Bank of Korea refutes the “semiconductor market has peaked” theory: AI-driven demand continues to outpace supply, extending the upcycle to 2026

As Korean stocks continue to fall, the Bank of Korea has clearly rejected market concerns that the semiconductor upcycle has already peaked, and said the global semiconductor expansion cycle will remain in place for a considerable period of time.

In a written reply submitted on July 13 to National Power Party lawmaker Park Seong-hun, the Bank of Korea said that due to a sharp increase in demand driven by AI infrastructure investment, while the pace of supply expansion is clearly lagging, the current semiconductor upcycle remains intact. This assessment goes further than the bank’s earlier forecast that the expansion cycle will continue until 2026, suggesting the window for the continuation of the semiconductor boom has widened.

Predictions from major investment banks—including JPMorgan, Goldman Sachs, and Morgan Stanley—provide support for the above view. The Bank of Korea cited the views of these institutions, saying that although there is uncertainty about the speed of AI adoption, the coverage it will achieve, and its profitability, most major investment banks generally expect the global semiconductor market to stay strong at least until next year.

This cycle has already surpassed the historical average, with stronger momentum

The Bank of Korea said the current semiconductor expansion cycle started in March 2023 and has already lasted 40 months, exceeding the historical average of 29 months across five expansion cycles between 2000 and 2020.

The bank also emphasized that the strength of this cycle is clearly better than historical levels. “Current semiconductor business conditions, driven by global AI infrastructure investment such as data centers, are showing momentum far stronger than that seen in previous expansion periods,” the Bank of Korea wrote in its written response.

Compared with earlier cycles, the underlying logic driving this expansion is also fundamentally different. The Bank of Korea believes this expansion is being led by competitive investment driven by companies’ expectations that AI will fundamentally reshape the industry’s ecosystem, rather than being driven purely by demand for consumer electronics or traditional IT.

Supply bottlenecks provide structural support

On the supply side, the Bank of Korea views constraints on supply expansion as a key factor supporting the persistence of the upcycle.

The bank explained that high-performance products involve high technical difficulty and require a considerable amount of time to reach mass production. In addition, current demand is dominated by customized products such as high-bandwidth memory (HBM), making the restraints on supply expansion more pronounced than in previous cycles.

This structural feature means that even if volatility appears on the demand side, the supply side will be unable to form excess pressure in the short term, thereby providing some buffer for prices and market conditions.

The central bank’s stance has warmed up more than before

This written reply represents a further upward adjustment by the Bank of Korea to its assessment of the semiconductor outlook. In last November, Lee Ji-ho—then head of the investigation bureau and now deputy governor—said at an economic outlook press conference that the semiconductor cycle “may extend until 2026,” but he took a cautious stance on whether it could extend into 2027.

In January this year, the former governor Rhee Chang-yong also expressed a cautiously optimistic view at a press conference, saying that “no matter who ultimately wins in the AI industry, semiconductors are a necessity,” and he expected that the relevant industries would be “at least favorable over the next year.”

This written reply further extends the above assessment, and its wording is also more explicit, showing that the Bank of Korea’s confidence in the semiconductor upcycle has increased compared with earlier views.

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