Bank of Korea Projects Continued Growth in Semiconductor Output Amid Rising Prices

A Bank of Korea (BOK) official has indicated that South Korea's semiconductor output is expected to increase next year, with high-bandwidth memory (HBM) production leading this growth. However, chip prices are anticipated to continue rising, albeit at a slower rate.

The BOK has projected that the semiconductor expansion will persist into the first half of 2027, primarily fueled by investments in AI infrastructure. Companies focused on building data centers are particularly interested in advanced memory solutions, with HBM being a key component of their requirements.

Despite the expected rise in output, the BOK believes that demand for chips like HBM will outstrip supply, maintaining pricing power for chip manufacturers. The complexity of HBM production and the lengthy process of bringing new capacity online contribute to this supply-demand imbalance.

Samsung Electronics has secured 80% of its planned 2027 memory output through long-term contracts, including full commitment for its HBM production. This situation indicates strong negotiating leverage for manufacturers, as they effectively sell out their key product lines before the year begins.

New production capacity is on the horizon, with facilities from SK hynix and Samsung expected to gradually ramp up. The South Korean government also shares the BOK's outlook, with Finance Minister Lee Hyoung-il stating that chip demand will exceed supply for the foreseeable future, projecting a boom lasting through at least 2027.

The current semiconductor cycle, which began in early 2023, is already longer than previous cycles, largely due to the specific demand generated by AI infrastructure spending. The BOK has noted that the ripple effects of this expansion will impact the broader South Korean economy, with major memory producers anticipated to distribute significant corporate bonuses that could boost private consumption growth.

While the pace of price increases is expected to moderate, the overall expansion remains dependent on sustained investment in AI infrastructure. The outlook hinges on the performance of hyperscalers and other major buyers, along with the timing of capacity increases at the new facilities.