Rapid technological innovation, led by the AI revolution, is reshaping the industrial landscape.

But technology is not the only variable at play. Shifting US trade policy, China’s increasing self-sufficiency — as well as its slowing economy — are all forcing South Korean industries to recalibrate.

In Korea, 13 flagship industries have long underpinned the economy.

Heading into 2026, which of these sectors will grow, and which will need to adjust?

(Part 1. Export Outlook: Technology Fuels Growth; Structural Constraints Trigger Realignment)

First, looking at the export trends for Korea’s 13 flagship industries in 2026,

IT and biotech are expected to lead growth.

However, continued weakness in the materials sector is likely to weigh on overall exports,

with the value of outbound shipments projected to decline by about 0.6% year-on-year.

In the machinery industries, exports are forecast to fall by roughly 2%,

reflecting US tariff pressures and the localization of production overseas. 

Shipbuilding exports are expected to dip slightly due to fewer shipments of high-value offshore platforms, but exports should remain at a relatively high level overall.

In the materials sectors, textiles exports should reassume an upward trajectory,

but exports of refined oil, steel, and petrochemicals are likely to remain soft. Overall, exports are set to tumble by 7.6% in the materials industries. 

The outlook for emerging IT-driven industries is more positive.

As AI-related demand continues to grow and demand for high-value components expands, exports of ICT devices, home appliances, and displays are expected to climb; sectoral exports are projected to increase by about 4.2% overall.

Semiconductor exports should continue to benefit from robust demand for high-value products, including High Bandwidth Memory (HBM) and DDR5 memory.

However, the base effect is expected to moderate overall growth prospects.

Biohealth exports are projected to jump by 7.8%, buoyed by greater exports by contract development and manufacturing organizations (CDMO) and steady growth in key product categories.

Exports of secondary batteries, on the other hand, are expected to decline by around 12%,

as overseas production expands and demand for electric vehicles falls.

(Part 2. Domestic Demand Outlook: “A mild recovery, but at different speeds across industries”)

Domestic demand in most industries is expected to increase, 

on the back of a recovery in private consumption and investment.

In the machinery industries, domestic demand for automobiles looks set to dip slightly, as models age and the economy slows. 

The shipbuilding industry is expected to undergo a sharp adjustment as orders for LNG carriers and container ships are scaled back.

Demand for general machinery, however, is projected to rise as facility and construction investment gradually recovers.

In the materials industries, the steel, refining, petrochemicals, and textiles sectors are all expected to see more demand, though stiff structural headwinds remain.

The demand outlook for the emerging IT industries is more sanguine. 

Investment in AI and related industries is poised to continue growing as demand surges; demand for semiconductors alone is expected to soar by more than 70%.

Demand in the displays and home appliances sectors should also return to a growth pattern. 

Domestic demand for both secondary batteries and biohealth products is expected to expand at a double-digit pace as well.

(Part 3. Production Outlook: An Inflection Point for Korean Industries)

Estimates of production for 2026 paint a picture of industrial divergence. 

Sectors in the emerging IT industries are expected to show clear gains, 

reflecting strong export momentum and robust domestic demand.

But battery production is projected to tumble by 9.8%

as battery makers move production abroad.

In the machinery industries, automobile production is expected to edge up slightly

as new EV plants come online, while production of general machinery should remain broadly flat,

with domestic demand providing support.

Domestic shipbuilding production, by contrast, is projected to fall by 9.7%

due to the base effect and reduced container ship construction.

In the materials industries, only the textiles sector is expected to see a bump in production, albeit marginal.

Production in the steel, petrochemicals, and oil refining sectors is poised to fall again, 

amid weak demand, slowing exports, and 

challenging global supply conditions.

(Part 4. Import Outlook: Recovery and Reallocation)

Imports in 2026 are projected to increase by 2.9% year-on-year.

Imports of general machinery and shipbuilding-related items are expected to continue rising, while automobile imports may dip slightly as Korean consumers seem to increasingly prefer domestic makes and models. 

In the materials sectors, imports are expected to increase, concentrated in the textiles and petrochemicals sectors.

Imports of refined oil should fall, however, plunging by 15.9% as prices decline.

In the emerging IT industries, imports are also expected to increase, in line with expanding production.

Only the battery sector is likely to see a continued decline in imports,

reflecting the repeated pattern of expanding overseas production.

(Outro)

In 2026, AI, biohealth, and next-generation semiconductors are poised to reshape the industrial paradigm for Korea’s 13 flagship industries,

while traditional industries such as oil refining, steel, and petrochemicals restructure and readjust in pursuit of a new equilibrium.

Amid so much uncertainty, one thing is clear: Technology is shaping the future of the Korean economy.