Demand for AI chips continues to surge, with South Korea's exports rising nearly 70% year-on-year in August.

South Korea's exports rose for the 15th consecutive month, with semiconductor exports tripling compared to the same period last year, and the trade surplus exceeding $30 billion.

On September 1, according to preliminary data released by South Korea's Ministry of Trade, Industry and Energy, exports in August increased by 68.7% year-on-year to US$98.25 billion, exceeding market expectations of a 62.0% increase and continuing the strong growth trend of 63.0% in July after revisions.

Semiconductor exports surged 209% year-on-year to $46.65 billion, a record high, marking the third consecutive month that exports have exceeded $40 billion.

Strong export data provided strong support for the Bank of Korea's hawkish stance. Last week, the Bank of Korea raised interest rates by 25 basis points for the second consecutive meeting and revised its 2026 economic growth forecast upward from 2.6% to 3.3%, giving policymakers more room to shift their focus to inflation management.

South Korean President Lee Jae-myung stated that the strengthening of the won will help reduce the cost of raw material imports, and pointed out that interest rate hikes are inevitable, and fiscal policy should play an active role in the context of rising interest rates.

Chip demand explodes, setting records for three consecutive months.

Semiconductors have become the absolute core of South Korea's exports, accounting for more than one-third of total exports this year.

Chip exports reached $46.65 billion in August, setting a new record after $45 billion in June and $41 billion in July. Since starting at $25.1 billion in February, semiconductor exports have shown a continuous upward trend.

The South Korean government attributes this performance to the continued expansion of AI infrastructure investment by mega-technology companies such as Google and Amazon.

Kwak Noh-jung, CEO of SK Hynix, one of the world's largest suppliers of high-bandwidth memory chips, said last week after the groundbreaking ceremony for a $4 billion AI chip factory in Indiana, USA, that AI-driven demand will keep the tight supply of memory into the end of this decade, a prediction two years later than Samsung Electronics' forecast in July.

Samsung Electronics and SK Hynix both recorded record profits and revenues in the second quarter, and the market generally expects this record to continue until the end of the year.

IT stocks led the gains across the board, with growth structure showing a "K-shaped" divergence.

The overall IT category also performed exceptionally well. Driven by the continued rise in the price of NAND, a core component of enterprise-grade solid-state drives, computer exports surged 419.5% year-on-year to US$6.24 billion, setting a new monthly record.

Driven by new products such as the Samsung Galaxy S26 and Z Fold/Flip 8, exports of wireless communication equipment reached US$1.88 billion, a year-on-year increase of 21.2%, marking the tenth consecutive month of positive growth. Exports of petroleum products increased by 65.3% to US$6.84 billion, while exports of petrochemical products increased by 12.2% to US$3.86 billion.

However, the structural divergence in export growth is also significant – the South Korean Ministry of Trade characterized it as “K-shaped” growth.

Automobile exports fell 29.8% year-on-year to US$3.85 billion, mainly due to fewer working days during the summer holidays and some strikes caused by wage disputes; ship exports fell by about 10% due to delivery delays.

Of South Korea’s 20 major export categories, 14 recorded growth, but the relative lag in non-technology sectors reveals an inherent imbalance in the economic structure.

Exports to the US and China both surged, with the trade surplus hitting a three-month high.

In terms of destination, exports to China surged 119.3% year-on-year to $24.1 billion, driven by demand for semiconductors and general machinery; exports to the United States climbed 89.3% to $16.5 billion, supported by triple-digit growth in semiconductor and computer shipments.

Exports to Southeast Asia rose 75.4% to US$19.09 billion, while exports to the EU increased by 14.6% to US$6.62 billion, both boosted by demand for chips. Exports to the Middle East, however, declined by 15% year-on-year, showing a relatively lagging performance.

The trade surplus widened to $34.75 billion in August, up from the revised $30.39 billion in July, marking the third consecutive month that it remained above $30 billion.

The cumulative trade surplus from January to August this year reached US$202.5 billion, a significant increase of US$162.2 billion compared to the same period last year.

The central bank's tightening stance is supported, but external risks remain.

Strong export and trade data provide ample justification for the Bank of Korea to maintain its tightening policy.

Overall inflation slowed to 2.8% year-on-year in July, but core inflation, excluding energy and food prices, accelerated to 2.6%, indicating that underlying price pressures remain stubborn.

The Bank of Korea maintained its consumer inflation forecast at 2.7% for this year and 2.3% for 2027, while slightly raising its core inflation forecast for this year and next to 2.5%.

Despite strong export momentum, the South Korean government remains vigilant about the external trade environment. South Korean Industry Minister Kim Jung-kwan stated that US tariff policies, EU steel import quotas, global supply chain restructuring, and the situation in the Middle East all contribute to high trade uncertainty for South Korean companies.

He also pointed out that while semiconductor exports remained strong, non-semiconductor exports also achieved a 20% increase, indicating that South Korea's export base is broadening. However, the government will closely monitor changes in the global trade environment and will not relax its efforts due to the current export boom.

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