Semiconductors have become the lifeblood of South Korea’s economy! South Korea's central bank warns: AI fever could hit national fortunes hard

The AI ​​craze has driven global demand for semiconductors to soar, and South Korea's export performance has hit new highs. However, behind the prosperity lies a crisis. Korean media pointed out that South Korea’s semiconductor exports accounted for 49.9% of total exports in September, accounting for almost half of the country. However, traditional pillar industries such as automobiles and steel continue to slump. The Bank of Korea warned that once U.S. technology giants reduce investment in AI, semiconductor exports may drop by up to US$100 billion (approximately NT$3.25 trillion) next year, and the South Korean economy will face a major impact.

South Korea's "Daily Business News" reported on the 26th that thanks to the boom in the AI ​​semiconductor boom, South Korea's current account surplus reached US$116.6 billion (approximately NT$378.95 trillion) in the second quarter of this year, even exceeding the combined surplus of the two major manufacturing powers, Germany and Japan. The International Monetary Fund (IMF) predicts that South Korea's current account surplus this year will be second only to China, ranking second in the world.

However, behind the outstanding export performance, there are hidden worries of over-reliance on semiconductors. Bank of Korea President Shin Hyun-song recently pointed out at a symposium hosted by CNN that how long the large-scale AI investment boom can last has become a key variable affecting the South Korean economy.

The Bank of Korea warned that if the AI ​​investment of large U.S. technology companies slows down more than expected, the growth of semiconductor exports next year will be suppressed, and the export value may be reduced by up to US$100 billion. By then, not only will economic growth momentum weaken, but the current account surplus may also shrink, further increasing the pressure on the Korean won to depreciate.

It is worth noting that the surge in South Korea's semiconductor exports mainly relies on price increases rather than a substantial increase in actual shipments. According to statistics from the Bank of Korea, the semiconductor export value index increased by 223.1% in the third quarter of this year, but the export quantity index only increased by 15.6%. There is a huge gap between the two.

Further observation shows that the annual growth rates of the semiconductor export quantity index from the first quarter to the third quarter of this year were 25.1%, 9.4% and 15.6% respectively, while the annual growth rates of the export value index were as high as 143.1%, 185.7% and 223.1% respectively, showing that the export boom is highly dependent on rising chip prices.

Yang Junxi, a professor at the Department of Economics at the Catholic University of Korea, warned that once the AI ​​craze subsides or more companies invest in AI memory production, triggering price competition, South Korea's current account surplus may shrink significantly.

Except for semiconductors, South Korea's other major export industries performed significantly weak. According to statistics from South Korea's Ministry of Industry and Trade, semiconductor exports increased by 184.4% from January to September this year, much higher than the 16.9% in the same period last year; automobile exports increased from 2.2% in the same period last year to a decline of 3.8% this year, and automobile component exports also decreased by 5.9%.

Other industries are also facing pressure. Exports of general machinery decreased by 1.5%, while steel exports only increased slightly by 0.2%. Although petrochemical exports increased by 6.6%, this was mainly driven by rising international oil prices. The automobile and battery industries are facing slowing demand for electric vehicles, Chinese competition and tariff barriers. The shipbuilding and defense industries are constrained by Chinese competition and the United States and Europe. The petrochemical industry continues to be under the pressure of global overcapacity.

South Korea's overall exports in September reached US$120.94 billion (approximately NT$3.95 trillion), an annual increase of 83.5%. Among them, semiconductor exports surged by 262.8%, reaching US$60.3 billion (approximately NT$1.96 trillion), exceeding US$60 billion (approximately NT$19.5 trillion) for the first time in history, accounting for 49.9% of overall exports. What’s even more astonishing is that about 79% of the overall increase in exports in September came from semiconductors, highlighting that South Korea’s export growth is almost dominated by a single industry.

Kim Sang-bong, a professor at the Department of Economics at Seoul University in South Korea, pointed out that South Korea’s economy is actually driven almost exclusively by the semiconductor industry, and the situation is similar to Taiwan. He believes that the growth of semiconductors should drive the simultaneous expansion of other industries such as automobiles and home appliances, but South Korea currently does not have such a positive diffusion effect.

What is even more worrying is that although semiconductor exports are booming, they have failed to effectively create job opportunities for young people. The Bank of Korea released a report on "Youth Employment Downturn and Policy Issues" on the 26th. It pointed out that as economic growth focuses on semiconductors and the rapid spread of AI technology, companies increasingly prefer to hire senior employees, and the demand for entry-level and basic jobs originally responsible for young people has shrunk.

The central bank pointed out that industries that are highly affected by AI, such as finance and insurance, professional science and technology, and information and communications, are gradually forming structural barriers for young people to enter the workplace. Traditional employment policies alone cannot solve the problem. In the future, it is necessary to expand the growth spillover effects of the information technology manufacturing industry, strengthen the connection between education and industry, and improve the flexibility of the employment system, in order to reduce the risks caused by the economy's over-reliance on a single industry.