South Korea faces potential US$100bn chip export hit if AI demand weakens

South Korea's crucial semiconductor sector faces significant downside risks if the global artificial intelligence boom loses momentum, according to analysis by the Bank of Korea.

The central bank's modelling of a pessimistic scenario suggests chip exports could decline by as much as US$100 billion should AI-related spending growth falter. This projection underscores the extent to which South Korea's economic fortunes have become intertwined with the strength of international demand for advanced semiconductors used in AI applications.

South Korea is a major player in global chip manufacturing, with major companies such as Samsung Electronics and SK Hynix producing memory chips essential for AI infrastructure. The sector accounts for a substantial portion of the country's export revenues and contributes significantly to gross domestic product.

The Bank of Korea's warning reflects broader concerns across Asia about the sustainability of the current AI investment cycle. Policymakers and economists have expressed caution about whether the extraordinary spending on AI infrastructure will continue at its current pace, or whether market saturation and moderating growth could trigger a correction.

The analysis adds to mounting pressures on South Korea's export-dependent economy, which already faces headwinds from slowing global growth and intensifying competition in key manufacturing sectors.