Chip exports drive South Korea’s fastest growth in years

South Korea’s economy grew 1.7% in the first quarter, driven by strong chip exports and a rebound in investment.

The result beat the central bank’s 0.9% forecast and marked the fastest quarterly expansion in five and a half years.

Exports rose 5.1% and imports gained 3%, while construction investment increased 2.8% and facility investment climbed 4.8%.

🧠 Food for thought

Implications, context, and why it matters.

South Korea’s recent economic strength comes from more than higher chip exports. It signals a shift toward High Bandwidth Memory (HBM), an advanced memory chip used in AI servers 1.
Trade flows have changed with it. Exports to Taiwan, home to Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s biggest contract chipmaker, and a hub for advanced chip packaging, reached US$27.076 billion. Taiwan’s share of South Korea’s memory exports rose from about 6% in 2020 to 28.6% last year 2.
That was close to China’s 32.7% share. The gap shows South Korea is relying less on its longtime top market for memory semiconductors 2.
The end buyer for HBM is often a U.S. company such as Nvidia, the leading supplier of AI chips. That means AI demand is reshaping the supply chain 2.

Making more high margin HBM has a cost. It is tightening supplies of standard memory chips used in servers, PCs, and other consumer electronics 3.
That squeeze is lifting prices for everyday devices. Dell and HP have warned about higher costs 3. International Data Corporation (IDC), a market research firm, expects global smartphone shipments to fall 12.9% in 2026. It sees PC shipments dropping 11.3%, while revenue holds up better as memory prices raise average selling prices 4.
The upswing also makes rate decisions harder. The Bank of Korea has kept its base rate at 2.5%, even with stronger economic activity 5.
Officials also face outside risks tied to the Middle East conflict, which could push up inflation while slowing growth 6.