South Korea's record chip exports spark over-reliance concerns

The country's overall merchandise exports reached a record $98.25 billion in August, the Ministry of Trade, Industry and Resources said. The ministry attributed the semiconductor boom to AI infrastructure demand as large cloud providers including Google and Amazon expanded capital spending.

Jeff Ng, head of Asia macro strategy at Sumitomo Mitsui Banking Corporation, told CNBC that semiconductor exports accounted for nearly 80% of export growth in August. He said overall growth was driven by chips, computers and higher petroleum product prices.

While such rapid growth is generally seen as positive, the pace itself has raised concern about what happens if or when the boom dissipates. Dave Chia, an economist at Moody's Analytics, said a gradual slowdown would be manageable, but an abrupt stall is a different matter because the economy already runs at two speeds, and the sectors that would need to take up the slack are the ones under pressure today.

Monetary policy could also reduce the cushion if the cycle turns soon. The Bank of Korea raised its benchmark rate to 3% in August, its second consecutive hike, as core inflation remained elevated. Chia warned that if chip demand cools while policy is still tightening, the windfall fades when domestic demand isn't strong enough to take over.

Other, more traditional sectors are struggling. Automobile exports fell 29.8% year over year in August, although the trade ministry attributed much of the decline to summer-holiday timing and partial strikes. Chia also said factors such as US tariffs and a shift toward production in American plants posed more persistent headwinds.

Still, the Bank of Korea said in its August monetary policy decision that the recovery in consumption is gradually accelerating. Ministry data also revealed that non-semiconductor exports climbed 20% in August. Homin Lee, senior macro strategist at Lombard Odier, said that if semiconductor momentum faded while other cyclical sectors performed well, South Korea could still sustain annual real growth of around 2% to 3%.

Analysts' near-term base cases remain positive. SMBC's Ng expects overall export growth to remain positive over the next 12 months, though it could moderate because of base effects and stabilizing prices. Lee said the semiconductor and tech export boom has certainly been exceptional, but he would not characterize it as 'over-reliance' because the country has other cyclical sectors that tend to do well when the broader global economy performs well.