In 2025, Korea's exports surpassed $700 billion (about 1,028 trillion won) for the first time. Observers say the competitiveness of key industries such as semiconductors and automobiles has reached a world-class level. It is also clear that exports are serving as a "breakthrough" for Korea's economy at a time when low birthrates and an aging population are clearly limiting growth in the domestic market. But a closer look at the results shows the structure remains centered on the Seoul metropolitan area and large corporations. The challenge is to create a virtuous cycle in which the fruits of export expansion flow to employment, income, and investment in regions and small and midsize companies. As global supply chains are reorganized and protectionism and the battle for technological supremacy intensify, diversifying export markets, items, and participants has become a condition for survival, not a choice. What is needed to both build on the $700 billion export milestone and pivot to a structure in which regional small companies can run alongside? Trade asked Koo Gi-bo, professor at Soongsil University's Department of Global Commerce, and Kim Heung-jong, former president of the Korea Institute for International Economic Policy (KIEP), about the significance of breaking through $700 billion in exports and the tasks ahead.
— What is the significance of surpassing $700 billion in exports?
Koo Gi-bo, professor at Soongsil University's Department of Global Commerce (hereafter Koo Gi-bo): "With the domestic market facing limits due to low birthrates and an aging population, the new growth breakthrough for Korea's economy ultimately lies in exports. Under these conditions, surpassing $700 billion in exports is, I believe, an event that showed new hope for our economy. Despite China's fierce challenge adding to the difficulties in some sectors such as steel, chemicals, and machinery, in semiconductors, automobiles, shipbuilding, and defense, the technological prowess of Korean corporations has reached a global level and translated into real competitiveness. It is meaningful because the results were achieved amid an unfavorable environment in which China's push exports and U.S. President Donald Trump's tariff pressure were operating at the same time."
Kim Heung-jong, former president of the Korea Institute for International Economic Policy (KIEP) (hereafter Kim Heung-jong): "Korea's economy has grown through a classic outward-oriented industrialization strategy. Because the domestic market is small, we made overseas markets the main stage for growth, and as a result, we became the world's sixth-largest exporter of goods, achieving more than $700 billion in annual merchandise exports. This is a signal that Korea's structural competitiveness remains intact. Exports are not just about volume; they are a driver that simultaneously pulls technological innovation, corporate innovation, and the advancement of industrial structure. That is because, amid global competition, export activity forces corporations to improve productivity and accumulate technology. However, compared to merchandise exports, service exports are still weak, leaving us around ninth in the world on a total exports basis. That means there is ample room to grow services and knowledge-based exports."
— It has been seven years since exports surpassed $600 billion. How much did the export structure change during this period?
Koo Gi-bo: "The semiconductor industry went through some difficulty during the memory downcycle, but exports steadily increased with the rapid growth of the artificial intelligence (AI) industry, centered on High Bandwidth Memory (HBM). The overall competitiveness of the automobile industry improved, and it delivered strong results in eco-friendly vehicles, particularly electric and hybrid cars. Sectors such as electric-vehicle batteries, shipbuilding, and defense also strengthened technological prowess and emerged as new export engines. That said, there are clearly sectors facing growing challenges, such as steel and petrochemicals. These sectors need technology development and restructuring, and petrochemicals in particular urgently need to shift to fine chemicals."
Kim Heung-jong: "I think a somewhat sober assessment is needed for this span. While the scale of exports grew from $600 billion to $700 billion, I question whether there were fundamental changes in the export structure. It is hard to say that diversification of export items made a dramatic leap forward, and the structure still relies heavily on a small number of items such as semiconductors and automobiles. The large-corporation-centered export structure has also not changed much. The fact that the rebound and strength in semiconductor exports played a very large role in achieving $700 billion this time means dependence on the global information technology (IT) cycle remains high. We also need to check whether polarization in regional exports—between the United States and China and other regions—may have actually deepened."
— What factors made $700 billion possible amid global protectionism and tariff pressure?
Koo Gi-bo: "Last year, semiconductor exports remained strong as production cuts in commodity chips coincided with increased exports of AI Semiconductor centered on HBM. The auto industry performed well not only in internal-combustion vehicles but also in electric and hybrid cars, shipbuilding saw more orders for high value-added vessels, defense increased weapons exports by boosting competitiveness, and nuclear power secured new export engines through overseas orders. But the market side presents clear tasks. Policies to reduce dependence on China have led to increased investment and exports to the United States, and as a result, the growth in exports to the U.S. has come back as tariff imposition by the Trump administration. With exports to China and the U.S., our No. 1 and No. 2 export destinations, becoming simultaneously difficult, we need to increase investment and trade with the so-called global South, including the European Union (EU), Southeast Asia, India, South America, and Africa."
Kim Heung-jong: "Last year's trade environment saw uncertainty expand significantly due to the Trump administration's tariff policy. In Korea, political uncertainty overlapped, and exports were generally sluggish across major markets, not just the United States, in the first half. But after a new government took office in the second half, exports recovered rapidly, mainly to the Middle East, some emerging economies, and ASEAN, lifting the annual numbers. This is meaningful in that it eased, to some extent, the structure of excessive dependence on specific markets. At the same time, I believe Korean corporations captured certain opportunities during the global supply chain reshuffle, and exchange-rate volatility also had some positive effects on export profitability."
— What is needed to improve Korea's export structure toward balanced development?
Koo Gi-bo: "The achievement of surpassing $700 billion in exports must spread not only to large corporations in the Seoul metropolitan area but also to small and midsize companies in the regions. There are a variety of regionally differentiated goods such as specialty products and foods, and we need a mechanism to connect them to the global market. For example, after last year's Asia-Pacific Economic Cooperation (APEC)1), Hwangnambbang faced a limit to sales growth due to insufficient supply volume, but by attracting capital and mass-producing, it could expand supply capacity to the global market. If we help attract capital and support facility investment so they can establish mass production, regional specialty products can also go to the global market in sufficient volume. Small and midsize companies have the ability to create creative ideas and products, but they lack funds, personnel, and marketing. It is important to select competitive products, help them build mass-production systems, and create a springboard for growth into mid-sized and large corporations."
Kim Heung-jong: "To promote the 'export corporatization' of small and midsize companies and regional companies, we need practical incentives for technology-based companies along with differentiated support for companies located in the regions. Without properly pushing the 'export corporatization' of small and midsize companies and regional companies, an export boom will not easily translate into job and income gains across the broader domestic economy. We should provide practical incentives to technology-based companies in small and midsize categories and in the regions, and offer differentiated support to regional companies. Beyond financial support, we need a system that helps with overseas expansion consulting, building local networks, and securing long-term buyers. Currently, small and midsize companies mostly export indirectly as part of large-corporation supply chains, and the number of exporters with their own brands and buyers is limited. We need a one-stop support system that integrates financing, guarantees, information, and talent support so small and midsize companies can enter overseas markets on their own, as well as a mechanism to share the risk of early failures."
— What are the directions for diversifying export items and new industries and for strengthening support for new technologies?
Koo Gi-bo: "Our semiconductor exports are still heavily concentrated in memory chips, especially commodity DRAM. That means the entire export picture could be shaken significantly if conditions flip to oversupply. Beyond memory, semiconductors include a range of areas such as system semiconductors, design (fabless), production equipment, and materials and components. Going forward, we need to actively foster system semiconductors, design, and materials development to broaden the portfolio. In automobiles, as the electric vehicle "chasm"2) persists, we should bolster competitiveness in hybrids and step up support for developing all-solid-state EV batteries. Exports in defense and nuclear power have already emerged as new export engines, so we need to systematize policy support further.
"In terms of new industries, aggressive investment and industrialization support for future industries such as AI and robotics are important. In bio, exports have so far centered on generics, but we should shift to full-fledged support for new drug development to create new export engines. In the electric industry, as power demand is expected to surge due to AI industry growth, we can seize opportunities through cooperation with the United States on nuclear power and by expanding transformer exports. The globalization of the Korean wave, including K-pop, dramas, and films, is a direct opportunity to expand exports of consumer goods such as cosmetics and food. We should strengthen support for small consumer-goods companies to participate in overseas trade shows and to work with overseas distribution companies. At the same time, we should guide regional small companies in the same industry to pursue mergers and acquisitions to gain economies of scale, and focus government support on facility investment for mechanization, digitalization, and smartization to shift toward a high value-added, digital export structure."
Kim Heung-jong: "The need to diversify export items has been raised repeatedly for a long time, but in reality it has been a difficult task to deliver results on. That is because even if you intentionally foster strategic industries, it is not easy to secure global competitiveness in a short period. That said, it is not that there has been no positive change. Over the past decade or so, the competitiveness of Korean corporations in bio and pharmaceuticals has gradually strengthened, and it has begun to translate into actual export performance. This is a case showing that when long-term research and development (R&D) investment is combined with regulatory improvements, new export items can take root.
"Going forward, we need strategic, medium- to long-term development in areas such as bio, advanced materials, eco-friendly technologies, and high value-added consumer goods. To raise the share of new industries in exports, the key is to radically improve the R&D investment environment rather than rely on short-term subsidies. In particular, bold R&D support is needed for small and midsize companies and advanced startups. At the same time, institutional mechanisms to strictly manage and oversee unfair transactions between large corporations and small tech companies are important. Only when an ecosystem is in place for tech-focused small companies to grow can numerous regional innovation companies emerge, thereby expanding the export base for new industries."
— What conditions are needed to shift the export structure and spread regional balance and small and midsize company participation?
Koo Gi-bo: "Going forward, the key will be how to qualitatively transform the export structure of regional small and midsize companies. The government should step up support so that regional small and midsize companies in the same industry can secure economies of scale through mutual mergers and acquisitions and build mechanized, digitalized, and smart production systems. Because the Seoul metropolitan area offers a favorable environment for doing business in terms of location, concentration there occurs. We need to create a business-friendly environment in the regions by ensuring a smooth supply of needed talent. Small and midsize companies may have good ideas or technologies but often find it difficult to develop products due to a lack of funds, so screening and support for such tech companies should be strengthened."
Kim Heung-jong: "A qualitative shift in the export structure and the spread of regional balance are not separate tasks. While growing high value-added manufacturing and service and digital exports at the same time, there are ways to actively involve regional small and midsize companies in the process. Going forward, we should base ourselves on high value-added manufacturing while strategically expanding service, digital, and knowledge-based exports. Exports centered on intangible assets such as data, platforms, content, and technology services should become new growth engines. To this end, the government should refine systems and infrastructure, and corporations should invest with a focus on securing medium- to long-term competitiveness rather than short-term results. In addition, Korea already functions beyond a one-day living sphere to a half-day living sphere. Therefore, breakthrough investments are needed so regions can gain residential competitiveness—for example, bold support in healthcare, education, and housing environments. It is truly a problem that in this small country we hear talk of a southern boundary for employment. In the medium to long term, policies are needed to induce large corporations to relocate to the regions, and this should be accompanied by breakthrough investments in core infrastructure such as transportation, communications, education, and healthcare. The key is to create an environment in which global talent can live and work in the regions."
Term explanation
1) Asia-Pacific Economic Cooperation (APEC)
An international organization created to strengthen the economic cohesion of Pacific Rim countries, it has a secretariat in Singapore and includes 20 countries and one special administrative region. It launched in Nov. 1989 as a ministerial consultative body and was elevated to a leaders' summit in 1993. Korea hosted the leaders' summit as chair in Busan in 2005 and in Gyeongju in 2025.
2) Chasm
A phenomenon in which demand temporarily stagnates or declines before high-tech products move from an early market dominated by a small group of innovative consumers to the stage where they are widely used by the general public.
Note: This article was published in the February issue of the monthly magazine Trade. Please search for "Monthly Trade" on Naver.