South Korea’s GDP growth beats forecasts amid AI boom
South Korea's economy grew 3.4 percent year-on-year in the July-September quarter, exceeding expectations as booming demand for AI chips drove exports higher.
The Bank of Korea reported Tuesday that GDP expanded 1 percent on a quarterly basis, significantly outpacing the central bank's August forecast of 0.3 percent growth. This robust performance was fueled by strong semiconductor demand amid the global artificial intelligence boom.
Exports, which constitute approximately 45 percent of South Korea's GDP, rose 2.3 percent quarter-on-quarter, driven by semiconductors, machinery and electrical equipment. Investment in facilities and intellectual property also increased, rising 4.1 percent and 2.3 percent respectively, while construction investment edged up 0.7 percent.
AI Chip Dominance
South Korea has capitalized on the AI boom amid a global shortage of memory chips. The country is home to two of the world's three largest memory chip makers, SK Hynix and Samsung Electronics, which together control roughly 80 percent of the global market for high-bandwidth memory and 60 percent of the market for dynamic random-access memory.
The latest results put the South Korean economy well on track to achieve its biggest economic expansion in more than a decade.
Consumer Concerns
Despite the strong performance in exports and investment, private consumption fell 0.2 percent in the quarter. South Korean Finance Minister Lee Hyoung-il said earlier this month that he expected growth to reach 3.4-3.6 percent in 2026, which would be the strongest performance since 2011, excluding the COVID-19 pandemic.
South Korea's economy grew just 1 percent in 2025, its slowest expansion since the pandemic. The country's exports in September surged 83.5 percent year-on-year to $120.9 billion, with chips accounting for nearly half of all shipments, according to the Korea Customs Service.
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