Artificial intelligence (AI) is the most important technology of our time, one that is rapidly transforming economies and societies. Yet, its implementation for productive applications varies widely across the globe. While some countries are still debating whether to deploy AI, amid concerns over security and job displacement, others are rapidly adopting it to realign national ambitions, stay competitive, and lead the future economic and industrial landscape.
East Asia, led by China and South Korea, is a region that is implementing AI in manufacturing at a pace and scale not seen elsewhere. This rapid adoption is likely to help East Asia maintain its manufacturing edge amid efforts by the West and Global South to shift production in their direction.
China, the world’s manufacturing powerhouse, is far ahead of any country in terms of using AI in manufacturing. To illustrate, Chinese multinational Xiaomi operates “dark factories (暗黑工厂)” fully automated with AI, big data, and Internet of Things, enabling it to produce one smartphone per second – a rate surpassing Apple’s output. This automation has significantly reduced costs by cutting manpower and energy use. As a result, Xiaomi recently surpassed Apple to become the world’s second-biggest seller of smartphones, thanks to its rising market share in India and other Global South countries.
Xiaomi’s success is not an isolated case. In fact, many Chinese companies are racing to adopt AI in manufacturing to stay ahead in global competition. As a result, China has recently delivered remarkable outcomes: BYD has passed Tesla in electric vehicle production and sales, while Baidu has outpaced Waymo – the world’s leading self-driving tech company – in pricing, despite entering the market later. China has aggressively deployed AI across its factories, and as of February 2025, it had built 30,000 smart factories – 1,200 of which are categorized as advanced-level and 230 as excellence-level.
Following China’s rapid AI implementation, another East Asian manufacturing powerhouse, South Korea, is also rapidly adopting AI in manufacturing. In April of this year, South Korea’s LG Innotek, a subsidiary of conglomerate LG, unveiled its “Dream Factory (드림 팩토리)” in Gumi Province, which is now being transformed into an AI manufacturing hub. By deploying deep learning technologies without human intervention, the factory has cut production costs and boosted efficiency, aiming to outperform global competitors.
South Korea’s other manufacturing giants – Samsung, SK Hynix, and Hyundai – have also deployed AI in order to maintain global their market leadership in semiconductors and automobiles. Thanks to early implementation, South Korea has seen a sharp rise in AI-powered smart factories across both major conglomerates and SMEs, making it a model for latecomers in this field.
Why are China and South Korea leading in AI manufacturing? In general terms, their mission-driven strategies, robust state-business coordination, and societal support combine to enable rapid implementation.
Mission-Driven AI Deployment in East Asia
China and South Korea stand out for their goal-oriented approach to AI manufacturing, shaped by international competition and domestic priorities. In contrast, many governments elsewhere have yet to formulate a coherent long-term strategy for the sector.
Under Xi Jinping, China has come to view AI as a key means of realizing its ambition to become a global high-tech superpower while maintaining manufacturing dominance. This vision has two major dimensions. The first is to surpass its primary rival, the United States, in the high-tech industries race by establishing technological supremacy, particularly in AI-driven manufacturing. The second is to halt the recent trend of manufacturing relocation from China to countries like India and those in Southeast Asia, which have emerged as competitive alternatives due to their cheaper labor costs.
With a declining working-age population and rising labor costs, Chinese leaders view AI as a strategic tool for sustaining productivity and industrial resilience. This vision has propelled the shift from “Made in China” to “Intelligently Made in China (中国智造),” emphasizing the role of AI in upgrading the country’s manufacturing capabilities. Framed within the concept of “New Quality Productive Forces (新质生产力),” AI-driven manufacturing is central to China’s ambition to maintain its dominance in global production and assert leadership in the emerging technological landscape.
China’s push for AI in manufacturing also stems from the realization that it can compete in – and potentially win – the AI race against the U.S. through a different strategy. While the United States excels in AI innovation, it lags in deploying AI technology. Unlike the U.S., which focuses on building advanced LLMs (large language models), China has identified its strength in “physical and industrial AI” – a potential recently acknowledged by U.S. firm NVIDIA. As a manufacturing powerhouse, China’s leadership sees industrial AI as a key path to global technological leadership.
South Korea’s AI manufacturing ambitions are also driven by a set of goal-oriented geoeconomic objectives. The first is the China factor. As China accelerates AI manufacturing, South Korea faces growing pressure. There is widespread concern in Seoul that China is overtaking – or will soon overtake – strategic industries that once formed the backbone of the Korean economy, including semiconductors, automobiles, and shipbuilding. In response, South Korea recognizes the urgent need to deploy AI in manufacturing to maintain its position as a global industrial leader and emerge as one of the “world’s top three AI powers (AI 3대 강국).”
Apart from the China factor, South Korea’s demographic crisis has also pushed the country to rapidly implement AI in manufacturing. South Korea has the lowest birth rate in the world, and its working-age population has declined sharply in recent years. Addressing the labor shortage, which is expected to worsen significantly, is now considered a national emergency. As a result, the rapid adoption of AI in manufacturing is seen as a strategic response to this looming crisis.
In addition, South Korea also sees a chance to remain competitive in the AI race by adopting the “China Model” – focusing on deploying AI in manufacturing rather than competing in building LLMs, which require huge amounts of capital to compete with the global giants. Instead, South Korea, by utilizing its wealth of manufacturing data, is seen to be in a better position than others to dominate the AI landscape.
Robust State-Business Collaboration
What makes China and South Korea different from other regions in terms of development models is the tight alignment between the state and business sectors to achieve national ambitions and goals. This is clearly evident in the case of AI manufacturing. Both governments have recognized the strategic potential of AI in manufacturing and have actively promoted early adoption through strong state–business collaboration.
As Kai-Fu Lee noted in his 2018 book “AI Superpowers: China, Silicon Valley, and the New World Order,” China quickly recognized the potential of AI manufacturing and pushed for its rapid implementation by giving signals to its companies to move ahead in this field. It has promoted a bold strategy by incorporating it into major national planning documents, including its Five-Year Plans and “Made in China” initiatives. It has also introduced specific plans such as the “AI Plus” initiative, which aims to provide top-level policy guidance and massive support to strengthen state-business cooperation.
Similarly, South Korea also gave early signals to its businesses that future growth would rely on AI-powered smart manufacturing. Seoul began implementing smart manufacturing policies as early as 2014, but as China accelerated its AI manufacturing through state-business collaboration, South Korea also stepped up its efforts. In 2020, South Korea announced the construction of 1,000 cutting-edge 5G+AI smart factories and 100 “K-Smart Lighthouse Factories” by 2025, by fostering strong state-business partnerships. Strengthening such collaboration has been a top policy priority across governments, from the Moon administration’s (2017–2022) Digital New Deal to the Yoon administration’s (2022–2024) National AI Strategy.
China and South Korea are also different from many other neoliberal regulatory states in the West in terms of direct financing to their private sectors to achieve national goals. Both have allocated massive public funds for R&D to stay ahead in AI manufacturing. They have also created separate direct funding mechanisms to encourage fast AI adoption in the private sector over the last few years. The latest example of this support is China’s $8.2 billion AI fund to accelerate adoption, while South Korea has pledged $7.5 billion to fast-track AI integration in manufacturing. These funds cover insurance, low-interest loans, and equity investments.
Funding is not the only support China and South Korea provide to their companies for rapidly implementing AI in manufacturing. Equally important is a comprehensive support ecosystem, including close consultation with the private sector to address specific needs. This includes infrastructure development, AI talent cultivation, targeted incentives, and strong collaboration among industry, academia, and government – all aimed at shaping and reinforcing their dominance in AI manufacturing.
Societal Readiness and Support for AI-Driven Transformation
China and South Korea also differ from others in their distinctive societal response to AI implementation, which has helped accelerate AI manufacturing in both countries.
In China’s communist system, people generally accept government plans for deploying new technologies. This holds true for AI, which many view as essential to competing with the United States and restoring China’s national strength. The government’s tight control over society enables both the state and businesses to rapidly implement AI in manufacturing. The vast manufacturing data in China is itself generated by the people’s widespread adoption of digital technologies – unlike in the West, where people are more cautious about adopting new technologies for daily uses, including shopping, payments, and transportation.
People in South Korea, an advanced liberal democracy, also support the rapid implementation of AI in both the economy and society. In fact, Korean public discourse often includes concerns that the country is falling behind China in AI, with growing calls for the government to play a more proactive role in accelerating AI adoption. This stands in contrast to Western liberal democracies, where anti-statism is more prevalent and government-led deployment of digital technologies is often viewed as a threat to privacy and individual rights. Like China, South Korea’s massive amounts of digital and manufacturing data are a direct result of people’s fast adoption of technologies, including AI services.
On the issue of AI-related job security, while people around the world are concerned about job losses due to AI, the dominant discourse in China and South Korea focuses on how many jobs AI will create in the future through its rapid implementation. This is not to say people are unconcerned about job security, but such concerns are outweighed by discussions about the positive impact of AI. In this context, people in China and South Korea are proactively learning AI, and governments are rapidly expanding AI literacy programs to prepare the workforce for the AI economy.
Challenge for the West and Global South’s Manufacturing Reshoring Ambitions
East Asia’s rapid implementation of AI in manufacturing has significant implications for ongoing efforts in the West and emerging economies in the Global South to restructure global production away from East Asia and back to their own regions. Over the last 40 years, East Asia, led by China and South Korea, has dominated the global manufacturing landscape. This is a unique phenomenon in modern history, as no other region has maintained such long-standing industrial dominance in the post-World War II era.
The West, including the U.S. and Europe, is attempting to reclaim its lost manufacturing base through reshoring initiatives – an agenda that gained momentum under the Trump administration and remains a major policy debate within the European Union. However, given the speed and scale at which East Asia has adopted AI in manufacturing, it is increasingly unlikely that Western countries will achieve their reshoring goals, as digitalization and AI adoption remain comparatively slow in those regions.
East Asia’s rapid advancement in AI manufacturing also poses a serious challenge to emerging economies in the Global South – such as India and some Southeast Asian nations – that aspire to become the next global manufacturing hubs by replacing China and East Asia’s current dominance. While China and South Korea have clear state-driven ambitions backed by strong state-business coordination and proactive societal support for AI implementation, such strategic alignment is largely absent in many Global South economies at this stage.
Hence, the rise of AI manufacturing in East Asia, led by China and South Korea, is likely to reshape the global balance of industrial power in the new AI-powered technological era.