How the Iran War Became an Energy Crisis for South Korea’s Semiconductor Industry
In March 2026, the blockade of the Strait of Hormuz triggered by the Iran conflict not only impacted global energy markets but unexpectedly exposed the deep vulnerabilities of South Korea’s semiconductor industry. Within just four trading days, the Korean stock market plunged 18%, wiping out over $500 billion in market value—the worst performance since the 2008 financial crisis. This market panic was merely a surface symptom, revealing a long-standing structural weakness in the Korean economy: the high coupling between energy dependence and the semiconductor industry is transforming geopolitical risks into systemic economic threats.
As a crucial pillar of the global semiconductor industry, South Korea dominates memory chip production worldwide. Samsung Electronics and SK Hynix together account for 80% of the global high-bandwidth memory (HBM) market and nearly 70% of the DRAM market. These chips are not only core components of artificial intelligence systems and cloud computing data centers but are also widely used in smartphones, automobiles, and industrial computing systems. However, this multi-hundred-billion-dollar industry is built on a fragile energy foundation—approximately 70% of South Korea’s crude oil imports come from the Middle East, with virtually all of it transported through the Strait of Hormuz.
Energy Constraints: The Achilles’ Heel of Korea’s Chip Economy
South Korean industry heavily relies on imported fossil fuels for power generation, with oil accounting for 36.6% of primary energy use, coal 22.3%, and natural gas 19.7%. This energy structure makes South Korea one of the major economies with the lowest energy self-sufficiency rate globally. Semiconductor manufacturing is energy-intensive, particularly the production of advanced process chips requiring continuous, stable electricity supply. The world’s largest chip complex in Yongin, Gyeonggi Province, scheduled for partial operation in 2027, is expected to require 16 gigawatts of energy to operate—equivalent to 17% of South Korea’s national peak electricity demand.
Energy costs have become a critical factor constraining the competitiveness of Korean semiconductors. Between 2020 and 2024, industrial electricity prices in South Korea increased by over 60%, forcing many manufacturers to shift production capacity to regions with lower power costs such as the United States and Southeast Asia. Samsung’s 1,000-acre semiconductor campus in Taylor, Texas, exemplifies this trend. However, even with some capacity relocation, South Korea’s domestic semiconductor manufacturing base remains an indispensable part of the global supply chain, and the impact of its energy security issues will extend far beyond national borders.
Global Chain Reaction: From Energy Disruption to Chip Shortage
The energy supply disruption triggered by the Iran conflict is transmitting through complex supply chain networks to the global technology industry. The AI boom has already pushed chip prices to historic highs, with major tech companies having signed multi-year contracts for advanced memory chips. Even before the Strait of Hormuz traffic stalled, the industry was experiencing supply shortages. The current crisis reveals a new strategic bottleneck: the world’s most important memory chip producers depend on energy supplies transported through some of the most geopolitically risky waterways on Earth.
This vulnerability affects not only South Korea but also threatens the progress of global digital transformation. Memory chips are the foundation of modern computing, from smartphones to autonomous vehicles, from cloud computing to AI training—all require stable, reliable chip supply. Any significant disruption in South Korea’s semiconductor industry could lead to stalled global electronics production, hindered AI research and development, delayed automobile manufacturing, and ultimately trigger widespread economic recession.
The Disconnect Between Energy Security and Semiconductor Strategy
Surprisingly, although the Korean government and businesses have long recognized the risks of energy dependence, progress in coordinating energy security with semiconductor strategy has been slow. Taiwan, with similar circumstances to South Korea, has seen its leading chip manufacturer TSMC commit to achieving 100% renewable energy supply by 2040, treating clean energy not just as climate policy but as a strategic foundation for semiconductor competitiveness and energy security. In contrast, South Korea’s pace in renewable energy deployment and grid modernization lags significantly.
While successive Korean governments have promised a transition to clean energy, actual progress has been limited. Even among electricity sources less dependent on Middle Eastern supplies, coal (33%) still exceeds nuclear power (31%). This inertia in energy structure reflects Korea’s difficult choice in balancing short-term economic interests with long-term energy security. The rapid development of the semiconductor industry increases energy demand, while the slow pace of energy transition limits industrial expansion space, creating a vicious cycle.
Solutions: Building an Anti-Fragile Energy-Chip Ecosystem
To ensure the long-term competitiveness of South Korea’s semiconductor industry, the energy system must be fundamentally restructured. First, South Korea needs to significantly expand reliable domestic energy resources, reducing dependence on imported fossil fuels. This includes accelerating nuclear expansion and renewable energy investment while fulfilling the commitment to phase out coal-fired power plants by 2040. President Lee Jae-myung recently reaffirmed the commitment to expand locally generated renewable power—this direction needs to translate into concrete policies and investments.
Second, South Korea must modernize its grid by removing regulatory barriers hindering transmission expansion. Streamlining grid regulations and expanding decentralized smart grid infrastructure will enable semiconductor clusters to connect more easily to secure domestic power sources while supporting energy-intensive industries like AI data centers. In 2026, Gyeonggi Province and Korea Electric Power Corporation agreed to build new transmission lines beneath a planned highway corridor to deliver an additional 3 gigawatts of power to the Yongin semiconductor cluster. Such coordination between infrastructure and power transmission needs institutionalization to avoid the decade-long delays that have historically plagued major grid projects.
The New Geopolitical Reality: Energy as Strategic Asset
The Iran war did not create South Korea’s energy vulnerability—it merely demonstrated how dangerous that vulnerability has become. In an era when the global digital economy depends on Korean memory chips, ensuring these chips can be powered reliably is no longer just an energy issue but a matter of economic and technological security. South Korea needs to elevate energy policy to the level of national strategy, deeply binding the competitiveness of its semiconductor industry with energy security.
This transformation requires not only policy support at the government level but also active participation from the business community. South Korea possesses the world’s second-largest battery storage industry (after China), providing the technological foundation for large-scale renewable energy deployment. Combined with enhanced domestic solar power generation capacity, South Korea can significantly reduce exposure to global energy shocks while supporting the rapidly growing electricity demands of semiconductor production and AI infrastructure. The sun cannot be choked at the Strait of Hormuz—this simple truth should become the core philosophy of South Korea’s energy transition.
Source: The Iran War Is Also Now a Semiconductor Problem | Carnegie Endowment for International Peace
