The boom in artificial intelligence (AI) has spurred a notable recovery in semiconductor exports, South Korea’s leading export commodity. Consequently, the trade deficit with China in the first half of this year has decreased to less than half of last year’s figure.
According to the Ministry of Trade, Industry, and Energy on July 8, the trade balance with China recorded a deficit of $5.43 billion from January to June of this year, marking a significant improvement from the $13.13 billion deficit in the same period last year.
Particularly, semiconductor exports to China from January to May this year reached $18.6 billion, representing a 36.8 percent increase from the $13.6 billion recorded during the same period last year, which was marked by a downturn in the semiconductor market.
Since semiconductors account for about one-third of South Korea’s total exports to China, the performance of semiconductor exports significantly influences the overall trade balance with China.
According to the Korea International Trade Association, exports of intermediate goods to China totaled $104.3 billion last year, reflecting a 19.9 percent decrease from the previous year.
There is a growing consensus that India and Vietnam should be considered as alternative export bases to China in the future. In fact, exports to India have been on the rise annually since 2020, along with their share of total exports.
Exports of intermediate goods to India increased by 58.8 percent from $9.7 billion in 2020 to $15.4 billion last year. The proportion of exports also grew from 2.7 percent in 2020 to 3.5 percent last year.
Notably, exports to India in June of this year reached a record high for any June, amounting to $1.55 billion, marking an 8.5 percent increase from a year ago. This surge was largely driven by a 254.2 percent increase in semiconductor exports to India compared to last year, due to the recovery in memory chip prices and rising demand for smartphones.
Due to investments in irrigation and water supply infrastructure, petroleum chemical exports increased by 48.3%. Additionally, the growth in demand linked to the expansion of manufacturing and infrastructure led to a 17.9% increase in exports of general machinery. These factors contributed to a robust export performance to India.
Exports of intermediate goods to Vietnam increased by 30.7 percent from $41.4 billion in 2020 to $54.1 billion in 2022, before slightly declining to $47.1 billion last year. However, the proportion of total exports has consistently remained between 10 percent and 11 percent from 2020 to 2023.
