South Korea is distinguishing itself as one of the few economies globally experiencing productivity gains driven by artificial intelligence, although tensions between the U.S. and China regarding semiconductor technology could pose a threat to its growth, according to analysts from Bank of America.
A recent study reveals that the pill form of Novo Nordisk’s drug Ozempic can significantly reduce the risk of heart attacks and strokes.
The semiconductor sector represents 17% of South Korea’s exports, and the nation has emerged as the biggest beneficiary of the AI surge, with export growth exceeding 50% year-over-year, as stated in a report by Bank of America Global Research. The analysts predict that South Korea’s substantial investments in AI research and development, along with a rising number of AI-related patents, will enhance its standing in the adoption of AI in the long run.
However, analysts caution that geopolitical factors could impact the semiconductor supply chain, especially with the escalating tensions between the U.S. and China, which could hinder AI growth in South Korea. Although the country has managed to diversify its chip exports from China to other regions, the report indicates that China and Hong Kong accounted for over 30% of South Korea’s chip exports in 2023, with exports to the U.S. being roughly equal.
Bank of America’s analysts warned that if geopolitical tensions escalate and the U.S. imposes further trade restrictions on advanced or AI-related chip exports to China, it could severely affect Korea’s memory semiconductor exports.
Additionally, South Korean chip manufacturers rely on China for various components and equipment necessary for chip production. Should tensions disrupt the supply chain, it would become more challenging for South Korean companies to acquire the essential tools for chip production.
Reports indicate that the U.S. has requested South Korea to limit exports to China of technology and equipment used for manufacturing memory chips and advanced logic chips, particularly those with higher specifications than 14-nanometer logic chips and 18-nanometer DRAM memory chips. South Korean officials are reportedly considering the U.S. request, weighing the potential consequences for major firms like Samsung and SK Hynix, which operate in China, South Korea’s largest trading partner.
Simultaneously, the Biden administration is said to be contemplating the implementation of an export control known as the foreign direct product rule against allies that continue to sell chipmaking tools and equipment to China. This rule prohibits the export of any goods to any country if they are produced with a certain percentage of U.S. intellectual property components.