DeepSeek and Privacy: Why Korea Paused on China's AI Disruptor

By Chyung Eun-ju and Joel Cho

When DeepSeek made its debut in the global AI arena earlier this year, it not only disrupted the tech world but also had a significant impact on the global market. However, this rise of the AI tool raised important concerns regarding data privacy, security, and the need for regulatory compliance. Crafted by a Chinese startup founded by Liang Wenfeng, DeepSeek's chatbot quickly captivated a global audience, climbing to the top of app store rankings and drawing comparisons with major players like OpenAI's ChatGPT.

The rapid success of DeepSeek also brought challenges, leading to various countries, including Korea, to scrutinize its regulatory compliance regarding user data management. Recently, South Korea decided to halt new downloads of DeepSeek, voicing concerns over how the app processes personal information.

DeepSeek's popularity can be attributed to its impressive AI performance offered at a much lower cost compared to Western competitors. Nevertheless, as is common with emerging technologies, concerns regarding data privacy began to surface as users grew increasingly aware of the importance of protecting their personal data.

Reports indicate that DeepSeek may share information with ByteDance, the Chinese firm behind TikTok, which has raised fears of possible data transfers to organizations linked to the Chinese government. Given China’s strict data protection laws, regulators are worried whether DeepSeek can guarantee adequate user privacy. In response to these issues, the Personal Information Protection Commission (PIPC) in Korea has opted to temporarily remove DeepSeek from app stores until a thorough examination of its data handling practices is conducted. Although current users are still able to use the AI model, new downloads are no longer permitted. This step mirrors similar actions taken by several other nations, including Italy, Australia, and Taiwan, each imposing restrictions or outright bans on DeepSeek due to data security concerns.

Countries taking steps against DeepSeek cite worries over data security and transparency. Italy’s Data Protection Authority limited the app's processing of user data due to a lack of clarity. Meanwhile, Taiwan has restricted government departments from utilizing DeepSeek, and Australia has outright banned the AI tool on government devices due to potential national security risks. These governments argue that the vague handling of data by DeepSeek could threaten user privacy, particularly in light of China's National Intelligence Law, which allows state access to corporate data. Unlike their Western counterparts, which may face scrutiny yet remain permissible, Chinese AI firms such as DeepSeek are often deemed direct security risks, resulting in complete bans as global data regulations become stricter.

Korea's data protection laws, akin to the European Union’s General Data Protection Regulation (GDPR), emphasize principles such as data minimization and transparency. If DeepSeek is found to be handling user data in ways that contradict these regulations, it may face stronger penalties. For Korea, a nation recognized for its tech innovation alongside strong data protection standards, the DeepSeek situation serves as an important test of its regulatory structure.

In a press release, the PIPC announced that “DeepSeek has temporarily suspended its service in Korea as of February 15, 2025, to enhance compliance with the Personal Information Protection Act (PIPA). The company plans to resume the service once necessary improvements are made.”

The rise of DeepSeek reflects China’s ambitions in the AI race, distinct from Western technologies. However, its swift entry into global markets has reignited worries over data sovereignty, as under China’s National Intelligence Law, the government can mandate collaboration from companies regarding national defense and intelligence services.

The suspension of DeepSeek has caught the attention of major Korean AI companies, including Naver and Kakao. Naver has responded by enhancing its AI model, HyperCLOVA X, making it more efficient and cost-effective in order to better compete with DeepSeek’s high-performance capabilities at lower prices. While pursuing its own AI advancements, Naver remains open to partnerships with external firms.

Conversely, Kakao has chosen to partner with OpenAI, integrating multiple AI models rather than focusing exclusively on in-house development. Nevertheless, Kakao's leadership has expressed concerns regarding DeepSeek’s reliability and security, indicating that further investments in safety measures could offset its cost benefits.

Korea is increasingly recognized as an “AI middle power” alongside nations like Japan, the EU, and regions in the Middle East. According to the Boston Consulting Group (BCG), as competition between the U.S. and China escalates, mid-tier AI nations like Korea have the potential to broaden their influence.

One notable advantage for Korea is its leadership in AI-related semiconductor manufacturing, with companies like Samsung and SK hynix dominating the global memory chip market. However, concerns exist about the sustainability of this advantage, as the U.S. and EU nations are heavily investing in domestic semiconductor production to lessen dependence on foreign supply stock.

Yet, as evidenced by the precautions surrounding DeepSeek, Korean firms must also navigate regulatory challenges affecting AI development. Although Korean companies possess strong capabilities in AI model design, strict privacy laws present significant obstacles regarding data accessibility. Industry leaders propose allowing select AI companies greater access to domestic datasets to foster innovation, but this must be achieved while adhering to existing data protection regulations. Failing to do so could result in the same issues faced by DeepSeek being echoed for other entities operating within Korea.

As Korea’s AI sector adapts to these developments, the DeepSeek situation highlights the ongoing discourse surrounding AI governance, data privacy, and the balance between innovation and regulation. While the timeline for DeepSeek’s return to the Korean market is uncertain, its impact on AI policy and competitive dynamics is irrefutable.

AI, Privacy, Regulation