(Yicai) Aug. 7 -- China overtook the United States as South Korea's biggest export market last month, reclaiming the position for the first time in more than year, as shipments nearly doubled on skyrocketing Chinese demand for artificial intelligence and memory chips.

South Korean exports to China soared 96 percent to USD21.7 billion in July from a year ago, according to data from the Ministry of Trade, Industry, and Resources. Exports to the Association of Southeast Asian Nations surged 74 percent to USD18.8 billion. The US was third at USD17.4 billion and the European Union fourth at USD9.4 billion, up 69 percent and 56 percent, respectively.

The contest between China and the US for the title of South Korea's largest export market has intensified since the second half of last year. The US maintained a clear lead during the first five months of this year, but exports to both markets drew nearly equal at about USD20 billion in June.

Surging global demand for memory chips, driven by the boom in AI computing, was the primary catalyst for the increase in exports to China last month, Kim Yoon Jun, a South Korean scholar, told Yicai.

“The recovery in China's domestic AI infrastructure and electronics manufacturing supply chains has led to a substantial increase in imports of related intermediate products from South Korea, significantly boosting semiconductor exports,” Kim said. “In addition, benefiting from the mature regional division of labor in East Asia, China has a complete end-product manufacturing chain and has consistently been a key market for absorbing South Korea's intermediate goods.”

China's return to the top spot confirms that the deep integration of the China-South Korea industrial chain is unlikely to change easily, he noted, adding that the Chinese market remains irreplaceable for South Korean exports.

The country’s total exports jumped 63 percent to USD98.9 billion last month from a year earlier, the second-highest monthly figure ever. Imports rose 27 percent to USD68.6 billion. AI-related industries remained the dominant growth engine, with semiconductor exports soaring 179 percent and computer exports, mainly server solid-state drives, skyrocketing 404 percent, respectively. For the first seven months of this year, South Korea's exports reached USD594.4 billion.

The Korea Institute for Industrial Economics and Trade projects that demand generated by global AI infrastructure investment will push exports of chips and information and communication technology products sharply higher. It expects South Korea's total exports to rise 30 percent this year to a record USD924.4 billion, while the annual trade surplus could reach an unprecedented USD219 billion.

If that forecast proves correct, South Korea would overtake the Netherlands, which ranked fourth globally for exports last year, and become the world's fourth-largest exporting nation. But South Korea's export boom remains heavily centred on semiconductors, Kim pointed out, noting that the recovery of other sectors must quickly catch up.

Editor: Martin Kadiev