The Bank of Korea said on July 13 that concerns over a peak in the semiconductor cycle are misplaced, arguing that surging demand from artificial intelligence infrastructure investment and slower supply growth will likely extend the global chip industry’s expansion for a considerable period.
In a written response submitted to lawmaker Park Sung-hoon of the ruling People Power Party, the central bank said the semiconductor market remains in a supply-constrained phase, with demand rising faster than manufacturers can expand production capacity.
“Semiconductor demand has increased significantly due to AI infrastructure investment, while supply expansion has been slower,” the Bank of Korea said.
The central bank said the current semiconductor upcycle differs from previous recoveries because it is being driven by a fundamental shift in the technology ecosystem caused by the expansion of artificial intelligence and aggressive investment by companies competing for leadership in the sector.
On the supply side, the bank identified the technological difficulty of producing advanced chips and the growing share of customized products as key constraints.
“High-performance products require considerable time to bring into mass production because of technological challenges,” the central bank said. It added that products such as high-bandwidth memory chips, or HBM, are increasingly customized, limiting supply growth compared with previous semiconductor cycles.
The Bank of Korea said the imbalance between strong demand and constrained supply supports its view that the global semiconductor industry will remain in an expansion phase for an extended period.
The central bank also said the current cycle is significantly stronger than previous semiconductor recoveries, driven by robust global investment in AI infrastructure, including data centers.
The current semiconductor expansion has lasted 40 months since March 2023, exceeding the average 29-monthduration of five previous expansion cycles recorded between 2000 and 2020, according to the central bank.
Major global investment banks are also broadly expecting the semiconductor industry to remain strong through at least 2026, the Bank of Korea said. While acknowledging uncertainty surrounding the pace of AI adoption, market demand and profitability, the central bank said firms including JPMorgan Chase, Goldman Sachs and Morgan Stanley generally expect continued strength in the sector.
The latest assessment extends the central bank’s previous outlook that the semiconductor recovery would continue through this year. In November 2025, Lee Ji-ho, then deputy governor for research at the Bank of Korea, said the semiconductor cycle was likely to continue into 2026, while adding that it was uncertain whether the recovery would extend into 2027.
Former Bank of Korea Governor Lee Chang-yong also said in January 2026 that even if the AI industry’s eventual winners remained uncertain, semiconductor demand would continue because advanced chips are essential to AI development. He said the outlook for related industries remained positive over at least a one-year period.
Recent stronger-than-expected semiconductor export data may have also supported the central bank’s assessment. South Korea’s semiconductor exports jumped 171.4% from a year earlier in April and 167.7% in May, based on customs data. Growth is estimated to have accelerated further in June, when the country’s monthly exports exceeded $100 billion for the first time.
