The wave of AI drives South Korea's export growth by 48%, with semiconductors as the core engine of trade growth.

South Korea's strong export momentum continued in April, despite the escalating risks of rising energy prices sparked by the turmoil in Iran, semiconductor demand remained strong and continued to support export growth. The Ministry of Trade said on Friday that after adjusting for working-day differences, exports increased by 48% compared to the same period last year; unadjusted exports also increased by 48%, compared to the revised 49.2% growth in March. Imports during the same period increased by 16.7%, resulting in a trade surplus of $23.8 billion. The semiconductor industry remains the absolute core engine driving South Korea's trade growth. Industry giants such as Samsung Electronics and SK Hynix have benefited from the premium and explosive demand for high-end products such as high-bandwidth memory (HBM), driving the semiconductor export price index to the fastest growth rate in decades. The rigid demand driven by technological changes, as orders from mainstream AI accelerator producers have been scheduled until 2025 or even further, successfully offset the pressure brought by the slowdown in traditional manufacturing sectors such as automobiles and steel exports. Data shows that despite escalating external risks, South Korea's export engine is still resilient. The conflict in Iran has pushed up oil prices, increasing import costs and exacerbating inflationary pressures on the South Korean economy, which heavily relies on energy imports. For policymakers, the differentiation between strong exports and rising cost pressures makes the economic outlook even more complex. Rising oil prices and a weakening South Korean won are expected to increase inflation and hamper growth, a challenge already acknowledged by the new Bank of Korea Governor, Lee Ju-yeol. South Korea's GDP grew by 1.7% in the first quarter of this year, the fastest growth in over five years, reversing the contraction expected by the end of 2025. However, the strong performance of April exports masks underlying vulnerabilities. Private consumption in the first three months of this year has only seen a slight increase, and the increase in energy costs related to the Iran conflict and the depreciation of the South Korean won further burden households and businesses. Decision-makers are now facing more complex trade-offs: while external demand for the semiconductor industry remains strong, confidence in the domestic market is weakening. Furthermore, import prices surged significantly in March, highlighting the speed at which external shocks are transmitted to the domestic economy. This trend may prompt the central bank to remain cautious when evaluating whether inflationary effects are just temporary. Due to concerns about energy supply disruptions and weaker economic prospects, consumer confidence in South Korea plummeted in April for the first time in a year into pessimistic territory. Inflation expectations have also risen to one of the highest levels in two years, highlighting growing concerns about price increases even as domestic demand weakens. Former Bank of Korea Governor Lee Choong-yong suggested that the central bank is inclined to ignore short-term shocks, but if price pressures become sustained, the central bank may respond.