According to a recent report from Bank of America, South Korea stands out as one of the few economies globally experiencing a productivity boost resulting from artificial intelligence (AI). The country’s semiconductor industry plays a crucial role in this success, making up 17% of its exports. This growth has been propelled by a remarkable surge in AI-related exports, which have increased by over 50% year-over-year.
Analysis from Bank of America notes that South Korea is well-positioned for long-term growth in AI, thanks to significant investments in research and development and a rising number of AI-related patents. However, potential geopolitical tensions, particularly between the U.S. and China, may pose a threat to this positive trajectory.
Despite efforts to diversify chip exports away from China, the report indicates that over 30% of South Korea’s chip exports went to China and Hong Kong in 2023. Additionally, the country relies on China for essential chipmaking components and equipment. Should tensions escalate—especially concerning U.S. requests to limit exports of advanced chip technology to China—South Korean firms like Samsung and SK Hynix could face serious challenges.
The Biden administration is reportedly considering implementing export controls aimed at allies that continue to provide chipmaking tools to China, which could further complicate matters for South Korean manufacturers.
Despite these challenges, South Korea’s foundational strength in AI innovation and its active pursuit of technological advancement suggest that the nation is equipped to navigate external pressures. With a commitment to enhancing its capabilities in the semiconductor and AI sectors, South Korea remains a beacon of hope in global economic growth amidst uncertainty.
Overall, while geopolitical tensions pose real challenges, South Korea’s strategic moves and investments in AI may ultimately fortify its position as a leader in technology and productivity advancement.