Chip Exports Drive South Korea’s Economy to Stronger-Than-Expected Growth

Dragon Media News Desk

South Korea’s economy expanded faster than expected in the second quarter of 2026, supported by strong global demand for artificial intelligence chips, semiconductor exports and increased investment in research and development.

Preliminary data released by the Bank of Korea on Thursday showed that inflation-adjusted real gross domestic product grew 0.6 percent in the April–June period from the previous quarter.

The result exceeded the market expectation of around 0.4 percent and the central bank’s own 0.2 percent forecast issued in May. Although growth slowed from the 1.8 percent expansion recorded in the first quarter, the economy remained stronger than anticipated.

On a year-on-year basis, South Korea’s economy grew 3.7 percent in the second quarter, compared with 3.8 percent in the first quarter.

Despite continued tensions in the Middle East and pressure linked to energy prices, demand for semiconductors and chips used in artificial intelligence technologies supported the export-driven economy.

Exports of goods and services rose 1.4 percent from the previous quarter, led by semiconductors, machinery and industrial equipment.

Imports increased 0.8 percent as demand grew for motor vehicles, machinery and equipment. Net exports contributed 0.3 percentage points to quarterly economic growth.

Investment in intellectual property products rose 3.3 percent as spending on research, development and software increased. It was the fastest quarterly rise since the first quarter of 2012.

Private consumption increased 0.5 percent, supported by purchases of durable goods such as household electrical appliances and higher spending on dining and accommodation services.

Facility investment rose 0.2 percent as semiconductor manufacturers continued to procure production equipment. Government consumption also increased 0.2 percent, supported by higher health insurance-related spending.

Construction investment, however, declined 0.2 percent because of weaker civil engineering activity.

By industry, manufacturing output grew 1.2 percent, led by computers, electronic products and optical equipment.

Service-sector production increased 1.1 percent, supported by wholesale and retail trade, accommodation and food services, and information technology.

Construction output fell 1.9 percent, while production in agriculture, forestry and fisheries contracted 7.1 percent.

Real gross domestic income increased 3.6 percent from the previous quarter and 15.6 percent from a year earlier. The annual increase was the highest since the first quarter of 1988.

The central bank’s data showed that national purchasing power grew faster than production, supported by improved terms of trade and stronger prices for export products, including semiconductors.

The Bank of Korea raised its policy rate by 0.25 percentage points to 2.75 percent in July. Stronger-than-expected growth and inflationary pressures have increased market attention on the direction of monetary policy in the coming months.

South Korea’s finance ministry had earlier raised its 2026 growth forecast by one percentage point to 3 percent. The Bank of Korea had projected growth of 2.6 percent in May.

The second-quarter data showed that semiconductor exports and research investment linked to artificial intelligence have become major drivers of South Korea’s economic expansion.

However, weakness in the construction sector, instability in the Middle East and energy prices remain key risks to the economic outlook.