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The Outlook for Korea’s 13 Flagship Industries in the Second Half of 2026

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  • Sung Jin Kim

    (Korea Institute for Industrial Economics and Trade)

Abstract

In H2 2026, South Korea’s industrial sector faces a complex external environment shaped by multiple concurrent pressures. Global demand growth is expected to remain subdued as the ongoing US-Iran conflict elevates oil prices, disrupts logistics, and dampens trade, even as AI infrastructure investment and emerging market expansion provide offsetting upward momentum. US tariff measures and US-China tensions are accelerating supply chain restructuring and regional production diversification across most industries. Exports from the 13 flagship industries are projected to increase by 31.9 percent year-on-year (YoY) in H2 2026, driven overwhelmingly by the semiconductor (+101.9%) and ICT devices (+93.2%) sectors, which are riding surging AI server demand and rising high-performance memory and SSD unit prices. By contrast, legacy industries such as the automotive (-0.6% annually), textiles (-2.5%, and home appliances (-5.1%) sectors are likely to see exports fall YoY amid fierce Chinese competition and tariff uncertainty. With regard to production, the semiconductor (+103.9% annually) and ICT devices (+69.6%) sectors continue to boost output, while production of refined oil contracts sharply (-15.6% annually) amid production cutbacks due to an unstable supply of crude. Domestic demand remains broadly subdued. Shipbuilding orders have plummeted (-47.7% annually); demand for autos is up just a tick (+1.0%). But the ICT devices (+12%), batteries (+10.8%), and biotech (+6.7%) sectors are seeing healthy domestic demand. Imports are projected to rise 11.9 percent YoY, led by semiconductors (+26.1%) and ICT devices (+26%) as Korea continues its domestic AI data center buildout and demand for solid state drives (SSD) shows no signs of abating. H2 2026 is characterized by a pronounced divergence between high-tech and legacy industries. Growth in the semiconductors and ICT devices industries is remarkable; the batteries and biotech sectors should post solid numbers as well, driven by demand for artificial AI, energy storage systems (ESS), electric vehicles (EVs), and biopharmaceuticals. Meanwhile, the automotive, general machinery, petrochemicals, refined oil, and home appliances sectors face ongoing headwinds from tariffs, Chinese competition, and rising costs.

Suggested Citation

  • Sung Jin Kim, 2026. "The Outlook for Korea’s 13 Flagship Industries in the Second Half of 2026," Industrial Economic Review 023553, Korea Institute for Industrial Economics and Trade.
    • Handle: RePEc:ris:kieter:023553
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    JEL classification:

    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • L63 - Industrial Organization - - Industry Studies: Manufacturing - - - Microelectronics; Computers; Communications Equipment
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions

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