Bank of Korea refutes claims of semiconductor peak: AI-driven demand continues to exceed supply, upward cycle extended to 2026

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Amid the continued decline in Korean stocks, the Bank of Korea has explicitly rejected market concerns that the semiconductor boom has peaked, asserting that the global semiconductor market expansion cycle will continue for quite a long time.

In a written response submitted to Park Seong-hoon, a lawmaker from the People Power Party, on July 13, the Bank of Korea stated, “Thanks to substantial demand growth driven by AI infrastructure investment, while supply expansion is clearly lagging behind, the current semiconductor upcycle remains intact.” This assessment goes beyond the bank’s earlier forecast that the expansion cycle would last “until 2026,” suggesting an extended time window for the boom.

Predictions from major investment banks such as JP Morgan, Goldman Sachs, and Morgan Stanley support the above assessment. Citing these institutions, the Bank of Korea said that despite uncertainties regarding the speed, reach, and profitability of AI adoption, major investment banks generally expect the global semiconductor market to remain strong at least through next year.

This Cycle Has Surpassed the Historical Average, With Even Greater Momentum

The Bank of Korea pointed out that the current semiconductor expansion cycle began in March 2023 and has lasted 40 months so far, exceeding the historical average of 29 months for the five cycles between 2000 and 2020.

The bank also emphasized that the strength of this cycle is significantly higher than historical levels. “The current semiconductor boom is being driven by global investment in AI infrastructure such as data centers, showing much stronger momentum than in previous expansion cycles,” the Bank of Korea wrote in the response.

Compared to prior cycles, this expansion is motivated by fundamentally different factors. The Bank of Korea believes this expansion is led by companies making competitive investments in anticipation that AI will fundamentally reshape the industrial ecosystem, rather than simply being pulled by traditional demand for consumer electronics or IT.

Supply Bottlenecks Act as Structural Support

On the supply side, the Bank of Korea views limited supply expansion as a key factor supporting the ongoing boom.

The bank explained that high-performance products are technically challenging, and mass production takes considerable time. Moreover, the current demand is primarily for customized products such as high-bandwidth memory (HBM), making supply expansion even more restricted than in previous cycles.

This structural feature means that even if there are fluctuations in demand, it will be hard for supply to generate excess pressure in the short term, providing some buffer for prices and the market boom.

Central Bank’s Tone Is Noticeably More Upbeat

This written response represents an upward revision of the Bank of Korea’s outlook on semiconductors. In November last year, then director of the research bureau and current vice president Lee Ji-ho said at an economic outlook conference that the semiconductor cycle “might last until 2026,” but was cautious about whether it would extend to 2027.

In January this year, former president Rhee Chang-yong also expressed cautious optimism during a press conference, stating that “no matter who wins in the AI industry, semiconductors are essential,” and predicting that the industry would “at least have a positive outlook for the next year.”

This written response further extends and clarifies the earlier assessments, showing that the Bank of Korea is more confident about the semiconductor boom than before.

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