South Korea's Economy Grows 1.7% in Q1, Driven by Chip Exports and Investment Rebound

Gate News message, April 23 — South Korea’s economy expanded 1.7% in the first quarter, beating the central bank’s 0.9% forecast and marking the fastest quarterly growth in five and a half years. Strong chip exports and a rebound in investment drove the expansion.

Exports rose 5.1% and imports climbed 3%, while construction investment increased 2.8% and facility investment surged 4.8%. The robust performance reflects growing demand for advanced memory chips, particularly High Bandwidth Memory (HBM) used in AI servers.

Trade patterns have shifted notably. Exports to Taiwan, home to TSMC and a hub for advanced chip packaging, reached $27.076 billion. Taiwan’s share of South Korea’s memory chip exports rose from 6% in 2020 to 28.6% last year, approaching China’s 32.7% share. The reallocation reflects growing U.S. demand for AI chips, with Nvidia and other American companies driving HBM procurement.

The HBM surge has created supply pressures. Increased production of high-margin HBM chips has tightened supplies of standard memory chips for servers, PCs, and consumer electronics, lifting prices. Dell and HP have warned of higher costs, while research firm IDC expects global smartphone shipments to fall 12.9% in 2026 and PC shipments to drop 11.3%. The Bank of Korea has maintained its base rate at 2.5% despite stronger economic activity, while external risks from Middle East tensions pose inflation and growth challenges.