InterviewHow Korea can turn its chip boom into lasting strength
Seoul must defend chip edge while reducing cycle risk: CLSA chief economist
Semiconductor chips on a circuit board of a computer/ Reuters-Yonhap
Leif Eskesen, chief economist at CLSA
Artificial intelligence (AI) has been a bonanza for Korea's two chip giants, Samsung Electronics and SK hynix. Yet the very boom that has lifted profits, exports and investment is also reviving an old anxiety: Korea remains heavily exposed to an industry whose fortunes can turn with brutal speed.
Leif Eskesen, chief economist at CLSA, warned that Korea's reliance on semiconductors could prove to be a double-edged sword, urging the country to preserve its competitive edge in memory chips through continued investment and innovation while also cultivating new growth engines beyond the semiconductor sector.
"It has been an important driver of growth in the past. It is an important driver of Korea's export and investment story, and it is one of the reasons why we think growth this year could come up in the neighborhood of 3 percent," Eskesen told The Korea Times in a recent interview. "However, when and if that sort of cycle turns, it will spill over through the export and the investment channel."
Eskesen is visiting Korea to participate the CITIC CLSA's inaugural Northeast Asia Forum in Seoul from Tuesday and Wednesday. The forum brings together over 150 institutional investors, and more than 80 leading companies from Korea, China, Japan and Taiwan.
His view is not that Korea should retreat from semiconductors. Rather, he said the country should use the current boom wisely: investing more, stepping up innovation and preserving its leadership in memory chips, while also building a broader set of growth drivers.
That task is becoming more urgent as Chinese memory-chip makers move up the value chain. Beijing's push for semiconductor self-sufficiency, accelerated by Western export controls, is no longer only about reducing reliance on foreign technology. It is also about expanding exports, potentially at lower prices. That could bring fiercer competition for Korean chipmakers in areas where they have long enjoyed a commanding position.
Yet the same Chinese rise that threatens Korea’s chipmakers may also strengthen Korea's strategic value. The more Washington sees Beijing's technological advances as a strategic threat, the more it needs trusted partners that underpin the global tech supply chain. That gives Korea leverage — provided it remains indispensable.
"Number one is to remain indispensable in the areas where they already are world leaders," Eskesen said. "The key is to continue to strengthen innovation and continue to push the efficiency frontier on that front."
A man walks past a Samsung store in Seoul, May 28. AFP-Yonhap
Semiconductors alone, however, cannot be Korea's entire growth strategy. Eskesen said the country also needs enough policy room to cushion a future downturn. Korea's fiscal position remains relatively solid, he said, giving policymakers some room to respond if the cycle turns. According to the International Monetary Fund, its general government debt-to-GDP ratio is expected to stand at 54.4 percent in 2026.
The harder task is to find structural growth drivers. Eskesen said Korea needs reforms that can lift productivity and make growth more resilient, including higher participation by women in the labor force as the population ages, along with ways to boost productivity in the service sector.
More fractured global economy
The need for resilience is growing as Korea navigates a more fragmented global economy, Eskesen said, with AI, trade protectionism and geopolitical tensions emerging as three powerful forces reshaping the outlook.
AI, he said, will not benefit all economies equally. Korea, Taiwan, China and Singapore are among those likely to gain more, both from a strong export cycle linked to AI investment and from their relatively strong readiness to adopt the technology at home.
But these countries' AI opportunities come in a less favorable trade environment than in the past. Compared with 15 years ago, the global economy now has more protectionism in place, and even advanced economies are turning to industrial policies in the name of national security, strategic competition and supply-chain resilience.
"That is a challenge for the more export-driven growth model," Eskesen added.
AI-related growth would also raise a domestic policy challenge, as policymakers must ensure that the benefits of the boom extend beyond a handful of large exporters and high-income households. Eskesen said the AI story is "challenging" from an inequality perspective because it could deepen the so-called "K-shaped" nature of economies.
The task, he added, is to help those benefits diffuse more widely by enabling workers and smaller firms to share in AI-driven productivity gains. That would require labor-market and education policies to build relevant skills, along with better access to capital and support for small and medium-sized enterprises adopting new technologies.