AI chip boom lifts South Korea exports

South Korea’s merchandise exports delivered a sharp upside surprise in May, rising 53.2% year-on-year to a record $87.75 billion, according to preliminary trade data released around June 1. The performance marks a four-decade high in export growth and underscores a powerful rebound in external demand for the country’s key technology products.

The export upswing has been broad in value terms but highly concentrated by sector, with technology-related items, particularly semiconductors and computers, driving much of the increase. This concentration has important implications for both trade dynamics and financial markets.

Semiconductor shipments surged 169.4% year-on-year in May to a record monthly high of $37.16 billion. This reflects strong global appetite for advanced chips used in data centres and artificial intelligence applications. The scale of the increase made semiconductors the single largest contributor to South Korea’s export expansion in May.

Computer exports climbed even faster in percentage terms, soaring 290.7% in May. Authorities attributed this jump to robust demand for AI servers, reinforcing the view that the global build-out of AI-related infrastructure is feeding directly into South Korea’s export base.

While technology exports posted exceptional gains, some traditional sectors lagged. Automobile exports fell 5.9% in May, with officials citing supply disruptions in the Middle East and the impact of U.S. tariffs as key headwinds for the auto industry.

The strong export performance translated into a record monthly trade surplus of $26.95 billion in May. Imports also increased, rising 20.8% to $60.80 billion, but the pace of export growth far outstripped inbound shipments.

By destination, South Korea saw sizeable gains in shipments to its two largest markets. Exports to the United States rose 59.1% in May, while exports to China climbed 80.9%. In contrast, shipments to the Middle East declined 7.7%, aligning with reported supply issues affecting automobile exports to that region.

The export boom has coincided with a sharp rally in South Korean equities. The benchmark KOSPI index rose more than 2% on the morning of June 1 to reach a record high. The index has gained more than 100% so far this year, reflecting strong investor interest in companies linked to the semiconductor and broader technology supply chain.

Market observers see the alignment of record exports, particularly in AI-related hardware, with record equity prices as a sign that external demand is feeding through to corporate earnings expectations. The technology sector’s outperformance has been a key feature of the broader market advance.

Policymakers have started to factor the improved trade and market environment into their forecasts. Last week, the Bank of Korea raised its 2026 economic growth projection to 2.6% from 2.0%. The upgrade reflects a more optimistic view of medium-term prospects as export conditions and investment trends improve.

Officials nonetheless highlight that the current upswing is heavily reliant on semiconductors and AI-driven hardware. This concentration underscores both the strength of South Korea’s position in global technology supply chains and its exposure to sector-specific cycles in external demand.