South Korea export growth hits four-decade high on AI chip boom

By Jihoon Lee

SEOUL, June 1 (Reuters) - South Korea's ‌exports grew more ​than expected ​in May at the strongest annual rate in over four decades, as a global boom in AI investment drove chip sales to a record, swelling optimism on the trade-reliant economy and its world-beating ‌stock rally.

Exports from Asia's fourth-largest economy, a bellwether for global trade, rose 53.2% from a year ⁠earlier to a record high of $87.75 billion, preliminary trade data showed on Monday, exceeding the median 48.4% increase forecast in a Reuters poll.

It ‌was the 12th consecutive month of exports ‌growing on a year-on-year basis and the biggest percentage rise since January 1984, bringing a record monthly trade surplus for the country.

"It is truly an unprecedented pace, raising market expectations again and again and exceeding them again ​and again," said Stephen Lee, an economist at Meritz Securities in Seoul.

He is forecasting even stronger momentum in the third quarter and export growth of around 50% for the full year.

"It justifies the KOSPI's rally and also ⁠raises expectations for this year's economic growth," Lee said, adding that he now expected a 2026 growth rate above 2.6%.

Last week, the country's central bank raised ​its economic growth forecast for this year to 2.6% from 2.0%, after the trade-reliant economy delivered its strongest growth in nearly six years last quarter on booming chip exports.

The country's ​benchmark KOSPI stock index, which has emerged as the world's best ‌performer in an AI-driven rally, rose more than 2% in morning trade on Monday to hit a record high.

The index has risen more than 100% so far this year, led by ⁠chipmakers Samsung Electronics and SK Hynix on their surging profits as memory chip prices soar. Last year, the index rose 76%, the biggest percentage gain since 1999.

FACTORY ACTIVITY EXPANDS, EXPORTS JUMP

Meanwhile, a separate survey also showed on Monday that South Korea's factory activity expanded ⁠in May at the strongest pace in more than five years on stock building by manufacturers as they braced for the impact ​of the Middle East conflict.

According to Monday's trade data, exports of semiconductors jumped 169.4% in May to a record monthly high of $37.16 billion, as memory chip prices continued to rise on growing investment by U.S. technology firms.

Computer sales also surged 290.7% on AI server ‌demand, while petroleum products climbed 46.6% on high oil prices. Exports of automobiles fell 5.9%, weighed by supply disruptions in the Middle East and the impact of U.S. tariffs.

By destination, ‌shipments to the U.S. and China were up 59.1% and 80.9%, respectively. Those to the Middle East were down 7.7%.

Imports rose ⁠20.8% to $60.80 billion, weaker than the median 21.5% ‌increase expected by economists but still the ​strongest since August 2022.

The country's trade balance stood at a surplus of $26.95 billion, wider than $23.75 billion in the previous month and an all-time high.

(Reporting by Jihoon Lee; Editing by Jacqueline Wong and ‌Jamie Freed)

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