A chip-led trade surge, with a split economy underneath
South Korea’s trade engine is finishing 2025 in strong shape—but the strength is increasingly concentrated in semiconductors.
A Reuters poll of economists estimates South Korea’s December exports rose 9.0% year-on-year, an acceleration from 8.4% in November and a likely seventh consecutive month of annual export growth. Reuters Economists said semiconductor shipments remain the dominant driver, supported by global demand tied to the artificial intelligence investment cycle. Reuters
In parallel, the trade ministry reported that annual exports surpassed $700 billion for the first time, reaching the milestone at 04:03 GMT on Dec. 29—a symbolic marker for an economy where external demand heavily shapes growth, corporate earnings and fiscal room. Reuters
What the December snapshot is signaling
Early-month indicators underline the same pattern: in the first 20 days of December, total exports rose 6.8% from a year earlier, with semiconductors up 41.8%, offsetting declines in autos, ships and steel, Reuters reported. Reuters The Reuters survey also projected imports up 2.5% and a monthly trade surplus of $10.0 billion, which would be the widest since September 2017. Reuters
That mix—exports outpacing imports—typically helps support the current account and can ease pressure on the currency over time. But the composition matters: right now, the surplus is being earned disproportionately by a single cluster of high-value technology exports.
Why chips are carrying the load
Standard Chartered described semiconductors as “the anchor,” citing AI-related demand and improving conditions in legacy memory pricing. Reuters Citi economists, also cited by Reuters, expect semiconductor exports to remain strong in 2026, projecting a sharp year-on-year increase driven by the global AI capex cycle. Reuters
For South Korea, that matters beyond headline trade. Chips sit at the center of investment plans, hiring intentions, and equity-market leadership—especially for heavyweight exporters that dominate local indices.
The weak spots: non-chip exports under pressure
Economists cautioned that many “old economy” categories—steel, machinery and automobiles—remain sluggish, reflecting U.S. tariffs and intensifying competition. Reuters Meritz Securities economist Stephen Lee summarized the imbalance bluntly: “There is a lack of momentum in other products,” adding that a broader manufacturing capex revival is “hard to expect in the near future.” Reuters
This divergence is critical for interpreting the $700 billion milestone. A record number can coexist with weakness in wide swaths of manufacturing, especially if one sector’s pricing power and volumes are doing most of the work.
Market and policy implications
The trade story lands as investors remain highly sensitive to AI-linked supply chains. In regional markets, tech-heavy benchmarks have been prone to outsized moves when data reinforces the durability of AI demand. Even so, concentration risk is rising: the more exports depend on semiconductors, the more macro outcomes hinge on memory pricing, data-center buildouts, and the pace of next-generation computing investment.
On the policy side, a chip-led export boom can strengthen near-term growth and tax revenues, but it can also complicate industrial strategy. If tariff exposure and competitive pressure continue to weigh on autos, steel, and machinery, Seoul may face renewed calls for targeted support, market diversification, and trade diplomacy—especially where tariff regimes reshape supply chains.
What to watch next
South Korea is scheduled to release full December trade figures on Jan. 1, 2026. Reuters Three details will matter most:
Breadth: whether non-chip categories stabilize or continue to drag.
Destination mix: whether shipments to major partners strengthen evenly.
Surplus quality: whether the surplus widens on volume growth rather than price effects alone.