The Bank of Korea has explicitly rejected market concerns that the semiconductor boom has peaked, asserting that the global semiconductor market's expansion cycle will persist for a considerable period, even as South Korean stocks continue to decline.
In a written response submitted to lawmaker Park Sung-hoon of the People Power Party on July 13, the central bank stated that the current semiconductor upturn remains intact due to surging demand driven by AI infrastructure investment, which is significantly outpacing the rate of supply expansion. This assessment goes beyond the bank's previous forecast of the expansion cycle continuing until 2026, suggesting a broader timeframe for the sustained upswing.
Major investment banks, including JPMorgan, Goldman Sachs, and Morgan Stanley, provide supporting evidence for this view. The Bank of Korea cited these institutions, noting that despite uncertainties regarding the pace of AI adoption, its scope, and profitability, major investment banks generally expect the global semiconductor market to maintain robust momentum at least through next year.
Current Cycle Exceeds Historical Average with Greater Momentum
The Bank of Korea pointed out that the current semiconductor expansion cycle, which began in March 2023, has now lasted 40 months, surpassing the historical average of 29 months observed across five expansion cycles between 2000 and 2020.
The bank also emphasized that the intensity of this cycle is significantly stronger than historical norms. "The current semiconductor boom, fueled by global data center and other AI infrastructure investments, is exhibiting a much more robust momentum compared to previous expansion periods," the Bank of Korea wrote in its response.
Compared to past cycles, the underlying driver of this expansion is fundamentally different. The central bank views this expansion as being led by competitive corporate investments made under the expectation that AI will fundamentally reshape the industrial ecosystem, rather than being driven solely by consumer electronics or traditional IT demand.
Supply Bottlenecks Provide Structural Support
On the supply side, the Bank of Korea identified constrained supply expansion as a key factor supporting the prolonged boom.
The bank explained that high-performance products involve significant technical complexity and require considerable time for mass production. Furthermore, current demand is dominated by customized products like High Bandwidth Memory (HBM), making supply expansion more constrained than in previous cycles.
This structural characteristic implies that even if demand fluctuates, the supply side is unlikely to create excess pressure in the short term, thereby providing a buffer for prices and the overall market conditions.
Central Bank's Stance Has Noticeably Warmed
This written response represents a further upgrade in the Bank of Korea's outlook for semiconductors. In November of last year, then-Head of the Research Bureau and current Deputy Governor Lee Ji-ho stated during an economic outlook briefing that the semiconductor cycle "could continue until 2026," but expressed reservations about whether it would extend into 2027.
In January this year, former Governor Rhee Chang-yong also expressed a cautiously optimistic stance at a press conference, stating that "semiconductors are essential regardless of who ultimately wins in the AI industry," and anticipated that the related sectors "will have a positive outlook for at least the next year."
The latest written response extends this assessment further, with more definitive language, indicating that the Bank of Korea's confidence in the semiconductor boom has strengthened compared to its previous positions.
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