COVER STORY Korea's chip-driven growth faces risks from potential US data center curbs
Potential hit to chip demand, household spending may cloud 2027 outlook
Korea is facing growing concerns that a sharp stock market decline triggered by fears of U.S. restrictions on artificial intelligence (AI) data center construction could spill over into the real economy, as such curbs, if implemented, could threaten semiconductor exports and weigh on next year’s growth, analysts said Sunday.
The Democrats’ victory in the U.S. midterm elections last week has fueled speculation that the party could push for tighter oversight of data center projects, although specific measures have yet to be announced.
Korea’s economy has benefited substantially from the global AI boom this year, with strong semiconductor exports providing a major boost to growth. Semiconductors accounted for 49 percent of the country’s total exports in October, and the Bank of Korea (BOK) estimates that the industry will contribute roughly half of the country's economic growth this year.
These concerns have already taken a toll on Korean stocks. Both the benchmark KOSPI and secondary bourse Kosdaq lost 10.43 percent and 8.54 percent, respectively, over the three trading sessions following the U.S. midterm elections, from Wednesday to Friday. Samsung Electronics fell 14.03 percent, while SK hynix tumbled 19.03 percent.
A prolonged stock market slump could erode household wealth and further weaken private consumption, which declined in the third quarter despite stronger-than-expected economic growth.
The economy grew 1 percent from the previous quarter, well above the central bank's forecast of 0.3 percent, its advance estimate showed. While semiconductor exports and equipment investment supported growth, household spending declined 0.2 percent, with purchases of both goods and services falling.
"A Congress controlled by Democrats is expected to scrutinize the Trump administration's investment in AI facilities more closely," said Kim Dae-jong, a professor of business administration at Sejong University. "Given Korea's heavy reliance on semiconductor exports, any setback to AI-related chip exports could have broader repercussions for the economy, affecting growth and financial markets."
He added that the extent of the economic impact would depend largely on the scope and severity of any restrictions.
“Close attention should be paid to whether policymakers and lawmakers seek to halt data center construction altogether or instead allow projects to proceed under stricter requirements,” he said.
2027 growth outlook uncertainty
An HBM4E chip model is displayed at Samsung Electronics' booth during the Semiconductor Exhibition at Coex in Seoul's Gangnam District, Oct. 14. Yonhap
Potential changes to U.S. data center policy have added uncertainty to Korea’s growth outlook for 2027.
The BOK projected Korea's economy to grow by 2.9 percent next year in its August forecast. The state-run Korea Development Institute and the Ministry of Finance and Economy both forecast 2.2 percent, in August and July respectively.
The International Monetary Fund projected 2.8 percent growth in October, and the OECD forecast 2.6 percent in September.
The outlook could change depending on the scope of any U.S. restrictions and their impact on AI infrastructure investments.
Later this month, the central bank is set to release updated economic projections, which the government is expected to reflect in its economic policy plan for next year.
The developments in the U.S. are being closely watched by Samsung Electronics and SK hynix, both of which are expanding their manufacturing operations there.
Texas, where Samsung Electronics is building a new foundry, has drawn particular attention following the midterm elections. Democrats Gina Hinojosa and James Talarico won the state's gubernatorial and Senate races, respectively.
Hinojosa has called for conditions on taxes, electricity rates, water use and construction labor for newly approved data center projects, though she noted that projects that have already received approval can proceed.
Long-term supply agreements between chipmakers and major customers could help cushion any near-term fluctuations in demand. However, much will depend on how U.S. policy takes shape and whether new restrictions affect projects already in the pipeline.