South Korean economy grows 1% in Q3, driven by chip exports

South Korea's gross domestic product expanded by 1 percent in the third quarter, according to advance estimates released by the Bank of Korea on Tuesday. On an annual basis, the economy grew 3.4 percent.

This performance significantly exceeded the central bank's August projection, which had anticipated a 0.3 percent increase for the July through September period. The primary driver of the surge was export activity, which rose 2.3 percent quarter-on-quarter. Semiconductors, machinery, and electrical equipment led the gains in a sector that represents roughly 45 percent of the nation's total economic output.

Corporate investment also contributed to the upward trend. Spending on facilities increased by 4.1 percent, while investment in intellectual property grew by 2.3 percent. Construction investment showed a modest 0.7 percent rise. Despite these gains in the business sector, household spending declined by 0.2 percent during the same period.

Finance Minister Lee Hyoung-il stated earlier in October that he expects the full-year 2026 growth rate to fall between 3.4 and 3.6 percent. If realized, this would mark the strongest economic performance since 2011, excluding the pandemic years. By comparison, the economy grew by only 1 percent in 2025.

The sectoral strength stems from the global demand for artificial intelligence components. South Korea is home to Samsung Electronics and SK Hynix, two of the three largest memory chip manufacturers worldwide. Together, these companies hold approximately 80 percent of the global high-bandwidth memory market and 60 percent of the dynamic random-access memory market. According to the Korea Customs Service, exports surged 83.5 percent year-on-year in September to reach $120.9 billion, with chips accounting for nearly half of those shipments.