(C) Vecteezy

SEOUL — A significant surge in Artificial Intelligence (AI) investment is expected to propel the growth of key South Korean industries, dubbed the ‘R.E.D.’ sectors—Ram (DRAM), Energy Storage Systems (ESS) for batteries, and Display—in 2026, which is designated as the 'Year of the Red Horse.'

The Korea Chamber of Commerce and Industry (KCCI) released its '2026 Industrial Weather Forecast' on Sunday, an analysis conducted in collaboration with 11 major industry associations. The forecast offers a mixed outlook, with a significant divide between AI-driven sectors and traditional heavy industries.

The Sunny R.E.D. Outlook

The semiconductor (DRAM) and display sectors were forecast to be 'Sunny,' while battery, bio, automobile, shipbuilding, and textile/fashion industries were rated 'Mostly Sunny.' In contrast, machinery, petrochemicals, steel, and construction face a 'Cloudy' outlook.

1. RAM (DRAM): High-Value Memory Takes the Lead

The semiconductor industry is projected to see its exports grow by 9.1% in 2026, following a strong 16.3% rise to $165 billion in 2025. This growth will be spearheaded by the expanding demand for high-value DRAM products, such as High Bandwidth Memory (HBM), driven by the global competition among tech giants to build robust AI infrastructure. Microsoft, Amazon, and Alphabet alone are reportedly planning investments totaling $100 billion in 2026 for AI infrastructure.

2. Display: OLED’s Efficiency Pays Off

The display sector is expected to see a 3.9% increase in exports, reaching $17.67 billion in 2026. This is attributed to the improved performance standardization of AI devices and the rising demand for power-efficient Organic Light-Emitting Diode (OLED) panels. The Korea Display Industry Association forecasts a particularly sharp increase in shipments: 83.3% for automotive OLEDs and a massive 238.5% for XR (eXtended Reality) OLEDs.

3. ESS (Battery): AI Data Centers Power Demand

Battery exports are forecast to grow by 2.9% in 2026, largely due to the increasing demand for ESS in AI data centers. The sector also anticipates a rebound in electric vehicle (EV) battery demand following a temporary slowdown (chasm), buoyed by major automakers like Hyundai, Kia, and BMW concentrating on K-battery-equipped model launches.

However, the industry faces headwinds, including the potential reduction in benefits from the US Advanced Manufacturing Production Credit (AMPC) and the rapid market share expansion of Chinese battery manufacturers. Chinese companies' global market share surpassed 77% this year, and they overtook Korea (38.7%) for the first time in markets excluding China, claiming a 46.5% share.

Mixed Forecasts for Other Key Industries

Bio: The sector is optimistic about securing large-scale contract development and manufacturing organization (CDMO) agreements, thanks to the full-scale operation of domestic facilities and a potential beneficial effect from the US Biosecurity Act. Global technology transfer success of high-value new drug pipelines is expected to increase collaboration with multinational pharmaceutical firms. However, US government-led drug price reduction pressure and 'America First' supply chain policies remain key variables affecting profitability.
Automobile: Production is anticipated to increase by 1.2% to 4.13 million units, and exports by 1.1% to 2.75 million units, driven by the full-scale operation of new domestic EV plants. The rapid global market share rise of Chinese automakers is the main threat.
Shipbuilding: A robust year is expected, with exports projected to grow by 8.6% to $33.92 billion. Strong demand is expected for container ships (375 projected orders) and up to 100 additional LNG carriers, driven by US LNG export expansion projects and Qatar’s fleet replacement needs. Uncertainty regarding the transition to eco-friendly fuel vessels has increased following the postponement of IMO greenhouse gas emission reduction measures.
Textile/Fashion: Exports are forecast to rise by 2.0% to $9.96 billion, benefiting from expectations of reduced Chinese restrictions on Korean content, global demand for high-value fashion items driven by the spread of K-content, and price competitiveness due to a weak Korean Won.

Cloudy Outlook for Traditional Sectors

Petrochemicals: Exports are forecast to decline by 6.1% due to oversupply from China and falling prices of raw materials like naphtha amid low oil prices. A positive factor is the recovery of operating rates following business restructuring and the phased closure of aging petrochemical facilities in Europe and China.
Steel: Exports are expected to fall by 2.1% due to US trade protection measures and the EU’s steel import quotas (TRQ).
Machinery: Exports are projected to decrease by 3.7%. The sector is impacted by the US government's tariff policies, which subjected construction machinery and transformers to a 50% tariff as steel and aluminum derivative products since August. However, increased demand for general machinery from Middle Eastern plant orders is expected to mitigate the export decline.
Construction: The high-interest rate environment, stringent project financing (PF) loan screening, and increased safety and labor regulations—leading to construction delays and cost increases—are restricting growth in private orders.
Lee Jong-myeong, Head of the Industrial Innovation Division at the KCCI, emphasized the necessity of proactive government action. "2026 must be a year of aggressive corporate experimentation, centered on AI," he stated. "It is a crucial year for the government to implement radical regulatory innovation and establish a comprehensive incentive system to support this."

[Copyright (c) Global Economic Times. All Rights Reserved.]