South Korea is experiencing a notable surge in productivity thanks to advancements in artificial intelligence (AI), according to analysts from Bank of America. This growth aligns with the country’s strong presence in the semiconductor industry, which constitutes 17% of its overall exports. In the past year, South Korea has benefitted significantly from the AI boom, achieving over a 50% increase in exports. Experts believe that ongoing investments in AI research and development, along with an uptick in AI-related patents, will solidify South Korea’s leading role in the global AI landscape.
However, this promising outlook is tempered by concerns regarding geopolitical tensions, particularly between the United States and China, which could potentially disrupt the semiconductor supply chain. Bank of America cautions that as South Korea has redirected a portion of its chip exports away from China, the fact remains that both China and Hong Kong still represent over 30% of South Korea’s chip exports as of 2023, with similar figures for exports to the U.S.
The analysts highlight that if the U.S. escalates trade restrictions on advanced chips destined for China, it could severely impact South Korea’s memory semiconductor sector. The reliance of South Korean chip manufacturers on Chinese components and equipment complicates matters, as any disruption could hinder their ability to produce chips effectively.
Presently, U.S. officials are urging South Korea to impose further limitations on exports to China concerning equipment and technology vital for manufacturing advanced memory and logic chips. This request is being weighed by South Korean authorities, who are cognizant of the potential repercussions it could have on major domestic players like Samsung and SK Hynix, both of which operate within the Chinese market.
As the situation evolves, the Biden administration is also contemplating implementing tighter export controls—specifically the foreign direct product rule—to allies that continue providing chipmaking tools to China. This rule would prohibit the export of products manufactured using a certain percentage of U.S. intellectual property.
In summary, while South Korea stands to gain from the AI boom, it must navigate the complex landscape of international trade and geopolitical tensions that could affect its semiconductor industry. Optimistically, the nation’s strong commitment to AI development may help it adapt to these challenges and maintain its leadership in the global technology arena.