Bank of Korea: "Semiconductor Market to Rise Until First Half of Next Year, Driving Korean Economic Growth"

Bank of Korea, Recent Semiconductor Market Situation Review Report
Recent Semiconductor Boom Similar to 2016 Cloud Server Expansion Boom

There is a forecast that the semiconductor market upturn will continue at least until the first half of next year. It is analyzed that the continued improvement in semiconductor exports will play a role in driving the growth trend of our economy.

According to the "Recent Semiconductor Market Situation Review" report released by the Bank of Korea on the 24th, the current global semiconductor market upturn driven by the artificial intelligence (AI) boom shows a pattern similar to the semiconductor upturn that began in 2016 with the expansion of cloud servers.

Since 2010, there have been three major semiconductor market upturns: in 2013 triggered by the expansion of smartphone demand, in 2016 with the start of cloud server expansion, and in 2020 due to increased non-face-to-face activities during COVID-19.

In all three cases, semiconductor demand expanded widely, leading to significant increases in corporate investment and supply, but then shifted to a downturn phase due to oversupply caused by weakened additional demand. Each of the three upturns lasted about two years, but the magnitude of the increase was greater when demand expansion occurred across various sectors.

Researchers are conducting semiconductor material and component development research in the 12-inch semiconductor testbed cleanroom at Daejeon Nano Comprehensive Technology Institute. (File photo) / Photo by Jinhyung Kang aymsdream@

Recent Semiconductor Boom Similar to 2016 Cloud Server Expansion Boom

Looking at the increase in semiconductor sales, the years 2016, when cloud servers and virtual assets expanded, and 2020, when non-face-to-face activities due to COVID-19 increased demand for mobile and PC IT products overall, showed larger growth than 2013, which was limited to smartphone demand expansion.

The report evaluated that the semiconductor boom triggered by AI is expected to spread not only to AI servers but also to general servers, mobile, PCs, and other sectors, making the current upturn phase similar to that of 2016.

In the AI server sector, big tech companies' investments continue in response to the AI boom, and intensified AI competition among big tech firms is likely to expand related investments. For general servers, factors such as aging existing facilities and previous underinvestment may contribute to demand recovery.

In the mobile sector, the Galaxy S24 equipped with AI functions showed strong sales earlier this year, and with AI features expected to be included in the iPhone to be released in the second half of the year, related semiconductor demand expansion is gradually becoming visible. In the PC sector, demand for high-performance computers for AI utilization is expected to increase, and the introduction of AI functions is anticipated to further stimulate PC demand, which is already due for replacement.

From the memory supply perspective, semiconductor companies are facing difficulties in expanding production capacity for advanced products, and the report analyzes that a focus on profitability may limit supply expansion. If supply constraints occur, semiconductor prices could rise further, prolonging the boom.

Therefore, the global semiconductor market is expected to remain strong at least until the first half of next year. Choi Young-woo, head of the Economic Trend Team at the Bank of Korea's Research Department and author of the report, emphasized, "Semiconductor demand is highly likely to expand from AI servers to other sectors in the future, and supply expansion is also constrained. We judge that the semiconductor market will continue its upward trend until the first half of next year, with the possibility of lasting even longer."

Choi added, "During the global semiconductor market upturn, domestic semiconductor exports are showing favorable performance, which is expected to drive the growth trend of our economy. Investments in domestic semiconductor production facilities and construction, as well as data center construction investments, will also play a positive role in the domestic economy."