AI chip demand to lift Korea's exports in 2026, but autos face headwinds

SEOUL, January 06 (AJP) - Semiconductors, which powered South Korea’s exports last year amid expanding artificial intelligence demand, are expected to remain the main growth driver in 2026 as the chip upcycle continues, while auto exports could lose momentum, according to the Ministry of Trade, Industry and Energy on Tuesday.

South Korea’s annual exports totaled $709.7 billion last year, surpassing $700 billion for the first time. The milestone came seven years after exports first exceeded $600 billion in 2018.

The government is targeting exports of $700 billion again this year, with semiconductors at the core of its strategy. Chip exports rose 22.2 percent from a year earlier to $173.4 billion in 2025, supported by steady demand for AI chips and a sharp increase in fixed prices for memory semiconductors.

"Semiconductors are likely to continue lifting overall exports as the AI-driven chip upcycle persists," a ministry official said. "With South Korean companies maintaining a technological edge, the structure of global demand points to further growth in chip shipments."

Exports could gain additional support if shortages of commodity memory chips persist. As chipmakers shift production capacity toward high-bandwidth memory, prices for older, general-purpose memory products are expected to remain elevated for the time being.

Wireless communications devices and display exports are also expected to stay in positive territory, the ministry said, citing continued growth in the foldable smartphone market.

Consumer goods exports, including food and beauty products, are also forecast to expand, supported by the global popularity of South Korean culture and rising trust in Korean brands. The ministry said fast-growing consumption among younger buyers, particularly in emerging markets, is increasing the share of consumer goods in total exports.

By contrast, auto exports may slow this year. Auto shipments rose 1.7 percent from a year earlier to $72.0 billion in 2025, as strong demand from the European Union offset weaker exports to the United States.

This year, risks related to U.S. tariffs are expected to become more pronounced. With a 15 percent item-specific tariff confirmed in the world’s largest auto market, South Korean automakers would face the same conditions as competitors, though analysts warn profitability could deteriorate over the medium to long term.

Additional uncertainties include the European Union’s introduction of a life-cycle greenhouse gas assessment system for vehicles and China’s expanding electric vehicle exports.

The outlook for oil products and petrochemical exports is also uncertain. Oil product export prices are falling as demand weakens amid a global economic slowdown and declining crude prices.

Petrochemicals, which are undergoing restructuring due to oversupply, may struggle to expand exports as operating rates fall despite rising capacity. Steel exports could face further pressure from stagnant demand and the spread of protectionist measures.

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