Hello. I’m Jae Yoon Lee,

Research Fellow and Director of the Office of Carbon Neutrality and Industrial Transition Research at the Korea Institute for Industrial Economics and Trade.

I’ll be discussing the outlook for South Korea’s 13 flagship industries in 2025.

For 2025, production is set to slow down in many of Korea‘s 13 flagship industries, saving only for a handful of IT-driven sectors,

due to escalating trade risks, a sluggish global economic recovery, and increased outsourcing overseas.

We expect export growth to fall and weak growth in domestic demand.

Overall, robust global demand for IT products should to support healthy production and exports of ICT devices, semiconductors, and displays.

The biotech and shipbuilding are likely to slow down in the second half of the year,

but are nonetheless slated to post positive growth year-over-year (YoY).

The automotive, machinery, steel, oil refining, home appliances, and secondary batteries sectors are expected to remain in recession during the first half of the year due to sluggish domestic and global demand.

We do however anticipate a modest improvement in the petrochemicals industry in the second half of the year, and a full-scale recovery could be in the cards post-2026.

Now, let's take a closer look at the outlook for each of Korea’s 13 flagship industries in the second half of 2025 through detailed graphs.

First, let’s examine each industry’s export outlook for the second half of 2025.

Despite continued export growth in emerging industries such as IT and biotech,

exports of the 13 flagship industries in the second half of 2025 are expected to decline by 2.3% year-on-year

due to prevailing negative factors, such as high US tariffs, intensifying external uncertainties, and increased outsourcing of production abroad.

Due to the reverse base effect and other contributing factors, by the time the first half of 2025 comes to a close,

overall exports are likely to have tumbled by 1.9%, resulting in an annual export decline of 2.1% compared to the previous year.

Among the machinery industries, the shipbuilding sector should expected maintain its growth trajectory in exports (3.4%) in the second half thanks to deliveries of high-value LNG carriers.

However, exports of automobiles (-11.4%) and machinery (-5.8%) are expected to decline further in the second half of the year due to US tariffs and sluggish global demand.

As a result, annual exports in the machinery sector — which grew by 0.6% last year — are expected to fall by 5% in 2025.

In the materials sector, lower oil prices, higher US tariffs,

and weakening global demand are expected to result in weak exports across all subsectors throughout the year.

Overall, sectoral exports look set to plummet by -9.4% in 2025, after falling by -1.2% in the previous year.

After a 29.4% surge in 2024, exports for the IT industry and emerging new sectors are expected to continue growing by 4.7% in 2025,

supported by strong global IT demand driven by AI adoption, an increasing share of high-value semiconductors,

and the growth of promising sectors such as biosimilars and energy storage systems (ESS).

However, risks such as tariffs, rapid Chinese growth, and expanded outsourcing are expected to act as constraints on export growth.

Next is the domestic demand outlook for Korea’s 13 flagship industries for the second half of 2025.

The overall decline trend in domestic demand for the 13 flagship industries should soften somewhat in the second half of 2025, aided by improved consumer sentiment.

However, sluggish construction investment and weak domestic and global growth will continue to constrain demand growth.

In the machinery sector, domestic demand for automobiles (2.1%) is expected to increase in the second half of the year as domestic automakers turn their focus to the domestic market.

But domestic demand for general machinery (-1.7%) is expected to decline in the second half of the year due to the slump in the construction and manufacturing sectors.

In the materials sectors, domestic demand for petrochemicals is expected to rebound by 6.3% in the second half.

However, overall annual demand growth is likely to be negative (-0.2%).

And due to weak construction investment, steel demand is also expected to fall (-4.7%). Domestic demand for textiles should remain flat (0.7%).

In the IT industry and emerging new sectors, new product launches and improved electric vehicle (EV) sales are expected to drive a rebound

in domestic demand for ICT devices (5.5%) and secondary batteries (6.8%) in the second half of 2025.

However, domestic demand growth in the biohealth sector is projected to decline by nearly three percentage points in the second half of 2025 due to the base effect,

but overall expanded policy support will allow the sector to see continued annual demand growth of 2.2%.

Next is the production outlook for the Korea’s 13 flagship industries in the second half of 2025.

Production in most sectors should continue to tumble in the second half of 2025,

following downturns observed in the first half of the year as exports stumble and domestic demand recovers only modestly.

In the machinery sectors, annual production is expected to decline for the second consecutive year,

as the decline trend in production of automobiles (-4.4%) and general machinery (-3.5%) worsens in the second half amid sluggish exports and domestic demand.

Although production in the shipbuilding sector is projected to drop by 5.8% in the second half of the year,

the industry should post positive overall annual growth (5.0%) as production is normalized.

In the materials sector, continued export sluggishness and a restrained domestic recovery are expected to result in further production declines

in the steel (-1.3%), refining (-2.2%), and textiles (-1.4%) subsectors during the second half of the year.

However, the petrochemicals (-0.4%) industry could see an uptick in production (3.5%) due to improved product spreads and higher capacity utilization.

Although production growth in the emerging IT industries is expected to slow in the second half of 2025 compared to the first,

increased exports should bolster production in the ICT devices (2.1%), semiconductors (2.3%), and biotech (3.1%) subsectors.

On the other hand, production in the home appliances (-0.5%) and secondary batteries (-2.2%) sectors is expected to fall again in the second half of the year as firms outsource production abroad.

Finally, let’s take a look at outlook for imports in Korea’s 13 flagship industries for the second half of 2025.

Despite rising imports of IT products, total imports in the 13 flagship industries are expected to decline by 0.5% YoY

due to slack domestic demand in the machinery and materials sectors and falling unit prices caused by an increase in low-cost imports.

In the machinery sectors, overall imports of automobiles are expected to tick downward due to increased imports of low-cost EVs,

while imports of general machinery should remain flat amid weak recovery in the manufacturing sectors.

However, shipbuilding imports are projected to increase due to localization of equipment.

In the materials sectors, imports of steel are expected to plunge as domestic demand falters and new restrictions on imports take effect.

Imports of refined oil are also likely to dip as unit prices fall.

However, with improving domestic demand and an increasing influx of low-cost imports, imports of petrochemicals and textiles are expected to grow slightly.

In the emerging IT industries, imports of IT products and home appliances are expected to increase in the second half of the year,

driven by improved consumer sentiment. Imports of semiconductors used in the development of advanced technologies are also projected to continue,

while the decline in secondary battery imports is expected to slow significantly due higher domestic demand for imported batteries.