Semiconductors, Batteries Bright; Steel, Construction Gloomy in H2 2026 Industry Outlook

South Korea's industrial landscape in the latter half of 2026 presents a mixed forecast, with strong performance expected in sectors like semiconductors, automobiles, and batteries, while construction and steel industries anticipate continued difficulties. The Korea Chamber of Commerce and Industry (KCCI) released its 'Industrial Weather Forecast for the Second Half of 2026,' categorizing sector outlooks using weather metaphors.

The semiconductor industry, a key driver of South Korea's exports in the first half, is projected to remain 'sunny.' A significant 92.2% increase in export value is anticipated, reaching $192.4 billion. This optimism stems from robust AI investments by major technology firms, leading to sustained demand, high chip prices, and favorable export conditions. The display, automotive, and battery sectors are forecast to be 'mostly sunny.' Battery exports, in particular, are expected to grow by 19.1% year-on-year to $4.32 billion, bolstered by demand for energy storage systems (ESS) and a strong electric vehicle market. The KCCI projects stable exports for displays and automobiles as well.

However, the outlook darkens for several key industries. Construction, machinery, textiles, fashion, and steel are categorized as 'cloudy.' The machinery and steel sectors face ongoing export sluggishness, exacerbated by U.S. tariffs and reduced duty-free import quotas from the European Union for steel. The construction sector is burdened by a decline in public works and private building projects, high interest rates, project financing constraints, escalating construction costs, and concerns over unsold properties.

Notably, the petrochemical industry is the sole sector predicted to experience 'rain,' indicating severe difficulties. Despite an expected 5.2% increase in production compared to the first half due to stabilizing Middle East tensions, exports are forecast to decline by 14.8%. This downturn is attributed to oversupply from China and falling product prices. The 'reverse lagging effect,' where the cost of raw materials like naphtha, purchased at higher prices during periods of geopolitical instability, cannot be passed on to current selling prices, is cited as a major pressure on profitability.

Lee Jong-myung, head of the KCCI's Industrial Growth Division, urged government support, stating, "As governments worldwide become direct players in global industrial competition, trade and supply chain barriers are rising, making it difficult for companies to overcome them through their own efforts alone." He proposed that the government should support investment and innovation in growth industries while also providing sector-specific assistance to ease transition costs and management burdens for struggling industries.

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As governments worldwide become direct players in global industrial competition, trade and supply chain barriers are rising, making it difficult for companies to overcome them through their own efforts alone. The government should support investment and innovation in growth industries while also providing sector-specific assistance to ease transition costs and management burdens for struggling industries.