Economy Grows 1.0% as AI Chip Demand Drives Exports

South Korea — South Korea’s economic growth picked up in the third quarter as rising global demand for artificial intelligence chips strengthened exports and investment, according to preliminary data published by the Bank of Korea.

Gross domestic product expanded 1.0% from the previous quarter during the July-to-September period, accelerating from the 0.6% growth recorded in the preceding quarter. The result also surpassed economists’ forecast of 0.7% in a Reuters poll.

Growth exceeded the central bank’s August estimate, which had projected a quarterly expansion of 0.3%.

Semiconductors were a major contributor to the improved performance. Lee Dong-won, director general of the Bank of Korea’s economic statistics department, said the industry accounted for approximately half of South Korea’s economic growth.

Rising investment in AI technology worldwide has boosted demand for advanced computing equipment and semiconductor products, benefiting South Korean producers and encouraging greater industrial investment.

Exports climbed 2.3% in the third quarter, supported by shipments of semiconductors, machinery and electrical equipment. Facilities investment rose 4.1%, largely reflecting increased spending on semiconductor manufacturing equipment.

Compared with the same period a year earlier, South Korea’s GDP recorded growth of 3.4% in the third quarter.

The country’s export performance has also improved significantly. Between January and September, exports surpassed $800 billion, exceeding South Korea’s previous full-year record. The pace of shipments places the country on track to achieve $1 trillion in annual exports.

Lee said exports and investment were likely to remain strong in the fourth quarter. He also pointed to further growth in semiconductor production next year, while noting that price increases were expected to moderate.

However, weakness in the domestic economy remains a challenge despite the strength of industrial activity.

Private consumption fell 0.2% in the third quarter, its first decline in nearly four years. Lower stock markets and strikes at major automakers weighed on spending, while consumer sentiment weakened as well.

The divergence between export growth and domestic demand illustrates the uneven recovery taking place in South Korea. Businesses benefiting from the global technology investment boom are seeing stronger demand, but households and other sectors have yet to share the same gains.

The Bank of Korea has kept its benchmark interest rate unchanged following increases in July and September. Stronger-than-anticipated economic growth may strengthen policymakers’ confidence in the outlook, although subdued consumer spending remains a key concern.

The central bank had earlier forecast that the economy would grow 3.3% in 2026. Based on its latest estimates, annual growth could reach 3.7% if fourth-quarter GDP stays at the same level as in the third quarter.

Future growth will partly depend on whether continued demand for AI-related semiconductors sustains manufacturing and exports, as well as whether household spending begins to rebound.

South Korea’s latest economic figures highlight how investment connected to advanced technology is shaping the country’s growth outlook. At the same time, they demonstrate the vulnerability of an economy that depends heavily on a single major growth driver while household demand remains weak.