South Korea on Monday set out an industrial strategy centered on semiconductors and artificial intelligence (AI).

According to the Yonhap News Agency, Industry Minister Kim Jung-kwan said the plan includes developing a new semiconductor production base in the country's southwestern region, supported by about 800 trillion won ($517.9 billion) in corporate investment that will create four memory chip fabrication plants.

The global semiconductor supply chain is highly complex and interconnected, and is generally understood as comprising three layers. The upstream segment covers inputs such as semiconductor materials and manufacturing equipment. The midstream segment refers to chip production itself, including chip design, wafer fabrication, packaging and testing. The downstream segment consists of end-use applications across consumer electronics, computing and automobiles, where chips are ultimately deployed.

In the case of South Korea's semiconductor industry, the sector is tightly integrated into global markets. Over time, the country has built a strong position in memory chips, with export growth driven by specialized production. Semiconductors are South Korea's largest export item. Against this backdrop, the development of its chip industry has remained heavily reliant on external demand from overseas markets.

Data from South Korea's Ministry of Trade, Industry and Resources showed that in 2025, exports of semiconductors rose 22.2 percent year-on-year to an all-time high of $173.4 billion, significantly driving the country's overall export growth.

At a time when the rapid expansion of AI is adding to demand for advanced computing capacity, South Korea's semiconductor exports have increased. Much of this demand flows through downstream industries such as consumer electronics, where chips are embedded in an expanding range of devices and systems. In this context, Asia's manufacturing base, particularly the concentration of consumer electronics production, continues to underpin demand for memory chips and related components from South Korean suppliers.

China is an important part of Asia's manufacturing ecosystem, with large-scale production of consumer electronics, computers and telecommunications equipment. These activities are closely linked to other segments of the regional supply chain through extensive trade in intermediate goods. This structure helps explain why China has become one of the world's largest semiconductor consumption markets.

From this perspective, South Korea's semiconductor industry is, at the downstream end, embedded in Asia's large and complex production network, benefiting from the demand for intermediate goods generated within that system.

At the upstream end, South Korea's semiconductor industry is also closely linked to international supply chains, particularly through imports of raw materials and manufacturing equipment. A Yonhap report in October 2025 noted that South Korea's reliance on imports from China for semiconductor materials such as niobium and silicon stood at 78 percent and 63 percent, respectively. While such figures are difficult to verify, given differences in statistical definitions and methodologies, they nonetheless point to a broader pattern: The upstream segment of the industry is embedded in a highly interconnected global supply chain.

It is, in many respects, a normal feature of the industry. Semiconductors, like many other high-tech sectors, are highly interconnected by nature. Their technological complexity has given rise to a fine-grained division of labor and extensive cross-border industrial collaboration.

South Korea's development of semiconductor clusters reflects a rapid response to rising chip demand driven by the global expansion of AI. It is clear that Seoul is seeking to capture the opportunities associated with this shift and to further strengthen its industrial base. In doing so, a key question is how to deepen cooperation with global manufacturing networks, particularly those in Asia. This is especially relevant given the inherently highly interconnected nature of the semiconductor industry.

Seen in this light, an open approach to supply chain engagement is likely to support the development of South Korea's semiconductor industry. Against a backdrop of heightened uncertainty in global trade, openness also appears to be a supportive feature of the broader Asian manufacturing ecosystem on which the sector depends.