index, shrinking the share of knowledge‐intensive industries in GDP and dragging total‐factor productivity further below advanced‐economy benchmarks.

- Commitments to increase defense spending in order to satisfy US cost‐sharing demands could push up sovereign borrowing costs as markets price higher debt issuance, while friction over interoperability and burden‐sharing may prompt additional US troop deployments and raise the probability of inadvertent military escalation on the peninsula.

- A potential breakdown in talks would signal intensifying strategic competition, incentivizing global firms to relocate supply chains at significant cost and leading South Korea to fall in global competitiveness rankings as firms diversify sourcing away from Korean production.

- Worsening terms‐of‐trade under higher US duties would amplify real‐effective‐exchange‐rate misalignment and import‐price pass‐through, fueling inflation volatility, depressing consumer confidence, reducing median real household incomes and increasing poverty head‐counts as private consumption growth becomes more erratic.

Monitored Intelligence for South Korea - July 2, 2025

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32

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62

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1

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0

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5

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0

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0

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0

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2

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China's maritime installations in the PMZ "may serve dual-use purposes beyond aquaculture"

Chosun Ilbo | English | News | July 2, 2025 | South China Sea

A U.S. think tank, the Center for Strategic and International Studies (CSIS), identified three Chinese maritime structures within the South Korea-China Provisional Measure Zone (PMZ) in the Yellow Sea. These include two semi-submersible aquaculture platforms, Shen Lan 1 and Shen Lan 2, and a fixed offshore platform called the Atlantic Amsterdam, which is a repurposed oil rig anchored to the seabed. China claims these installations focus on aquaculture, with the fixed platform serving as an operations hub managing the surrounding aquaculture cages.

The PMZ is an area of overlapping exclusive economic zones (EEZs) between South Korea and China, with no agreed maritime boundary, where non-fishing resource development or facility construction is prohibited. However, CSIS and former South Korean Navy officials expressed concerns that the fixed platform likely hosts underwater detection equipment capable of monitoring submarine movements and collecting navigational data. This dual-use potential raises suspicion given China’s history of converting civilian facilities into military outposts, particularly in disputed maritime regions like the South China Sea.

The presence of these installations near South Korea’s maritime zones has amplified tensions, with fears of China gradually establishing a jurisdictional presence under the guise of civilian activities, a manifestation of broader Chinese gray zone tactics. The South Korean government reportedly plans to respond assertively, viewing the sovereignty issues in the West Sea as a bipartisan priority supported by major political parties.

Facing low pay and long hours, elite students snub science and engineering for medical school

Joongang Ilbo | English | News | July 2, 2025 | UndeterminedWages and Compensation

Elite South Korean students increasingly prefer medical school over science and engineering due to significant wage disparities and challenging work conditions in research fields. Despite Korea’s success in space technology, such as the launch of the Nuri rocket, researchers at institutions like the Korea Aerospace Research Institute report low salaries and lack of overtime pay, earning around 52 to 53 million won annually compared to physicians' average income of 237 million won.

This wage gap is prompting calls for systemic reforms to attract and retain scientific talent. Proposals include establishing an AI Innovation Institute offering competitive salaries and housing, and adopting programs similar to China’s Thousand Talents Plan that provide substantial incentives to top science undergraduates. Experts emphasize the need to improve financial support for graduate students and create an environment where science careers are more financially rewarding than medicine.

There are also calls to rebuild Korea’s startup ecosystem to better reward innovation and risk-taking, noting that unlike in the U.S. and China, Korea has produced few post-startup success stories beyond early venture leaders. Suggestions include establishing responsible management frameworks to share startup risks and encouraging corporate acquisitions that benefit founders financially.

Educational reforms are recommended to shift Korean universities from traditional lecture-based models to hands-on, real-world learning and career guidance, drawing inspiration from top U.S. institutions. Enhanced experiential learning and support aim to reduce student anxiety about their futures and foster innovators capable of developing transformative technologies.

On a government level, President Lee Jae Myung has pledged massive investments in AI and strategic industries, establishing a senior presidential secretary for AI and future planning and revising laws to standardize and improve support for science and engineering talent across all education levels. This national strategy aims to create a stable and nurturing environment for research and innovation talent development.

South Korean firms race to issue bonds backed by treasury shares

Chosun Ilbo | English | News | July 2, 2025 | UndeterminedFinancial System Problems

South Korean companies listed on the main stock exchange are increasingly issuing exchangeable bonds (EBs) backed by their own treasury shares ahead of anticipated changes to corporate governance laws. This surge is seen as a last effort to utilize existing regulations before tighter rules take effect, including expanded directors’ fiduciary duties and greater board oversight. Market participants believe firms are acting preemptively due to fears of stricter treasury stock restrictions, such as forced cancellations previously proposed in political campaigns.

Exchangeable bonds allow companies to raise capital by offering investors the option to convert bonds into treasury stock, avoiding ownership dilution typical of direct equity sales. Once favored by smaller firms, EBs are now popular with larger corporations. Data shows EB issuances backed by treasury shares increased from four in 2020 to 12 in 2024, with 11 deals already announced in 2025. Notable examples include SK Innovation’s 376.7 billion won issuance to finance a purchase and SKC’s 260 billion won issuance to support its semiconductor business. Other companies like MONA Yongpyong, SNT Dynamics, and LS have also employed EBs to fund various needs.

Observers consider this rise in EB activity a strategic move to finalize transactions before legal reforms take hold, potentially subjecting boards to greater legal risk for decisions harming minority shareholders. Critics argue that issuing EBs using treasury shares could depress stock prices and contravene the original intent of treasury stock, which is meant to return profits to shareholders. Investor backlash is evident, as highlighted by Taekwang Industrial’s controversial 318.6 billion won EB issuance backed by 24.4% of its equity, which provoked strong opposition from its second-largest shareholder, Truston Asset Management. Truston labeled the move irrational, alleging it attempts to circumvent upcoming regulations and announced plans for legal action. Following the news, Taekwang’s stock fell over 11%, though the company defended the bond issuance as necessary to fund operations and strategic investments through 2026 given its capital requirements.

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