Korea's export growth in July slowed down but was better than expected, with chip exports exceeding $40 billion supporting the trade surplus.

In July, South Korea's exports continued to show strong momentum. Although the growth rate has retreated from June's high, it is still significantly better than market expectations. Semiconductors remain a core driver, providing robust support for South Korea's economy while further reinforcing the basis for the Bank of Korea to continue tightening monetary policy. According to preliminary data released by the Ministry of Trade, Industry and Energy on Saturday, July exports rose 62.8% year-on-year to $98.9 billion, down from the revised 70.7% growth rate in June, which marked the fastest increase in nearly 50 years. However, this was still higher than the median expectation of 59.5% derived from a survey of 11 economists conducted by The Wall Street Journal. When adjusted for working days, the year-on-year increase in exports was 69.6%. Imports grew by 26.5% to $68.6 billion, narrowing the trade surplus to $30.3 billion, down from the revised $36.1 billion in June. In terms of total export scale, July's $98.9 billion marked the second-highest monthly total in South Korean history, second only to June's record of $102.2 billion. Semiconductor exports surged by 178.8% year-on-year to $41 billion, surpassing the $40 billion mark for the second consecutive month. This performance has directly led economists to revise their expectations for the Bank of Korea's interest rate hike pathaccording to Bloomberg, most economists expect the central bank to raise rates again before October, while a minority believes the hike may occur as early as the board meeting on August 27. Strong demand for chips drives record exports July's export figures continued the historic breakthrough seen in June, reaching $98.9 billion, making it the second-highest monthly export total in South Korean history. Excluding semiconductors, exports in other categories collectively grew by approximately 26% year-on-year. Industry Minister Kim Jung-kwan noted that 19 out of 20 major export categories in South Korea achieved positive year-on-year growth, indicating a continued diversification of the export structure. In other major export categories, automobile exports increased by 7% to $6.2 billion, bolstered by global demand for hybrid and other eco-friendly vehicles; petroleum product exports rose 34.1% to $5.7 billion, boosted by rising oil prices; petrochemical products increased by 10.3% to $4.2 billion; and mobile device exports grew by 51% to $1.8 billion, with robust sales of high-end smartphones like the Galaxy S26 series. In terms of export destinations, exports to China rose 96.2% year-on-year to $21.7 billion, mainly driven by chips, non-ferrous metals, and petroleum products; exports to the United States grew 68.7% to $17.4 billion, propelled by investments from large tech companies in AI data centers; exports to the ASEAN region surged 73.7% to $18.8 billion; and exports to the European Union increased 55.7% to $9.4 billion. AI infrastructure investment drives ongoing chip shortages The continued investment in global AI infrastructure is triggering a serious supply shortage in memory chips, with supply growth lagging far behind demand expansion. Samsung Electronics stated on Thursday that it expects the semiconductor shortage to persist until 2028. Samsung's financial report for April to June showed that net profit surged 14 times year-on-year, with both revenue and operating profit hitting record highs. SK Hynix also saw its net profit increase 13 times year-on-year to a historical peak, with both revenue and operating profit setting records, driven primarily by strong demand for high-end chips. Both companies maintained an optimistic outlook for the remainder of the year. Exports of computer-related products saw a year-on-year increase of 404%, further confirming the widespread penetration of AI-related demand. Strong export data supports further tightening by the central bank The aforementioned trade data provides new support for the Bank of Korea's stance on monetary policy. Last month, the Bank raised the benchmark interest rate by 25 basis points to 2.75%, marking the first rate hike since early 2023. Bank Governor Shin Hyun Song later stated that the decision-making body still considers it necessary to further raise rates, but the timing and pace will depend on inflation, economic growth, and financial stability conditions. In terms of inflation, the consumer price index increased by 3.2% year-on-year in July, while core inflation remained at 2.5%, indicating persistent underlying price pressures. In terms of growth, South Korea's economy expanded by 0.6% quarter-on-quarter in the second quarter, exceeding economists' expectations. The South Korean government forecasts a full-year economic growth of 3%, higher than the projections by the central bank and the International Monetary Fund. Shin Hyun Song noted that the Bank's growth forecast of 2.6% made in May now appears clearly too low and will be "significantly" revised upward in August, citing that exports, investment, and consumption have all outperformed expectations. Despite the overall positive data in July, external risks facing South Korean trade have not dissipated. Kim Jung-kwan pointed out in a statement that the rise of protectionism in major economies and ongoing geopolitical tensions in the Middle East are the primary obstacles facing South Korean exports. He stated that the government will closely monitor market dynamics for key export products and comprehensively employ various policy tools to assist South Korean companies in responding to changes in the global trade environment, including tariffs and non-tariff barriers. This article is reproduced from Wall Street Jiewen, authored by Zhang Yaqi; edited by Wenwen.