Korean Economy Outpaces Forecasts on AI Chip Demand

South Korea’s gross domestic product grew faster than economists predicted in the July-September period. Advance estimates released by the Bank of Korea on Tuesday showed the economy expanded 1 percent from the previous quarter. On an annual basis, growth reached 3.4 percent. The central bank had projected a slower pace of 0.3 percent in August.

Strong demand for artificial intelligence hardware fueled the performance. Exports accounted for roughly 45 percent of the country’s GDP and rose 2.3 percent during the quarter. The Bank of Korea attributed this increase to shipments of semiconductors, machinery, and electrical equipment. Investment in facilities increased by 4.1 percent, while spending on intellectual property grew by 2.3 percent. Construction investment also climbed by 0.7 percent.

Consumer spending did not keep pace with business activity. Private consumption dropped by 0.2 percent during the third quarter. This divergence suggests that the economic lift came primarily from the production and export sectors rather than domestic household spending.

Finance Minister Lee Hyoung-il stated earlier this month that he expects 2026 growth to land between 3.4 percent and 3.6 percent. If realized, this would mark the strongest expansion since 2011, excluding the pandemic years. The 2025 growth rate of 1 percent was the slowest since the pandemic began.

South Korea maintains a dominant position in the global memory chip market. The country is home to Samsung Electronics and SK Hynix, which together control approximately 80 percent of the high-bandwidth memory market and 60 percent of the dynamic random-access memory sector. September export data from the Korea Customs Service showed a year-on-year surge of 83.5 percent to $120.9 billion, with chips comprising nearly half of all shipments.