Strong demand for storage chips offset tariff pressure, South Korea's exports in the first 20 days of October saw a significant rebound.

Benefitting from the continued strong demand for semiconductor products, South Korea saw a significant increase in exports in the first 20 days of October, despite the drag from US tariff policies and data distortion caused by holidays. Data released on Tuesday showed that South Korea's exports in the first 20 days of October fell by 7.8% year on year, while imports dropped by 2.3%, resulting in a trade deficit of $2.8 billion. However, after adjusting for the number of working days, exports surged by 9.7% year on year. The latest resilient export data highlights the leading players in high-end manufacturing such as semiconductors, especially in the crucial area of memory chips for South Korea's economic growth. With the continuous expansion of storage chip demand driven by the global wave of AI data center construction, South Korea is heading towards an unprecedented super cycle. Memory chips are crucial for South Korea's exports and economy. South Korea is home to the world's two largest memory chip manufacturers - SK Hynix and Samsung, with global HBM leader SK Hynix becoming Nvidia's core HBM supplier. Samsung, another storage giant in South Korea, is one of the world's largest technology companies and a major supplier of consumer-grade DRAM and NAND storage chips, as well as enterprise-grade NAND storage components. Samsung has also recently become a supplier of HBM storage systems for Nvidia's flagship AI compute cluster products - the GB200/GB300 series. With breakthrough AI applications like AI smart bodies penetrating various industries around the world, the future demand for AI chip infrastructure such as AI chips, HBM storage systems, enterprise SSDs, high-performance networks, and power equipment will be enormous. In addition, the AI boom on the edge side will drive the demand for consumer-grade DRAM and NAND storage towards a new growth curve. It is worth noting that South Korea's export rebound occurred in the first 20 working days of October, which were fewer than the same period last year, with reduced export activity due to holidays from October 3 to 9. Specifically, semiconductor exports surged by 20.2%, while ship exports increased by 11.7%. Meanwhile, automobile exports plummeted by 25% as the US tariff hike began to impact the industry. Following US President Trump's 15% tariff on South Korean goods in August, the ongoing impact of higher US tariffs continues to ferment, and the 25% tariff on automobiles is still in effect as the executive order to reduce tariffs has not been signed. Some exporters rushed to ship goods before the tariff increase earlier this year, but this temporary boost is now fading. Final negotiations on the trade agreement reached between South Korea and the US in July have stalled over details of a $350 billion investment fund linked to the agreement. South Korea is seeking ways to mitigate the potential outflow of funds on the exchange rate, while the lack of a formal trade agreement has heightened uncertainty about future exports to the US. The US is South Korea's main export market, accounting for over 40% of South Korea's GDP, making a formal trade agreement crucial for boosting economic stability and restoring confidence in the manufacturing industry. This early trade data released on Tuesday will be the final key indicator before the South Korean central bank's monetary policy meeting on Thursday. At that time, the Bank of Korea's Monetary Policy Committee will decide on the direction of interest rates. Despite a slowdown in export growth, most economists expect the Bank of Korea to keep rates unchanged to strike a balance between export risks, rising household debt, and continuously increasing apartment prices in Seoul.