Bank of Korea: AI-driven Supercycle to Continue, Dismissing Peak Concerns
Quick Look
- The Bank of Korea's report indicates the global semiconductor market faces undersupply, with the AI-driven supercycle expected to persist.
- This contradicts investor fears of a market peak, citing slow supply expansion and custom product demand.
AI-generated summary
Why It Matters
The Bank of Korea released a report stating the global semiconductor market remains undersupplied due to slow supply expansion, driven by AI infrastructure investments. This contradicts investor concerns about the chip cycle peaking.
SEOUL, July 13 (Yonhap) -- The South Korean central bank said the global semiconductor market remains undersupplied and the current AI-driven supercycle is expected to continue for some time, according to a report released Monday, dismissing investors' concerns that the chip cycle has already peaked.
"While semiconductor demand has surged significantly due to investments in artificial intelligence (AI) infrastructure, the pace of supply expansion has been slow," the Bank of Korea (BOK) said in a report submitted to Rep. Park Sung-hoon, adding that the semiconductor cycle has yet to slow.
The BOK said the current chip cycle differs from previous ones because it is being driven by competitive corporate investment in anticipation of fundamental changes to the industrial ecosystem brought about by the spread of AI.
"The pace of supply expansion is more constrained than in the past, as the market is led by custom products such as high-bandwidth memory (HBM)," the BOK said. "The global semiconductor market is expected to continue its expansionary trend for a considerable period."
The report comes amid growing concerns over debt-funded AI infrastructure spending, elevated market valuations and the potential for a memory chip oversupply, triggering selloffs in major technology stocks.
In South Korea, chipmakers Samsung Electronics Co. and SK hynix Inc. have posted sharp declines in recent days.
Samsung Electronics fell more than 9 percent on July 2, while SK hynix dropped nearly 15 percent.
Last Tuesday, Samsung Electronics shares fell 7 percent and SK hynix lost 6 percent even after Samsung reported nearly 90 trillion won (US$59.9 billion) in second-quarter operating profit, beating market expectations.
"There is uncertainty surrounding the pace and scope of AI technology adoption, as well as its profitability," the BOK said. "Major investment banks, including J.P. Morgan, Goldman Sachs and Morgan Stanley, generally forecast that the global semiconductor market will remain robust at least through next year."
What to Watch
AI outlook — possibilities, not facts
Global semiconductor market expansion to continue at least through next year.
Likely · Within months
Open Questions
- What is the exact timeline for supply expansion?
- How will custom product demand evolve?
- What is the long-term profitability of AI adoption?
