South Korea

Intelligence for Better Decision Making

Bank of Korea and Naver Launch Sovereign AI Platform for Secure Financial Analysis

Jan. 22, 2026 | Financial System

South Korea’s central bank and technology giant Naver have launched a sovereign AI platform tailored to finance and economics.

**The Bank of Korea partnered with Naver Corp to develop and deploy BOKI (Bank Of Korea Intelligence), a generative AI system specialized in financial and economic analysis.**
Unveiled at the January 2026 Bank of Korea–Naver Joint AX Conference, BOKI represents the world’s first sovereign AI platform operating within a central bank’s live working environment.

**Bank of Korea engineers built BOKI entirely within the institution’s internal network, isolating it on-premises to prevent data leakage and comply with strict national security guidelines.**
Naver Cloud contributed the cloud infrastructure, large language models and technical support, while the Bank’s personnel manage application development and day-to-day operations. All AI training and inference occur within this closed network to ensure data remains secure.

**BOKI offers five core functions that align with the Bank’s mission: document search and summarization, Q&A assistance, translation of official publications, economic issue analysis and data-driven decision-making.**
The platform also features law and regulation checks and an internal work chatbot designed to streamline workflows.

**After launching initial digital technology initiatives in 2020, the Bank commenced full-scale development of BOKI in 2024.**
Following rigorous internal testing and standardization, the Bank initiated BOKI’s first operational rollout in early 2026.

**Governor Lee Chang-yong emphasized the need for a sovereign AI system that understands Korea’s financial history, institutional frameworks and cultural context.**
He warned that current network separation policies—which forbid cloud-based internet access for critical institutions—hinder large-scale AI deployment and called for regulatory reforms to accommodate significant computing demands.

**Anticipating regulatory changes by March 2026, the Bank is reclassifying around 1.4 million internal documents into AI-readable formats, preparing a new national network security system and evaluating advanced security technologies.**
These steps will allow BOKI’s capabilities to expand once network separation rules are relaxed.

**Naver Cloud plans to apply lessons learned from BOKI to accelerate AI transformation across other high-security public and financial sectors.**
CEO Kim Yoo-won pointed to this project as a global example of deploying AI under stringent central bank security conditions and pledged continued support to strengthen AI infrastructure throughout South Korea’s industries.

Surging Semiconductor Demand Fuels Price Increases, Export Growth, and Production Expansion

Jan. 22, 2026 | Firms

Strong global demand for semiconductors is driving increases in prices, exports, and production capacities.

**Producer prices in South Korea rose 0.4 percent month-on-month in December 2025, marking the fourth consecutive increase since September.**
Semiconductor costs led the gain, with prices in the computers, electronics, and optical equipment category climbing 2.3 percent. Flash memory jumped 6.0 percent and DRAM semiconductors surged 15.1 percent, while industrial goods overall added 0.4 percent, pushing up the headline index.

**Bank of Korea data show both the Domestic Supply Price Index and the Total Output Price Index rising 0.4 percent in December 2025, indicating that domestic and export sectors contributed equally to price pressures.**
BOK officials say the extent to which producer price increases pass through to consumer prices will depend on company pricing strategies, prevailing business conditions, and government inflation measures. They also advise monitoring falling global oil prices for potential offsetting effects on inflation.

**The semiconductor industry has entered a “hyper bull” phase fueled by robust demand for memory chips, especially from expanding AI server deployments.**
Counterpoint Research projects memory chip prices could rise 40 to 50 percent quarter-on-quarter in early 2026, possibly surpassing the 2018 peak. Experts attribute current shortages—particularly in general-purpose DRAM—to a structural shift as manufacturers focus on high-bandwidth memory expansion.

**Major producers are responding by boosting capacity.**
Micron Technology plans to acquire Powerchip Semiconductor’s P5 fabrication plant in Taiwan for $1.8 billion, aiming to accelerate DRAM output by mid-2027. This approach should alleviate memory chip shortages faster than building new facilities, which typically require over five years to come online.

**South Korea’s leading memory firms are expanding as well.**
SK hynix is developing its Yongin semiconductor cluster, slated to begin operations in February 2027, and has already started HBM production at its M15X plant. Samsung Electronics is constructing its P4 and P5 fabs with a target of full operation by 2028. Both companies are evaluating US fab investments estimated between $67 billion and $81 billion for 2027–2030, aiming to sidestep potential tariffs despite only about 8 percent of Korean semiconductor exports going directly to the United States.

**In Japan, Advantest—a semiconductor inspection equipment maker—has seen its share price triple over two years to around ¥22,000 as of January 2026, with a market capitalization of ¥16.46 trillion.**
The company commands an estimated 60–70 percent share of the HBM tester market and holds a near-monopoly on AI accelerator inspection systems. Its testers validate next-generation GPUs from NVIDIA and AMD as well as memory products from Samsung, SK hynix, and Micron. Advantest plans to boost production capacity by more than 70 percent by the end of 2026, and global investment banks forecast operating profits exceeding ¥350 billion for that year.

**South Korea’s export performance in January 2026 underscored the semiconductor sector’s key role in the economy.**
In the first 20 days of the month, total exports rose 14.9 percent year-on-year to $36.36 billion, driven by a 70.2 percent surge in semiconductor shipments to $10.73 billion, which accounted for 29.5 percent of all exports. Exports to China climbed 30.2 percent to $8.45 billion, and shipments to the United States grew 19.3 percent to $6.66 billion despite existing tariffs. Imports over the same period increased 4.2 percent to $36.98 billion, resulting in a $600 million trade deficit. In December 2025, exports expanded 13.4 percent year-on-year to $69.6 billion—marking the 11th consecutive month of growth—and annual exports for 2025 reached a record $709.7 billion.

### IMPACT ANALYSIS
**From this Development, various impacts could cascade through the system, to a lesser or greater extent, depending on the severity and criticality of the shocks.**

Domain	Causal Chain	Possible Outcome
Macroeconomics & Growth	(Semiconductor export boom ↑ → Terms-of-trade index ↑ → Current-account balance (% GDP) ↑ → Potential GDP growth revision ↑ → Real GDP growth ↑)	The enhanced terms of trade and external surpluses will underpin upward revisions to potential output and drive stronger real GDP growth.
Macroeconomics & Growth	(Memory chip price surge ↑ → Import-price pass-through ↑ → Headline CPI/Core CPI ↑ → Inflation volatility ↑ → Inflation-targeting credibility ↓)	Rising import-price pass-through and inflation volatility may erode confidence in the central bank’s ability to keep inflation near its 2 percent target.
Competitiveness	(Semiconductor export boom ↑ → Trade-openness & preferential access ↑ → Real export market-share change ↑ → High-value-added export share ↑ → Total-factor productivity level vs frontier ↑)	Greater preferential access and high-value trade gains will accelerate productivity convergence toward the global frontier.
Macroeconomics & Growth	(DRAM price surge–driven profits ↑ → Capital-formation rate ↑ → Business fixed-investment growth deviation ↑ → Private fixed-investment growth ↑ → Potential GDP growth revision ↑)	Surging profits will finance elevated business investment, prompting analysts to hike potential GDP growth estimates.
Macroeconomics & Growth	(Memory chip price surge ↑ → Global-value-chain reconfiguration velocity ↑ → FDI net inflow (% GDP) ↑ → Foreign-owned green-field project count ↑)	Accelerated value-chain shifts will draw substantial FDI and increase foreign-owned greenfield semiconductor projects.
Firms	(South Korean PPI inflation ↑ → Supply-chain restructuring cadence ↑ → Supplier-delivery-times index ↓ → End-to-end supply-chain lead-time deviation ↓ → Capacity-utilisation in manufacturing ↑)	Faster supply-chain restructuring and reduced lead-time variability will boost manufacturing capacity utilization.
Technology & Innovation	(Strategic-sector export risk ↑ → Dual-use export-control restrictiveness ↑ → Semiconductor fab utilisation rate ↓ → AI inference cost index shift ↑ → AI adoption GDP uplift ↓)	Tighter export controls will reduce fab utilization, raise AI inference costs, and dampen AI-driven GDP gains.

### BOTTOM LINE

- Robust AI-server demand has driven a pronounced memory-price cycle—general-purpose DRAM is projected to rise 40–50 percent quarter‑on‑quarter in early 2026—which has already lifted South Korean producer prices for four months and increases the likelihood of pass-through into consumer inflation unless firms absorb costs or falling oil prices offset the effect.

- The 70.2 percent year‑on‑year surge in semiconductor exports in early January 2026, which made semiconductors 29.5 percent of exports in the period, will materially improve South Korea’s terms of trade and current‑account receipts and is likely to justify upward revisions to potential GDP and stronger near‑term real growth if export strength persists beyond cyclical inventory adjustments.

- Elevated memory prices have translated into outsized cash flow for producers, which is accelerating capacity expansion via faster routes such as M&A (Micron’s $1.8 billion P5 acquisition) and large greenfield builds (SK hynix Yongin, Samsung P4/P5), and these actions should begin to relieve shortages by mid‑2027 to 2028, exerting downward pressure on prices over a 12–24 month horizon.

- Because acquisitions and new fabs take time to raise output, the market is likely to remain tight and price‑volatile through most of 2026, sustaining producer‑price pressures and complicating the Bank of Korea’s policy trade‑offs between containing inflation and supporting growth from the export boom.

- Firms across semiconductor supply chains are already shortening supplier lead times and raising capacity utilization, which will increase manufacturing investment and capital formation, tighten upstream markets for equipment and materials, and improve end‑to‑end reliability even as costs remain elevated.

- Tighter export controls or wider dual‑use restrictions would slow the flow of specialized equipment and materials, reduce fab utilization, raise unit costs for advanced memory production, and could slow global AI deployment by increasing AI inference costs and reducing downstream adoption rates.

- Equipment and testing suppliers are capturing disproportionate gains from the cycle—Advantest’s tripled share price and planned >70 percent capacity increase through 2026 demonstrate that test‑equipment makers and suppliers will continue to benefit and attract investment and talent over the next 12–18 months.

- The cycle is prompting value‑chain reconfiguration and potential US‑based investments (Korean firms evaluating $67–81 billion in US fabs for 2027–2030), which will increase FDI and diversify production footprints but will be costly and slower to deliver than near‑term capacity relief achieved through acquisitions and existing expansions.

- Policymakers and central bankers should monitor corporate pricing strategies, oil‑price trajectories, and the pace of announced capacity coming online, and consider targeted fiscal or regulatory measures (capex incentives, temporary subsidies, or macroprudential tools) to smooth consumer‑price effects while preserving incentives for private investment in domestic semiconductor capacity.

- Procurement and downstream firms should plan for sustained higher electronic‑input costs through 2026 by locking supply contracts, using hedges or pass‑through clauses, and exploring strategic partnerships or localized sourcing to mitigate exposure and secure long‑lead components.

Monitored Intelligence for South Korea - Jan. 23, 2026

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SK Innovation brings KHNP into TerraPower SMR alliance

Korea Herald | English | News | Jan. 23, 2026 | UndeterminedBizdev-Partnering

SK Innovation has sold part of its stake in US-based small modular reactor (SMR) developer TerraPower to Korea Hydro & Nuclear Power (KHNP), marking KHNP’s first entry into a global SMR alliance. KHNP received approval from the Committee on Foreign Investment in the United States in December, enabling the investment. SK Innovation, which initially invested 367.5 billion won ($250 million) in TerraPower in August 2022 alongside SK Inc., remains the second-largest shareholder after the partial sale.

TerraPower is developing a commercial SMR plant in Wyoming using its proprietary Natrium technology, a sodium-cooled reactor system designed to flexibly adjust power output to meet demand. The partnership between SK Innovation, TerraPower, and KHNP aims to enhance cooperation on SMR projects in the US and other international markets, with plans to formalize business agreements within the year.

The collaboration comes amid rising demand for stable, large-scale power sources driven by the expansion of artificial intelligence and data center infrastructure. SMRs are gaining traction for their modular design, scalability, and ability to provide continuous power. SK Innovation plans to support the Wyoming project and promote overseas expansion and localization of key materials through this strengthened alliance.

Samsung ranks last in operating margin among major memory chip makers

Hankyoreh - E | English | News | Jan. 23, 2026 | UndeterminedOperating Results

Among major memory chip makers, Samsung Electronics ranks last in operating margin despite the current semiconductor super cycle driven by AI hype. SK Hynix leads in profitability with an operating margin of 46.6% in the third quarter of 2025, projected to rise to 52.7% in the fourth quarter. Micron follows closely with a 45% operating margin in the first quarter of fiscal 2026, showing strong performance despite having higher net revenue than SK Hynix.

Samsung recorded its highest-ever quarterly operating profit of 20 trillion won (US$13.6 billion) in Q4 2025, with 16 trillion won from chip production. However, its chip business operating margin was around 36.8%, about 10 percentage points lower than competitors. This is attributed to deficits in Samsung’s System LSI and foundry businesses, as well as challenges in its AI-based high bandwidth memory sector.

Despite claims from Samsung’s CEO of regaining market favor, internal sources caution that the company’s technological competitiveness and foundry yield still lag behind rivals such as TSMC. Samsung also faces challenges in securing more clients and advancing in AI chip technology. Analysts suggest the low operating margin is primarily due to problems in the foundry business, which are currently being addressed.

In contrast, TSMC and Nvidia have established strong "technical moats," resulting in high operating margins of 50.7% and over 60%, respectively. Nvidia benefits from being a fabless company, avoiding large manufacturing investments and dominating the AI GPU market, generating significant profits.

Lee condemns civilian drone incursion into North Korea as ‘akin to starting a war’

Hankyoreh - E | English | News | Jan. 23, 2026 | North Korea

President Lee Jae Myung condemned the recent incident of a civilian manufacturing and sending a drone into North Korea, calling it "akin to starting a war." During a Cabinet meeting at the Blue House, he emphasized that such actions are unacceptable and likened them to firing a gun towards the North. The individual involved had sent drones on three occasions, prompting Lee to criticize the Ministry of National Defense for inadequate surveillance measures and to demand improved facilities and equipment to prevent hostility and mistrust between the two Koreas. He ordered a thorough investigation into the incident, stating concerns that state agencies might be implicated.

Lee’s comments also aimed to maintain ongoing military efforts to ease tensions on the Korean Peninsula, such as the suspension of loudspeaker and radio broadcasts toward North Korea, signaling his intention to hold those responsible accountable without undermining diplomatic measures.

On energy policy, Lee called for rational, ideology-free discussions regarding the construction of new nuclear power plants and small modular reactors. He acknowledged strong public support for nuclear power as essential to addressing electricity needs and urged efforts to minimize political polarization on the issue. These remarks follow previous government officials’ statements emphasizing the inevitability of expanding nuclear power facilities.

Additionally, Lee addressed the importance of media neutrality concerning court decisions, urging adherence to fairness and the public interest, especially in politically sensitive cases where public broadcasts might criticize prosecutors regardless of verdicts.

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