Korea's Chip-Reliant Growth at Risk From US Data Centre Curbs

South Korea’s heavy dependence on chip-reliant growth and semiconductor exports has left its growth outlook exposed to possible US curbs on AI data centre construction, with analysts warning on Sunday that a sharp stock market sell-off could spill into the real economy, The Korea Times reported.

The concern follows the Democratic Party’s win in last week’s US midterm elections, which the newspaper said fuelled speculation of tighter oversight of data centres in the United States. No specific measures have been announced.

Three-day market slide

According to The Korea Times, the benchmark KOSPI fell 10.43% and the tech-heavy Kosdaq lost 8.54% over the three trading sessions from Wednesday to Friday after the midterm vote. Chipmakers led the decline, with Samsung Electronics down 14.03% and SK hynix down 19.03% over the period.

On Friday alone, the KOSPI closed 6.02% lower at 5,059.69 after a circuit breaker briefly halted trading, the paper reported separately. Finance Minister Lee Hyoung-il said that day the authorities would map out measures to make the local stock market less volatile, while describing the economy’s fundamentals as more solid than ever, according to a Yonhap report carried by The Korea Times.

Chip-reliant Growth

– Photo by Stas Knop on Pexels.com – Korea’s Chip-Reliant Growth at Risk From US Data Centre Curbs

Semiconductors made up 49% of South Korea’s total exports in October, and the Bank of Korea (BOK) estimates that chips will contribute about half of the country’s economic growth this year, the report said.

Gross domestic product grew 1% quarter on quarter in the third quarter, according to the BOK’s advance estimate, beating the central bank’s 0.3% forecast. Household spending, however, slipped 0.2% from the previous quarter, with purchases of both goods and services declining.

Kim Dae-jong, a business administration professor at Sejong University, told the paper that a Democratic-controlled Congress is expected to scrutinise the Trump administration’s AI facility investment more closely. He said “any setback to AI-related chip exports could have broader repercussions” for growth and financial markets, adding that the impact would depend on whether policymakers halt data centre construction or let projects proceed under stricter requirements.

In Texas, where Samsung Electronics is building a new foundry, Democratic governor-elect Gina Hinojosa has called for conditions on taxes, electricity rates, water use and construction labour for newly approved data centre projects, while saying already-approved projects can go ahead, the report said. Both Samsung and SK hynix are expanding manufacturing in the US. The paper noted that long-term supply agreements with major customers could cushion near-term swings in demand.

What’s next

Forecasts for South Korea’s 2027 growth currently range from 2.2% by the Korea Development Institute and the Ministry of Finance and Economy to 2.9% by the BOK, with the IMF at 2.8% and the OECD at 2.6%, The Korea Times said. The BOK is due to release updated projections later this month, which the government is expected to reflect in its economic policy plan for next year.

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