South Korea's Semiconductor Export Boom Raises Concern Over What Comes Next

According to CNBC, South Korea's semiconductor exports surged 209% from a year earlier to a record $46.65 billion in August, accounting for 47.5% of the country's $98.25 billion in goods exports that month, according to the Ministry of Trade, Industry and Resources. The ministry said the jump was driven mainly by AI infrastructure demand as large cloud providers including Google and Amazon increased capital spending. Jeff Ng, head of Asia macro strategy at Sumitomo Mitsui Banking Corporation, said semiconductor exports accounted for nearly 80% of export growth in August, while overall export growth was driven by chips, computers and higher petroleum product prices. Dave Chia, an economist at Moody's Analytics, said a gradual slowdown would be manageable, but an abrupt stall would be more difficult because the economy already runs at two speeds and the sectors that would need to offset the weakness are under pressure. The Bank of Korea raised its base rate to 3% in August, its second consecutive hike, as core inflation remained elevated. Chia warned that if chip demand cools while policy is still tightening, the windfall would fade before domestic demand is strong enough to take over. Automobile exports fell 29.8% from a year earlier in August, though the trade ministry attributed much of the decline to summer-holiday timing and partial strikes. Chia also cited U.S. tariffs and a shift toward production in American plants as more persistent headwinds. The Bank of Korea said in its August monetary policy decision that the recovery in consumption is gradually accelerating, and the ministry's data showed non-semiconductor exports rose 20% in August. Homin Lee, senior macro strategist at Swiss private bank Lombard Odier, said South Korea could still sustain annual real growth of around 2% to 3% if semiconductor momentum faded while other cyclical sectors performed well. Ng said overall export growth is expected to remain positive over the next 12 months, though it could moderate because of base effects and stabilizing prices.