According to Yonhap News Agency on August 4, citing the South Korean Ministry of Trade, Industry and Energy and the Korea International Trade Association data reported that in July, South Korea's exports to China increased by 14.9% year-on-year, to 11.4 billion US dollars, a new high in nearly 21 months, once again becoming China's second largest source of imports.

From January to July this year, South Korea's exports to China accumulated 74.8 billion U.S. dollars, and China replaced the United States as South Korea's largest export destination again. Although Sino-US trade frictions have led to supply chain restructuring, South Korea's exports of IT intermediate products such as memory semiconductors and wireless communication equipment parts to China have increased, pushing South Korea's exports to China to show a strong recovery trend, and cumulative exports to China from January to July have overtaken exports to the United States.

According to statistics released by China's General Administration of Customs, South Korea accounted for 6.7 percent of China's total imports in the first half of this year, ranking second only to Taiwan (7.6 percent). South Korea has been China's second largest source of imports from 2021 to 2022, but was overtaken by the United States (6.5%) in 2023 and returned to second place in the first half of this year.

According to the report, given that the good momentum of the semiconductor industry is expected to continue into the second half of the year, South Korea's exports to China are also expected to maintain the recovery momentum.

However, South Korean semiconductor exports to China may be affected by U.S. policy. Since the United States restricted exports of advanced semiconductor equipment to China in October 2022, the United States has been pressuring its Allies to adopt the same restrictions. Due to the huge investment of South Korean semiconductors in China, the United States decided last year to extend the exemption period for Samsung Electronics and SK Hynix's factories in China to import American chip equipment.

Bloomberg reported that the United States asked South Korea to strengthen semiconductor export controls to China, including logic chips that are more advanced than 14 nm and DRAM products that are more advanced than 18 nm. According to people familiar with the matter, the United States may include high bandwidth memory (HBM) produced in South Korea into the Chinese chip control object at the end of September. HBM is an important component for manufacturing AI accelerators, mainly supplied by Samsung Electronics, SK Hynix and Micron Storage.

Although the South Korean government remains cautious ahead of the official U.S. announcement, it believes that even new U.S. sanctions will have limited impact due to the relatively low share of advanced semiconductor exports to China.