Semiconductors account for over 40% of total exports in May and June

State research institute sees chip super-cycle lasting into early next year

Experts warn that a shift in chip conditions could ripple across the whole economy

A semiconductor manufacturing facility [Herald DB]
A semiconductor manufacturing facility [Herald DB]

South Korea's monthly exports surpassed $100 billion for the first time, setting a new milestone driven almost entirely by a semiconductor boom. Chips riding a super-cycle accounted for 44 percent of total exports last month, powering the record-breaking figure. The country has emerged as the biggest beneficiary of the memory chip surge fueled by rising AI investment.

Experts, however, caution against reading the milestone as a sign of broad economic recovery. With the country's export base increasingly concentrated in semiconductors, any slowdown in AI investment by global tech giants — or a shift in interest rates or exchange rates — could simultaneously undermine both exports and growth. Whether the chip boom's gains can spread to domestic demand and employment remains an open question.

According to June trade data released Tuesday by the Ministry of Trade, Industry and Energy, exports jumped 70.9 percent year-on-year to $102.25 billion. Average daily exports reached $4.54 billion, surpassing the previous record of $4.28 billion set in May.

Semiconductor exports jumped 199.5 percent to $44.82 billion, surpassing $40 billion for the first time and setting yet another all-time monthly record — roughly four times the year-earlier figure.

Chips have now posted record monthly highs for 15 consecutive months. After crossing the $30 billion mark for three straight months this year, they vaulted past $40 billion last month.

Semiconductors' share of total exports reached an all-time high of 43.8 percent. The figure had long hovered around 20 percent before rising to 24.4 percent last year. It climbed to 38.1 percent in March, dipped to 37.1 percent in April, then crossed the 40 percent threshold in May at 42.3 percent and held above that level last month.

The chip boom is attributed to rising capital expenditure by US and Chinese tech companies, which has sustained demand and pushed memory prices sharply higher. Fixed memory prices over the past year tell the story: DDR5 16Gb surged 682 percent, from $4.80 to $37.50, while NAND 128Gb soared 807 percent, from $2.92 to $26.50.

Against that backdrop, memory chip exports last month posted year-on-year gains of 369.8 percent for DRAM and 206.8 percent for NAND.

The chip boom is expected to continue for some time. The Korea Research Institute for Industrial Economics and Trade, a state-run think tank, said in its second-half economic and industrial outlook last month that the semiconductor super-cycle could last into early next year. If chips continue to anchor exports, the institute projected annual exports this year would rise 30.3 percent to $924.4 billion.

The concern is that as semiconductors come to underpin more than 40 percent of total exports, any downturn in the industry could spread more broadly across the South Korean economy.

Kim Jeong-sik, an emeritus professor of economics at Yonsei University, said the combination of the semiconductor boom and a weak won — which boosts price competitiveness — is driving export growth. "Changes in interest rates in the United States and South Korea could affect semiconductor investment, but export growth is likely to continue in the second half," he said, adding that "ultimately, the biggest variables are interest rates and the exchange rate."

Shin Se-don, an emeritus professor of economics at Sookmyung Women's University, said semiconductor prices have risen so sharply that chip exports now dominate the trade figures. "The fact that the exchange rate is not falling despite the trade surplus is a structural problem," he said, adding that "the government needs to pay closer attention to this."

Yang Jun-seok, a professor of economics at Catholic University of Korea, warned that the semiconductor concentration may be creating a distorted picture of the economy. "South Korea's economy may be caught in an optical illusion right now," he said. "Only semiconductors are doing well, but it could be mistaken for a broad economic recovery."

Yang added that if other industries are struggling while the won remains weak, "there is some fundamental problem — and semiconductors are masking it." He called for policies that diagnose how severely non-semiconductor exports are stagnating and address those weaknesses.

He also said the sustainability of export growth hinges on whether AI data center construction continues. "If talk of an AI data center bubble spreads, construction will slow," he said. "And if the US Federal Reserve raises interest rates on top of that, worsening investment conditions, AI data center construction will contract and our semiconductor exports will inevitably be affected."

Yang also said strong exports are unlikely to translate directly into a recovery in domestic demand and employment. "The semiconductor industry does not employ large numbers of workers, and its linkages to other industries are not as broad as those of, say, the auto sector, so the multiplier effect on the domestic economy is limited," he said. "Automobiles have large spillover effects through employment and parts industries, but semiconductors have a relatively small impact on domestic economic activity by the nature of the industry." He added that fiscal policy — including expanding the tax base — would be essential to channel the gains from export growth back into the domestic economy.


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