The demand for AI continues! South Korea's exports in July hit the second highest in history, with chip exports exceeding $40 billion for two consecutive months.

Data released on Saturday showed that July exports surged 62.8% year-on-year to $98.89 billion, marking South Koreas second-highest monthly figure on record, trailing only the historical peak of $102.25 billion achieved in June. After adjusting for working days, the year-on-year growth rate for exports reached 69.6%. Although this growth rate fell from a revised 70.7% in June, it was significantly above economists median forecast of 59.5%. Imports in July grew by 26.5% to $68.56 billion, resulting in a trade surplus of $30.32 billion, surpassing the $30 billion mark for the second consecutive month. The "super cycle" for chips continues: Semiconductor exports skyrocketed by 178.8% to $41 billion. Semiconductors have once again become the absolute core engine of South Korea's exports. In July, semiconductor exports reached $41.01 billion, a year-on-year leap of 178.8%, breaking the $40 billion threshold for the second month in a row. While semiconductor exports were recorded at $44.8 billion in June, July saw a slight decline but still remained the second highest on record. The continued ramp-up in AI infrastructure investment is the key driver of chip demand. The fixed prices for DRAM and NAND flash memory remain high, coupled with an explosive demand for server memory driven by the boom in AI adoption and inference, which supports the strong performance of semiconductors. Samsung Electronics stated on Thursday that the semiconductor shortage is expected to continue until 2028; SK Hynix's net profit during the same period surged thirteenfold to a historic peak. Exports of computer-related products saw a year-on-year increase of 404% to $4.79 billion, with demand for enterprise-level SSDs persisting amid ongoing investments by major tech companies in AI infrastructure. Exports of wireless communication devices grew by 51% to $1.81 billion, driven by robust sales of high-end smartphones such as the Galaxy S26 series. The export structure is showing a trend toward diversification. Aside from semiconductors, other categories collectively saw a year-on-year growth of approximately 26%. Out of 20 major export categories, 19 achieved positive growth, except for household appliances. Car exports increased by 7% to $6.2 billion, stimulated by global demand for eco-friendly models such as hybrids; petroleum products rose by 34.1% to $5.7 billion due to rising oil prices; petrochemical products grew by 10.3%; and ship exports surged by 46.9%. Minister of Trade, Industry and Energy, Lee Chang-yang, noted that the effectiveness of export diversification is becoming increasingly evident. Exports to China nearly doubled, while exports to the U.S. are driven by investments in AI data centers. In terms of export destinations, AI-driven semiconductor demand shows broad support globally. Exports to China: increased by 96.2% year-on-year to $21.68 billion, breaking the $20 billion mark for the second consecutive month, primarily driven by chips, non-ferrous metals, and petroleum products. Exports to the U.S. rose by 68.7% to $17.43 billion, propelled by investments in AI data center projects by major tech companies. Exports to the Middle East, previously affected by conflicts in the region, also saw their first growth since January in July. Strong exports provide support for further tightening by the central bank. The July export data provides new evidence for the Bank of Koreas monetary policy stance. Last month, the Bank of Korea raised the benchmark interest rate by 25 basis points to 2.75%, marking the first increase since the beginning of 2023. Bank Governor Rhee Chang-yong later indicated that the decision-making body still believes it is necessary to further raise rates, but the timing and pace will depend on inflation, economic growth, and financial stability conditions. In terms of inflation, the consumer price index rose by 3.2% year-on-year in July, with core inflation remaining at 2.5%, indicating persistent underlying price pressures. On the growth front, the economy expanded by 0.6% quarter-on-quarter in the second quarter, exceeding economists expectations. Most economists anticipate that the central bank will raise rates again before October, while a minority believes an increase may occur as soon as the board meeting on August 27. Rhee Chang-yong stated that the central bank's annual growth forecast of 2.6% made in May now seems evidently too low and will be significantly revised upward in August, citing stronger-than-expected exports, investment, and consumption. The South Korean government expects the economy to grow by 3% for the entire year, surpassing the Bank of Korea and International Monetary Fund's forecasts.