South Korea is emerging as a major beneficiary of global trends, as the spread of artificial intelligence (AI) coincides with a rearmament push driven by global security concerns, according to an analysis.
Britain's Financial Times (FT) reported Monday that booms in strategic industries such as semiconductors, shipbuilding and defense are energizing Korea's economy overall.
Indeed, Korea's gross domestic product (GDP) rose 3.6% year-on-year in the first quarter of this year. Michael Breen, CEO of Insight Communications, said in an interview with the FT that "some sectors are in a sweet spot right now," adding, "There are problems such as dependence on imported energy, high prices and youth unemployment, but the growth engine is still working very well."
Surging memory chip demand, fueled by expanding AI investment, has driven export growth, while shares of Samsung Electronics and SK hynix have also trended upward. As data center construction increases, orders are also expanding for power equipment makers such as Hyosung Heavy Industries, HD Hyundai Electric and LS Electric, which produce ultra-high-voltage transformers, the FT reported.
"Operating Over 100% Capacity"... Shipbuilding and Defense Boom Too
Shipbuilding was also cited as a key pillar supporting Korea's economy. The FT analyzed that as the global shipbuilding market has effectively been reshaped into a competition between Korea and China, the United States and its allies are paying more attention to Korea's shipbuilding industry. A worker at a shipyard in Geoje told the FT that "all facilities are being used to the point where there is no available space left," adding, "We are so busy that production capacity is operating at over 100%."
The defense industry is also continuing its strong export performance. Demand for Korean-made weapons is increasing as security concerns have grown in Europe, Asia and the Middle East following Russia's invasion of Ukraine. The FT assessed that Korean weapons are emerging as an alternative for Western countries, offering compatibility with U.S. weapons systems while having strong price competitiveness and relatively fewer supply delays.
Along with this, Korean cosmetics are maintaining their position as the world's second-largest exporter after France, and the number of foreign tourists visiting Korea is also rapidly increasing, the FT noted.
"Losing Edge Except in Semiconductors"... China's Pursuit Is a Variable
However, the FT pointed out that the Korean economy faces no small number of structural challenges. Intensifying competition with China and the impact of high oil prices are pressuring the steel and petrochemical sectors, while small and medium-sized enterprises are struggling with rising wages and energy cost burdens.
In particular, China's rapid transition from a low-cost producer to an advanced technology power was cited as the biggest threat to Korean industry. The FT also introduced the assessment that Korea is no longer maintaining the same overwhelming edge it once had in some areas such as machinery, batteries, displays and automobiles.
Kim Young-han, a professor at Sungkyunkwan University, told the FT, "It is only a matter of time before industries that fail to maintain technological competitiveness against China are pushed out of the market," adding, "Except for semiconductors, a trend of losing comparative advantage is appearing in many Korean industries."
