Semiconductors Lead South Korea's Tech Export Surge, But Tariffs Cloud the Horizon

South Korea's tech sector has emerged as a beacon of resilience in 2025, with semiconductor exports hitting record highs amid a global shift toward artificial intelligence (AI) and advanced computing. However, U.S. tariff uncertainties and structural challenges in key markets are creating a delicate balancing act for investors. This article dissects the near-term risks and long-term opportunities for semiconductor and tech investors, leveraging South Korea's export data and geopolitical dynamics.

The Tech Recovery: Semiconductors as the Growth Engine

South Korea's tech-driven export recovery is unambiguously semiconductor-led. In June 2025, semiconductor exports surged 50.9% year-on-year to a record $13.4 billion, fueled by rising demand for high-value chips like high-bandwidth memory (HBM) and DDR5, which are critical for AI servers and 5G infrastructure. This growth, combined with a broader tech-sector expansion, pushed total exports up 5.1% year-on-year to $57.1 billion in June—the ninth consecutive month of growth.

The Ministry of Trade, Industry, and Energy (MOTIE) highlights that semiconductors now account for 20% of South Korea's total exports, with HBM shipments to the EU and China driving record production. Samsung Electronics and SK Hynix, which dominate 75% of the global DRAM market, are reaping the benefits of structural demand shifts. Their investments in advanced packaging and foundry capacity (e.g., TSMC's CoWoS reaching 70,000 wafers/month by end-2025) position them to capitalize on AI's exponential chip requirements.

Near-Term Risks: Tariffs and Geopolitical Headwinds

Despite the tech sector's momentum, risks loom large. The U.S. tariffs on Chinese goods—proposed 10% universal tariffs and 60% retaliatory duties—threaten to disrupt South Korea's $11.0 billion monthly exports to the U.S., particularly in automotive and petrochemical sectors. Automotive exports to the U.S. have already fallen 14% year-on-year, while semiconductor exports to China dropped 14.6% as Beijing accelerates domestic chip production.

Domestic political instability—such as the impeachment of President Yoon Suk Yeol—has also weakened investor confidence, pushing the won to a 15-year low and raising borrowing costs. Meanwhile, China's aggressive chip subsidies (e.g., $1.3 trillion allocated to domestic semiconductor industries) are eroding South Korea's margins in low-to-mid-tier memory chips.

Long-Term Opportunities: AI, Diversification, and Structural Shifts

The semiconductor sector's long-term prospects remain robust, driven by AI-driven demand and South Korea's technology leadership. The global semiconductor market is projected to hit $697 billion in 2025, with AI chips accounting for over 20% of sales. Samsung's $360 billion AI investment plan and SK Hynix's focus on HBM3E for AI supercomputers underscore strategic bets on this trend.

Moreover, South Korea is diversifying its export markets. Exports to Taiwan surged 49.6% in May 2025, reflecting its role as a critical manufacturing hub, while EU semiconductor purchases grew 18.4% to $6.7 billion. This geographic diversification reduces reliance on volatile markets like China and the U.S.

Investment Strategy: Focus on Semiconductors, Mind the Tariff Tailwinds

For investors, the semiconductor sector offers clear opportunities, but a nuanced approach is critical:
1. Overweight Semiconductors: Companies like Samsung (005930.KS) and SK Hynix (000660.KS) are well-positioned to benefit from AI and 5G demand. Their dominance in advanced memory chips and R&D investments justify long-term holdings.

1. Avoid Overexposure to Auto/Manufacturing: U.S. tariffs could further pressure automotive stocks (e.g., Hyundai (005380.KS)) and petrochemicals, where oversupply and Chinese competition persist.
2. Leverage ETFs for Diversification: The Kospi 200 Semiconductor ETF (KOPN) offers broad exposure to the sector while mitigating stock-specific risks.

Conclusion: A Tech-Driven Recovery, but Navigating the Tariff Crossroads

South Korea's tech-driven export recovery is undeniably led by semiconductors, with AI and advanced computing fueling a record-breaking performance. However, the path forward hinges on navigating U.S. tariff risks, geopolitical tensions, and China's chip ambitions. Investors should prioritize semiconductor leaders while staying vigilant about sector-specific tariffs and geopolitical developments. For those willing to endure near-term volatility, South Korea's tech sector remains a cornerstone of global innovation—and a compelling long-term bet.

JR Research's view: Bullish on semiconductors; cautious on broader industrial exposure until trade uncertainties subside.