BoK flags AI risk to Korea chip exports

Night city skyline suggesting uneven growth tied to AI risk for Korea chip exports and GDP outlook

Key Points

01BoK models chip exports falling $50bn–$100bn below forecasts if AI capex slows
02Pessimistic scenario would trim Korea’s 2027 GDP growth by about 0.4 point
03Current account surplus seen well below an initial $430bn projection
04Scenario assumes 10% drop in chip prices amid uncertainty over AI demand

BoK models major downside risk for chip exports

South Korea’s central bank has warned that the country’s semiconductor exports could fall sharply below earlier expectations if global AI investment cools. In a pessimistic scenario submitted to lawmakers, the Bank of Korea estimates that chip exports could be $50 billion to $100 billion lower than previously forecast next year if capital spending on artificial intelligence infrastructure by major US technology firms slows.

The central bank’s modelling treats a slowdown in AI-related investment as a key external shock for South Korea’s trade outlook. The projected export shortfall focuses on semiconductor shipment volumes and values, reflecting the sector’s outsized role in the country’s economy.

Impact on growth and external balances

Under this pessimistic scenario, the Bank of Korea estimates that the sudden weakness in semiconductor exports would shave approximately 0.4 percentage point off South Korea’s GDP growth rate next year. The reduction reflects both lower external demand and weaker pricing conditions for Korean chipmakers.

The central bank also expects the export slump to weigh heavily on the country’s external accounts. It projects that the resulting current account surplus would fall well below an earlier projection of $430 billion for 2027, underscoring the importance of sustained global demand for South Korean semiconductors.

Assumptions on prices and AI spending

The downside projection assumes a 10% decline in Korean semiconductor unit prices, amplifying the hit from lower export volumes. The combination of weaker pricing and reduced shipment volumes frames the scale of potential revenue losses for the industry in the event of softer AI-related demand.

The scenario is tied to capital expenditure plans at five large US technology companies: Amazon (AMZN), Google (GOOGL), Microsoft (MSFT), Meta (META) and Oracle (ORCL). Their combined capex is estimated at $80 billion this year, up from $40 billion last year, and is projected to rise to $110 billion next year, driven in part by AI infrastructure build-out.

Reliance on chips and AI demand uncertainty

The Bank of Korea’s assessment highlights South Korea’s heavy reliance on semiconductors, which account for roughly half of the nation’s exports. This concentration makes the economy particularly sensitive to swings in global demand for memory chips and AI computing hardware.

The central bank notes that considerable uncertainty remains over the trajectory of AI demand and the broader memory-chip business cycle. While current investment plans by major US firms point to continued growth, the downside scenario illustrates how a moderation in AI spending could translate into substantial export and growth risks for South Korea.

Key Takeaways

01South Korea’s growth outlook is tightly linked to semiconductor exports, making AI investment trends a critical macro risk factor.
02A relatively modest assumed 10% decline in chip prices, combined with weaker demand, translates into a large potential export shortfall.
03The gap between strong current AI capex plans and the Bank of Korea’s pessimistic scenario underscores high uncertainty in the chip cycle.

References