The Bank of Korea has dismissed concerns about a potential peak in the semiconductor market, stating that the supply of high-performance semiconductors continues to lag behind demand driven by increased investment in artificial intelligence (AI). This trend suggests that the semiconductor boom will persist for the foreseeable future.
In a written response to lawmaker Park Seong-hoon of the ruling People Power Party on July 13, the Bank of Korea cited supply conditions falling short of demand as a key reason for the ongoing semiconductor market strength. While demand for semiconductors has surged due to expanded AI infrastructure investments, the pace of supply expansion remains slower than in the past.
The Bank noted, "This expansion phase is different from previous ones, as it is expected to bring fundamental changes to the industrial ecosystem driven by the spread of AI, with competitive investments from companies fueling demand."
Particularly on the supply side, the Bank highlighted the challenges in ramping up production of high-bandwidth memory (HBM) and other high-performance semiconductors. It stated, "The technical difficulties associated with high-performance products require significant time for mass production, and the dominance of custom products like HBM constrains the speed of supply expansion compared to the past."
The Bank of Korea assessed that the current semiconductor boom is stronger than previous cycles. The semiconductor market expansion, which began in March 2023, has now lasted for 40 months, exceeding the average duration of 29 months seen in five previous expansion phases from 2000 to 2020.
International investment banks share a similar outlook. The Bank of Korea reported, "While there are uncertainties surrounding the pace of AI technology diffusion and profitability, major investment banks such as JP Morgan, Goldman Sachs, and Morgan Stanley expect the global semiconductor market to remain strong at least until next year."
This perspective is more optimistic than the Bank's previous forecast of sustained expansion through this year. Lee Ji-ho, the Bank's Deputy Governor at the time, projected in a November 2022 economic outlook briefing that the semiconductor cycle would continue until 2026. Former Governor Lee Chang-yong also expressed in January that regardless of who emerges as the winner in the AI industry, semiconductors will remain essential, maintaining a positive outlook for at least another year.
Earlier, in an economic assessment report released in April, the Bank of Korea noted, "The increase in semiconductor demand is steep due to competitive infrastructure investments aimed at securing AI leadership, while the expansion of semiconductor supply is constrained by technical difficulties, leading to a greater and longer-lasting supply-demand imbalance compared to past semiconductor expansion phases."
It added, "Considering public supply constraints, we expect the expansion of the semiconductor industry to continue at least until the first half of next year."
The Bank's assessment appears to be influenced by stronger-than-expected export trends. According to customs data, semiconductor exports surged by 171.4% year-on-year in April and 167.7% in May, with estimates suggesting that the upward trend continued in June, when monthly exports exceeded $100 billion.
* This article has been translated by AI.
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