South Korea's Economy Outpaces Forecasts on Chip Demand

South Korea's economy grew faster than analysts predicted in the third quarter.

The Bank of Korea reported that gross domestic product expanded 1 percent from the previous quarter. That represents a 3.4 percent increase compared to the same period last year. The central bank had previously projected a much slower 0.3 percent quarterly gain in August.

Exports rose 2.3 percent quarter-on-quarter, accounting for roughly 45 percent of the nation's GDP. Semiconductors, machinery, and electrical equipment led the surge. Investment in facilities climbed 4.1 percent, while spending on intellectual property increased 2.3 percent. Construction investment edged up 0.7 percent. Private consumption, however, fell 0.2 percent despite the strong performance in other sectors.

Finance Minister Lee Hyoung-il stated earlier this month that he expects full-year growth to reach between 3.4 and 3.6 percent. That projection would mark the strongest performance since 2011, excluding the pandemic years. The 2025 economy expanded by just 1 percent, the slowest rate since the pandemic began.

South Korea benefits from a global shortage of memory chips used in artificial intelligence systems. The country is home to Samsung Electronics and SK Hynix, two of the three largest memory chip manufacturers in the world. Together, they control about 80 percent of the high-bandwidth memory market and 60 percent of the dynamic random-access memory market.

Customs data shows September exports surged 83.5 percent year-on-year to reach $120.9 billion. Chips accounted for nearly half of all shipments during that month.