Semiconductor "super cycle" hedges Middle Eastern chaos, South Korea's March exports hit highest growth rate in 5 years

What are the potential impacts of the Middle East situation escalation on the semiconductor supply chain?

South Korea, known as the “global trade barometer,” has set a new record for monthly exports.

According to the latest data from the Ministry of Trade, Industry and Energy of South Korea on April 1, South Korea’s exports in March are expected to have increased by 48.3% year-on-year, not only faster than the 28.7% growth in February but also higher than the median forecast of 44.8% by economists. This is the strongest monthly export growth since May 2021 and marks the 10th consecutive month of year-on-year increase.

In March, total exports amounted to $86.13 billion, imports to $60.4 billion, and the trade surplus reached $25.74 billion, hitting a record high.

The department’s analysis suggests that the rapid export growth is mainly driven by the surge in demand and price increases for storage chips due to the global AI investment boom. Additionally, rising oil product prices and having one more working day in March compared to the same period last year also contributed to the export increase.

According to the latest data from the World Semiconductor Trade Statistics (WSTS), global semiconductor sales are projected to grow by 25.6% year-on-year to $791.7 billion in 2025. It is also estimated that the global semiconductor market sales will continue to grow strongly in 2026, with a year-on-year increase of 26.3%, reaching $975 billion. The Korea International Trade Association (KITA) expects that this year, South Korea’s storage semiconductor exports will increase from $114 billion to $125 billion, a growth of 9.6%.

South Korean scholar Kim Yoon-jun told First Financial that currently, the transportation of some key semiconductor materials is inevitably affected by the escalation of the Middle East situation, but this has not yet propagated widely downstream and does not hinder the long-term development of the semiconductor industry.

“Super Cycle” Shines

The just-concluded March witnessed another milestone turning point in the global semiconductor industry. With international giants like Texas Instruments and Infineon issuing price adjustment notices, and domestic wafer fab companies like Jinghe Integration announcing price hikes, the long-standing “inventory reduction” gloom in the industry has dissipated. A comprehensive price increase driven by AI computing power explosion and supply chain restructuring is now underway.

Since last year, as the fourth-largest economy in Asia and a global trade barometer, benefiting from the “super cycle” effect in the semiconductor industry, exports have begun to rise steadily. According to data from the Korea National Statistical Office, last year, South Korea’s total exports reached $709.4 billion, a 3.8% increase year-on-year, the highest since relevant statistics began in 2010. This was mainly due to increased demand for AI and data centers. In the fourth quarter of last year, exports totaled $189.8 billion, up 8.4% year-on-year. Among them, exports of semiconductors and other IT components increased by 33% year-on-year, setting a record high and driving the fourth quarter’s export growth.

Entering 2026, export performance in January and February remains strong. According to data from the Ministry of Trade, Industry and Energy, South Korea’s exports in January increased by 34% year-on-year to $65.85 billion, with a 13% increase in December last year. In that month, semiconductor exports doubled to $20.54 billion. In February, exports reached $67.45 billion, up 29% year-on-year. Semiconductor exports continued to rise, reaching approximately $25.16 billion, a surge of 160.8% year-on-year, setting a monthly record. This marks the third consecutive month that South Korea’s semiconductor exports exceeded $20 billion. Since April 2025, South Korea’s monthly semiconductor exports have continuously hit new highs.

At the beginning of the year, the South Korean government also aimed to “capitalize on the momentum,” proposing to double AI-related spending in 2026 to help South Korea rank among the world’s top three AI powers, behind the US and China.

Is the Middle East Turmoil a Minor Wave?

Kim Yoon-jun describes the current Middle East situation as a “small wave” in the long cycle, stating, “We cannot ignore the chain reactions caused by the escalation of the Middle East situation, such as the continuous rise in oil prices which will increase energy costs for chip manufacturing, and the rise in fuel surcharges for international shipping, as well as increased safety risks on some shipping routes. These will extend chip transportation cycles and raise logistics costs, and these additional costs will ultimately be passed on to export products, squeezing profit margins for Korean semiconductor companies.”

Currently, with no signs of easing in the Middle East geopolitical situation, the global semiconductor supply chain faces critical raw material challenges. Korean chip manufacturers are urgently monitoring the supply chain. For example, the spot price of helium, known as the “golden gas” for semiconductors, has surged significantly. A report from rating agency Fitch indicates that as the Middle East conflict continues and Qatar’s natural gas (helium as a byproduct) supply is interrupted, the tail risks faced by Asian semiconductor supply chains due to helium shortages are increasing. Under Fitch’s baseline scenario, cost pressures are minor, but prolonged supply disruptions could have significant impacts. In severe shortages, spot helium prices could soar by 50% to 200%; contract prices are usually more stable but could still increase by 20% to 40% during renegotiations.

Kim Young-bae, a lawmaker from South Korea’s ruling party, said in mid-March after meetings with executives from Samsung Electronics and other companies, as well as business and trade groups, that besides the supply of key raw materials, industry concerns include the possibility that this crisis could hinder tech giants’ plans to build AI data centers in the Middle East. “We call the semiconductor industry in a ‘super cycle,’ but the data center construction plans are highly likely to be disrupted, which could cause issues with chip demand.”

Currently, institutions like Bank of America and Goldman Sachs are optimistic about the “super cycle” in the semiconductor industry. For example, Bank of America, in recent discussions with more than ten storage chip manufacturers, indicated that despite the turmoil in the Middle East, the impact on the storage supply chain is minimal. Demand far exceeds current capacity, and the supply-demand imbalance is expected to persist until the first half of 2027. Goldman Sachs believes that the fundamentals are stable but advises paying attention to market sentiment changes.