Bank of America analysts have noted that South Korea is experiencing a significant productivity boost due to advancements in artificial intelligence (AI). The nation has emerged as a key player in the AI sector, achieving over a 50% increase in exports year-over-year, with the semiconductor industry alone accounting for 17% of its total exports. This growth is largely attributed to South Korea’s substantial investments in AI research and development and its increasing number of AI-related patents.
However, challenges loom on the horizon. Rising geopolitical tensions between the U.S. and China, particularly concerning the semiconductor supply chain, may threaten South Korea’s growth in this area. Despite efforts to diversify chip exports away from China, the report indicates that over 30% of South Korea’s semiconductor exports still go to China and Hong Kong, presenting a potential risk if trade tensions escalate.
South Korean chip manufacturers rely on imports from China for crucial components and equipment needed for production. The U.S. has requested that South Korea limit exports to China of certain chipmaking technologies, specifically targeting advanced memory chips and logic chips. South Korean officials are currently weighing the implications of the U.S. request, considering the potential impact on major domestic firms like Samsung and SK Hynix, both of which have substantial operations in China.
Adding to the complexity, the Biden administration is exploring export controls that would affect allies participating in the semiconductor supply chain. This could impose additional restrictions on the export of goods produced using U.S. intellectual property.
Despite these challenges, South Korea’s proactive investment in AI and innovation offers hope for its continued leadership in the sector. By adapting to the dynamic global landscape and fostering local talent and technology, South Korea can potentially mitigate the risks associated with geopolitical tensions and maintain its competitive edge.
In summary, while geopolitical tensions could present hurdles for South Korea’s semiconductor and AI sectors, the country’s commitment to innovation and technology growth suggests a path forward that can sustain its progress and leadership in the industry.