South Korea's semiconductor-driven economic boom could lose steam within two years despite near-term upside risks to gross domestic product growth, Capital Economics' Marcel Thieliant says. The economist expects the U.S. artificial-intelligence investment boom to run out of steam in 2028, which could prompt South Korean chip makers to start cutting capital spending as the industry is highly cyclical.

Thieliant notes that Samsung Electronics and SK Hynix announced a combined 800 trillion won investment plan to build new chip fabrication plants in southwestern South Korea, although the time frame has yet to be disclosed. SK Hynix cut its capital expenditure by two-thirds in 2023 as the post-pandemic electronics boom reversed, he notes.