South Korea's Economy Outpaces Forecasts as AI Chip Demand Surges

South Korea's economy expanded much faster than expected in the July-September quarter, lifted by strong global demand for chips used in artificial intelligence (AI). Advance estimates from the Bank of Korea, released on Tuesday, showed gross domestic product rose 1 percent from the previous quarter and 3.4 percent from a year earlier.

The result far exceeded the central bank's own projection. In August, the Bank of Korea had forecast third-quarter growth of just 0.3 percent.

Exports, which make up about 45 percent of the country's GDP, climbed 2.3 percent from the prior quarter. The central bank said semiconductors, machinery and electrical equipment led the gain.

Investment also contributed. Spending on facilities rose 4.1 percent, and investment in intellectual property increased 2.3 percent. Construction investment edged up 0.7 percent. Private consumption was a weak spot, however, falling 0.2 percent.

The figures put the economy on course for its strongest annual expansion in more than a decade. Finance Minister Lee Hyoung-il said earlier this month that he expected growth of 3.4 to 3.6 percent in 2026. That would be the best performance since 2011, not counting the COVID-19 pandemic period.

The expected rebound follows a sluggish stretch. The economy grew 1 percent in 2025, its slowest expansion since the pandemic.

Asia's fourth-largest economy has benefited from the AI boom at a time when memory chips are in short supply worldwide. South Korea is home to two of the three largest memory chip makers, SK Hynix and Samsung Electronics. Together they control roughly 80 percent of the global market for high-bandwidth memory and 60 percent of the market for dynamic random-access memory.

Trade data underscore the trend. According to the Korea Customs Service, South Korea's exports in September jumped 83.5 percent from a year earlier to $120.9bn, with chips accounting for nearly half of all shipments.