CHANGWON — South Gyeongsang Province has named the development of physical artificial intelligence its top priority for the ninth term of its elected administration, pledging 21 trillion won ($15.1 billion) through 2035 to build testing centers and research and development facilities and to train workers. The plan aims to overhaul the region's industrial base by applying AI to its existing clusters in machinery, autos, defense, nuclear power and aerospace.
The provincial government said on the 17th that while the eighth term focused on attracting corporate investment and laying industrial foundations, the ninth term will shift the weight of policy toward converting those efforts into actual growth and jobs. Governor Park Wan-su set economic and industrial competitiveness as the top priority, under the premise that a healthy economy creates jobs and keeps young people in the region.
Physical AI is at the center of the plan. The province argues that its dense concentration of manufacturers, suppliers and partner firms in machinery, autos, defense, nuclear power and aerospace makes it well suited to applying AI on actual factory floors. The goal is not merely to develop AI technology but to embed it in robots, machinery and production equipment to raise manufacturing productivity and competitiveness. Officials also plan to build an ecosystem, centered on testing centers and R&D facilities, where companies can trial and commercialize their technologies in real production settings.
The province has also secured central government funding. Of a 670 billion won research and development program run by the Ministry of Science and ICT, South Gyeongsang secured 66 billion won in state funds this year. The province says it will go beyond nurturing parts suppliers to build an ecosystem in which global companies manufacture finished physical AI products in the region — an industrial structure spanning research, components and final assembly.
The province also sees the central government's mega-project for the southeastern region as an opportunity. Officials say South Gyeongsang, with its existing manufacturers, suppliers and skilled technical workforce, has an advantage in shifting to physical AI over regions that would have to build an industrial base from scratch. Hyundai Wia (011210) is pursuing investment in thermal management systems and expanding its research staff in the province, while Hanwha Aerospace (012450) is developing aircraft engines aimed at urban air mobility and drones. The province intends to channel such corporate investment into cultivating anchor firms that produce finished physical AI products.
Industrial infrastructure is cited as another strength. The province's electricity self-sufficiency rate stands at 137%, the highest in the country, and it also has adequate industrial water supply. The provincial government plans to continue expanding industrial complexes while streamlining administrative procedures so that permitting does not delay projects after companies commit to investing.
Alongside physical AI, the province is fostering small modular reactors as a second pillar of future growth. South Gyeongsang hosts a cluster of nuclear power companies including Doosan Enerbility (034020). The provincial government has set a target of investing 4.699 trillion won through 2035 — combining state funds, provincial funds and private investment — and capturing a 60% share of the global SMR manufacturing market.
To that end, the province will expand infrastructure such as a support center for manufactured components under its Gyeongnam SMR Global Development Strategy 2.0, and build a full-cycle industrial ecosystem running from R&D through manufacturing, testing, certification and exports. The strategy is to create new markets by linking SMRs with the province's established mainstay industries, including shipbuilding and marine, defense and space.
On the legislative front, the province called for swift passage of the special act on an aerospace complex city and the special act on the development of the South Coast region. Under the aerospace bill, the province envisions a national aerospace hub centered on Sacheon with research, production and residential facilities, while the South Coast bill would support a marine tourism belt stretching from Busan to Yeosu. The provincial government regards the two bills as the key legislative tasks that will determine the region's industrial and tourism competitiveness.
The province is also asking the central government to strengthen a preferential system for non-capital regions that expands tax and fiscal support the farther a region is from the Seoul metropolitan area. Officials argue that promoting corporate relocation and investment outside the capital region requires differentiated support reflecting geographic conditions, rather than forcing regions to compete on the same terms as Seoul and its surroundings.
"There is no answer if you tell regions to compete on exactly the same footing as the capital area," Park said. "Tax and fiscal support should expand the farther a region is from the capital area, and the government's regional preference index should become a core policy for balanced national development."
