South Korea—Growing AI demand supports export upswing
Robust demand for South Korean semiconductors is supporting export growth in Australia’s third largest export market (Chart). The semiconductor rebound reflects increasing demand for advanced microprocessors and memory chips that are essential for the development of artificial intelligence (AI) applications. In particular, the rise of ChatGPT and other AI applications is significantly increasing demand for microchips; to the benefit of South Korea’s Samsung Electronics and SK Hynix—the world’s two largest manufacturers of memory chips.
Global demand for semiconductors is likely to continue growing alongside expansion of the AI market. GlobalData forecasts that the overall AI market will be worth US$909 billion by 2030 (about the size of Switzerland’s economy today), growing at a compound rate of around 35% per year between 2022 and 2030. Semiconductors are also an important input in consumer electronics (including smartphones), 5G telecommunications and electric vehicles—all of which have a robust demand outlook.
South Korea’s dominance in manufacturing, high-tech goods and semiconductor exports (around 20% of the global semiconductor market) makes it a barometer for global demand. The upswing in South Korea’s exports therefore suggests continued recovery in global trade. Indeed, recent IMF forecasts suggest global trade will recover to 3% in 2024, up from 0.3% in 2023, but still well below the historical (2000–19) annual average growth rate of 4.9%. The performance of South Korean semiconductor exports is also a bellwether for Asian manufacturing, given electronics are the largest contributor to export revenues across Asia (fluctuating around 30% of total exports). Although Southeast Asian countries are small producers of advanced microprocessors and memory chips, their role in downstream services such as assembly, testing, sorting and packaging means these countries benefit from AI-driven demand. That’s positive for Australia given these countries are important export markets.
