China’s AI chip demand pushes Korea into rare surplus with top trade partner

Semiconductor chips on a circuit board of a computer . (Source: Yonhap)

The country's trade position with China had strengthened steadily this year, swinging from a $764 million deficit in December 2025 to a $1.1 billion surplus in February, before widening further to $3.8 billion in May, according to data from Korea's Ministry of Trade, Industry and Resources.

The turnaround has been driven largely by semiconductor shipments to China, as the global AI boom fuels demand for memory chips. The surge had tightened supply and sent prices sharply higher, with 16 gigabyte DDR5 memory chips up 682 percent and NAND flash memory prices up 807 percent, according to Morgan Stanley.

In May, Korea's semiconductor exports to China jumped 243 percent from a year earlier, the ministry's data showed.

Korea’s improving position stands in sharp contrast to that of other East Asian economies, where rising Chinese competitiveness and shifting technology supply chains have put trade balances under increasing pressure.

Japan’s export volumes to China had fallen by 10 percent since 2022, while the postpandemic surge in imports from China had largely been sustained, according to Marcel Thieliant, head of Asia-Pacific at Capital Economics. As a result, Japan's trade deficit with China had risen to a record 1.2 percent of gross domestic product.

"We believe that it’s only a matter of time before the loss of market share by Japanese manufacturers within China will be replicated globally," Thieliant wrote in a May 18 report, adding that China's export basket had become increasingly similar to those of advanced economies, including Japan.

Taiwan’s trade balance with mainland China has also shifted into a deficit this year. Troy Stangarone, a visiting senior fellow at the Korea Economic Institute of America, said Washington's export controls on advanced chips to mainland China had diverted more of Taiwan’s semiconductor shipments to the United States, eroding its long-standing surplus with the mainland.

He added that Korea’s memory chip-driven advantage could keep it ahead of many of its regional peers in the near term, as competition over artificial intelligence would continue to support demand and DRAM chip shortages were unlikely to ease soon.

But that advantage might not last. "The medium-term risk is the development of indigenous Chinese competitors," he said, noting that firms such as ChangXin Memory Technologies were expanding and were likely to "take market share from South Korean suppliers."

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