Korea awards state AI projects and budgets 5 trillion won for factory floors

South Korea is treating artificial intelligence in the public sector as something to be demonstrated and sold, not just installed. In a two-day stretch on Oct. 28 and 29, the government handed awards to state institutions for AI projects and announced a 5 trillion won ($3.74 billion) push to put AI and robots into small manufacturers.

The awards came at the 2026 Public Institution AI Innovation Conference in Seoul, jointly hosted by the Ministry of Economy and Finance and the Ministry of Science and ICT and organised by the National Information Society Agency. It was the first outing for an AI challenge that drew 316 submissions from 105 public institutions between June and August; expert judging in September cut these to 30 winning projects.

The two grand prizes went to state bodies that have already put AI into operations. Korea Western Power won in the demonstration category for a gas turbine it describes as the country's first to be run by AI and inspected by robots, combining a digital twin, AI agents and robots with domestic NPUs and Korean AI models; the company expects about 2.1 billion won ($1.57 million) a year in economic benefit. Incheon International Airport Corporation took the other grand prize for replacing manual air-safety monitoring with 24-hour AI prediction and detection, which it said cut delays in recognising aircraft approaching the gate by 91.3 percent, from 23 cases to two.

Other winners pointed the same way. Korea Expressway Corporation reported roughly 80 percent better inspection efficiency from automatic detection of damage to roads, bridges and tunnels; Korea Water Resources Corporation said AI and digital twins cut the time and cost of monitoring 37 dams by up to 95 percent. Korea Electric Power Corporation's service for spotting signs of solitary death in electricity usage data has led to 15 emergency rescues, and the Korea Trade-Investment Promotion Agency cut the time needed to write an export market analysis report from 27 days to five minutes.

"We will redesign the functions of public institutions around the public and speed up the AI transition," Finance Minister Lee Hyung-il said in his opening address, adding that incentives for institutions and staff that deliver results would keep being strengthened.

The industrial push came the next day. At a national policy coordination meeting in Cheonan, South Chungcheong Province, the Ministry of SMEs and Startups presented a strategy to spend more than 5 trillion won of state resources on smart manufacturing innovation by 2030, tying digital, AI and robot conversion together. The targets are 30,000 small manufacturers digitally converted and 6,000 adopting AI, lifting the digital conversion rate from 30 percent to 50 percent and AI adoption from 1 percent to 10 percent. The ministry also aims for 500 specialised smart-manufacturing technology suppliers by 2030, and plans to upgrade the Korea AI Manufacturing Platform into a "Manufacturing AI 24" system for circulating factory data.

Small manufacturers have built digital foundations through smart factories but still struggle to adopt AI and robots together because of limited investment capacity and a shortage of specialists, the ministry said. Its answer includes testing AI and robots in real production settings to lower the uncertainty of adoption, and carrying results from national projects into smaller plants — including an unmanned factory operating system built at KAIST with science ministry support.

"In the era of the AI transformation, manufacturing AI innovation at small and medium-sized enterprises, the backbone of our economy and industry, is the key to becoming a leading country in physical AI," SMEs Minister Lee So-young said.

The science ministry, meanwhile, said it would build a physical AI training centre next year to support the production and use of training data, and run a demonstration project with the Korea Post to test applications in real settings. It held talks with industry, academic and research experts at the Korea Chamber of Commerce and Industry on Oct. 29.

What ties the effort together is a preference for domestic parts. The science ministry said building a full domestic stack spanning semiconductors, models, data and robots matters, and that using products made by Korean companies is important for growing the business ecosystem.