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An illustration of an AI data center construction by GS E&C. / Generated by AI

GS Group's artificial intelligence (AI) data center project, involving a 15-trillion-won investment in Donghae, Gangwon Province, is kicking into high gear. With the first data center securing building approval, subsequent procedures including project financing and contractor selection are expected to gain momentum. The securities industry is highlighting the possibility that GS Engineering & Construction could secure more than 5 trillion won in construction orders through this project. Using this as a springboard, GS E&C plans to nurture data centers as a new growth engine and expand business operations for GPC, its precast concrete manufacturing subsidiary.

According to the construction industry on the 19th, the first 100-megawatt (MW) data center under the "Donghae AI Data Center Campus Development Project" pursued by GS Group received building approval from Donghae City on the 1st. Project implementer Donghae AI Campus 3 plans to break ground within the year and complete construction in the second half of 2028.

GS Group plans to develop a 1.2-gigawatt (GW) AI data center in Donghae in phases. Out of the total investment of 15 trillion won, financing around 12 trillion won through project financing (PF) is being discussed. The data center approved this time is the first project within the overall development.

The securities industry expects PF procurement and contractor selection procedures to proceed through November. In particular, observations suggest that GS E&C is highly likely to take on construction as a group affiliate. As GS Group also pursues follow-up projects, including Campuses 1 and 2, analysis indicates that the construction volume secured by GS E&C could exceed 5 trillion won. However, the actual scale of orders may vary depending on the contractor selection results and the progress of subsequent projects.

Shin Dong-hyun, an analyst at Hyundai Motor Securities, forecast, "Catalysts capable of driving the stock price still remain, such as additional orders for GS E&C across some of Sites 2 through 4 and progress on Phase 2," adding, "Given the rapid pace of the group's AI data center business, we will be able to confirm contract wins and earnings contributions in the short term."

GS E&C plans to divide operational responsibilities depending on the form of project participation. If it takes on construction alone, the Building and Housing Business Division will oversee it; if it manages the entire process from planning to design, construction, and operation, the New Growth Business Development Division will take the lead. Data centers are one of the businesses GS E&C CEO Huh Yoon-hong is fostering as future growth engines. The company is also exploring expansion into overseas markets based on its domestic project experience.

Market prospects are also bright. According to the Korea Data Center Council (KDCC), the domestic data center market is projected to expand from the 6-trillion-won range in 2024 to the 11-trillion-won range by 2029 in terms of revenue. As demand for data processing increases with the spread of AI, business opportunities are expanding not only in construction, but also across power supply, cooling, and operations and maintenance.

GS E&C has moved to secure core technologies in line with this trend. In August, it signed a memorandum of understanding (MOU) with LS Electric to cooperate on AI data center businesses. The company is also reviewing plans to pilot AI-based energy efficiency technologies at data centers in Anyang or Ilsan.

Collaboration with subsidiaries is also underway. GPC, 100% owned by GS E&C, produces precast concrete (PC) products manufactured in factories and assembled on site. It has been broadening its business footprint from logistics centers, semiconductor plants, and housing into data centers. The precast concrete method offers advantages in shortening construction periods by reducing on-site work and maintaining uniform quality control. If GS E&C participates in the Donghae project, new order opportunities could open up for GPC as well.

GS E&C is also pursuing design optimization and construction efficiency in cooperation with Xi S&D. Through DC Bridge, a subsidiary dedicated to data center leasing and operation, the company aims to widen its business scope, securing recurring operating revenue beyond simple construction.

A GS E&C official said, "If the company is selected as the contractor for this project and data centers need to be built using precast concrete structures, GPC will also be able to play a role," adding, "Our goal is to develop modular data center technology by next year and secure core technologies such as next-generation cooling and smart maintenance by 2030."

                                                                                                                 Lee Soo-il