Naver and Kakao expanded research and development spending last year. Their investment methods differed clearly.

The companies spent 2.22 trillion won and 1.30 trillion won on R&D, respectively, their business reports showed on March 26. Both were the largest amounts on record.

Naver focuses 18.5 percent of revenue on R&D, expands AI use based on HyperCLOVA X

Naver's R&D expenses last year were 2.22 trillion won, up from 1.86 trillion won a year earlier. The share of revenue rose to 18.5 percent from 17.3 percent. The main goal of the increase is to expand the use of its large-scale AI, HyperCLOVA X, across business areas such as search, advertising, commerce and content.

On the research side, subsidiaries including Naver Labs, Naver Cloud and Naver France play a key role as major R&D pillars. Naver's business report said it uses a structure in which related functions are carried out together within a single organisation for each business. Under this system, it is moving to build in-house technology across search, advertising, commerce and cloud services.

It also invested in infrastructure. Capital expenditure last year was 1.32 trillion won, including 1.16 trillion won for servers and supplies. That was about triple the 482.3 billion won a year earlier. It is interpreted as focused investment to expand AI computing infrastructure such as securing GPUs. Naver completed the construction of what it described as South Korea's largest AI computing cluster in January using 4,000 units of Nvidia's next-generation B200 (Blackwell) GPUs.

Achievements are also emerging in technology accumulation. Naver currently holds a total of 4,622 intellectual property rights at home and abroad. Of those, 3,173, or about 69 percent, are patents in search, platform, mobile, infrastructure and AI.

Kakao at 16 percent of operating revenue, strengthens proprietary LLM development by creating Kanana organisation

Kakao's R&D expenses last year were 1.30 trillion won, equal to 16 percent of total operating revenue. That was a 2.3 percent increase from a year earlier, when it spent 1.27 trillion won, and was the largest amount on record. The share of sales edged down to 16 percent from 16.1 percent, a trend of increasing the absolute amount while keeping the ratio steady. Its R&D organisation consists of five divisions: CPO, Tech, Kanana, AI Studio and personal information.

The Kanana organisation is tasked with researching generative AI technologies such as data and large language models and developing new services. Key tasks include advancing LLMs, research into multimodal technology and developing machine learning for large-scale data processing. It is placing weight on advancing its own models. AI Studio is responsible for R&D of technologies for new AI businesses and services.

On infrastructure, it spent total CAPEX of 614.3 billion won last year, including tangible and intangible assets. It plans investment totalling 424.9 billion won in building its Ansan data centre through 2029. The aim is to respond to rising future IT data demand and build in-house capabilities for AI and big data operations.

Its R&D scope is not limited to AI models. It is also conducting research to improve the quality of existing platform services and optimise operating costs, including an automated map-information detection system based on visual computing, real-time product recommendation logic and development of data storage for cloud-native services.

Different approaches, same direction; timing of a shift to earnings is a challenge

Naver and Kakao share the common goal of building in-house AI technology, but their methods differ. Naver's 4,622 intellectual property rights show a prominent flow of long-term, cumulative technology accumulation within a division-of-labour structure based on existing corporations and organisations.

Naver has said it plans to spend an additional more than 1 trillion won each year from this year on infrastructure investment alone, including GPUs, suggesting that its infrastructure investment stance will continue for the time being. Kakao is clearly moving to concentrate generative AI capabilities around Kanana. However, in terms of quantitative results such as patents, it has fewer disclosed figures than Naver.

With both companies spending large sums on AI infrastructure and technology development, a key point to watch will be whether the investment leads to monetising AI services and improving cost efficiency.

An industry official said, "Naver is betting first on infrastructure and Kakao is focusing on strengthening its own model capabilities, so their approaches are diverging." The official added, "Which side is right will ultimately be decided at the point when AI services actually lead to revenue."