[Edaily Reporter Seong Ju-won] The Financial Times (FT) has reported that the three pillars of the Korean economy—semiconductors, shipbuilding, and defense—are rapidly rising in tandem amid the competition for artificial intelligence (AI) supremacy and geopolitical realignment.

The FT reported this in an article titled “Chips, ships and guns: South Korea booms on AI race and global conflict” published on the 8th (local time).

◇First-quarter growth rate of 3.6%…Exports hit record high

South Korea’s economic growth rate for the first quarter of this year was 3.6% year-on-year, more than double the rate of the fourth quarter of last year (1.6%). First-quarter exports surged 38% to $220 billion (approximately 333.608 trillion won), setting a new record high.

Total exports in April also broke another record, reaching $85.89 billion. Of this, exports of memory semiconductors alone amounted to $31.9 billion.

Both Samsung Electronics (005930) and SK Hynix (000660) surpassed a market capitalization of $1 trillion, joining the ranks of the world’s top 20 companies. This is the result of surging demand for memory semiconductors driven by the construction of data centers for AI services.

The proliferation of data centers has also boosted demand for ultra-high-voltage transformers. The combined order backlog of three related companies—Hyosung Heavy Industries (298040), HD Hyundai Electric (267260), and LS Electric—reaches 32 trillion won. Hyosung Heavy Industries’ stock price has surged more than 50-fold over the past five years.

Shin Hyun-song, Governor of the Bank of Korea, stated last week that strong semiconductor exports are expected to boost the 2026 gross domestic product (GDP) growth rate by 0.7 percentage points. This is more than enough to offset the economic impact of the Iran conflict.

◇ Shipbuilding Orders “Fully Booked”… U.S. Navy Also Heads to Korea

The shipbuilding industry is also enjoying a record boom. Hyundai Heavy Industries, the world’s largest shipbuilder, has secured orders for 16 liquefied natural gas (LNG) carriers so far this year. This figure exceeds twice the annual order volume for 2025 (7 vessels).

A worker at a shipyard on Geoje Island near Busan told the FT, “We are utilizing every available space to the point where there is no empty space,” adding, “The production utilization rate is nearly 100%.” The three major shipbuilders—Samsung Heavy Industries (010140), Hanwha Ocean (042660), and HD Korea Shipbuilding & Offshore Engineering (009540)—have secured contracts worth $19.1 billion from January through mid-May of this year. If this trend continues, they are expected to surpass last year’s total annual order value of $36.3 billion.

The United States is also turning its attention to the Korean shipbuilding industry. Last April, the U.S. Department of Defense announced a $1.85 billion feasibility study to explore outsourcing the design and construction of warships to South Korea and Japan. This decision breaks with the principle of domestic production that has been maintained for decades. Last year, the U.S. Government Accountability Office (GAO) diagnosed the state of the U.S. shipbuilding industry as “nearly complete collapse.”

Patrick Han, a Seoul-based banker specializing in infrastructure and defense, said, “For the U.S. to maintain its leadership in the Asia-Pacific region, the shipbuilding capabilities of South Korea and Japan—especially South Korea’s—are absolutely essential.”

◇K-Defense: $6.5 Billion in Contracts with Poland This Year Alone

Defense exports are also surging. Russia’s invasion of Ukraine and security concerns in the Middle East, Asia, and Europe have boosted demand for South Korean weapons. South Korean weapons are considered a strong alternative because they are cheaper than Western options and come with fewer delivery delays and usage restrictions typically associated with U.S. products.

This year alone, South Korea has signed defense contracts with Peru, Norway, and the United Arab Emirates (UAE), and secured a $6.5 billion deal with Poland for fighter jets, rockets, and tanks. The order backlog for defense exports has increased by 24% over the past year, reaching 113.3 trillion won.

◇“At a competitive disadvantage without semiconductors”… Dark clouds loom

Behind the boom, however, there are shadows. The steel and petrochemical industries are suffering from the double whammy of low-cost Chinese competitors and high oil prices. Small and medium-sized enterprises (SMEs) are being crushed by wage burdens and energy costs. Experts believe that South Korea has already ceded the lead to China in the machinery, battery, display, and automotive sectors.

Kim Young-han, a professor of economics at Sungkyunkwan University, warned the FT, “Industries that fail to maintain a technological competitive edge over China will soon be forced out of the market,” adding, “South Korea is heading toward a comparative disadvantage in almost every sector except semiconductors.”

Patrick Han viewed this “semi-permanent sense of crisis” as, paradoxically, the driving force behind South Korea’s industry. “The moment we stop, that will be the peak of the economy,” he said. “People instinctively know that to move forward, we must keep rowing.”