▲AI PRISM* Customized Economic Briefing
*Editor's Note: 'AI PRISM' (Personalized Report & Insight Summarizing Media) is an "AI-based customized news recommendation and summary service" developed with support from the Korea Press Foundation. It selects and provides six customized news items by reader type.
[Key Issue Briefing]
■ ASML-TSMC Conflict: As ASML pushed to raise prices for EUV and DUV lithography (semiconductor exposure equipment) against the backdrop of an AI chip supply shortage, TSMC, its largest customer that commands 73% of the foundry (contract chip manufacturing) market, has pushed back strongly. ASML has already notified Chinese chipmakers of a 10% price increase for DUV equipment, and is pressuring TSMC by citing Intel's acceptance of a price hike on High NA EUV equipment costing more than $400 million per unit.
■ China's Surging National Debt: Net bond issuance by China's central and local governments in the third quarter of this year is expected to reach up to 4.4 trillion yuan, surpassing last year's third-quarter record high (3.8 trillion yuan). The IMF estimated that China's government debt-to-GDP ratio will reach 120.3% in 2029. With the gap between the U.S. AI capital expenditure forecast for next year ($1.018 trillion) and China's ($123 billion) expected to widen to 8.3-fold, deteriorating fiscal health is emerging as a dark horse in the U.S.-China AI supremacy race.
■ KOSPI Volatility: The KOSPI closed at 6,820.60 on the 16th, plunging 463.81 points (6.37%) and giving back the previous day's 6.24% rebound in a single day, with the simultaneous plunge of Samsung Electronics (005930) (-8.77%) and SK hynix (000660) (-11.53%) leading the index decline. The number of KOSPI sidecar triggers this year reached 37, surpassing the peak of the 2008 global financial crisis (26), and single-stock leverage exchange-traded funds (ETFs) launched on May 27 are cited as the key factor behind the expanded volatility.
[News of Interest to Global Investors]
1. ASML Signals Price Hikes, Escalating Conflict With Largest Customer TSMC
- Key Summary: In the wake of the AI chip supply shortage, a sharp price increase is expected for lithography, a core piece of semiconductor manufacturing equipment. As Dutch semiconductor equipment maker ASML moved to raise prices for EUV and DUV lithography, Taiwan's TSMC, which accounts for 73% of the foundry market, has pushed back strongly, while ASML Chief Financial Officer (CFO) Roger Dassen said there is "considerable room for price increases." ASML notified Chinese chipmakers, which cannot secure EUV due to U.S. export restrictions, of a 10% price increase for DUV equipment, and some Chinese companies have already accepted the raised prices. Meanwhile, ASML appears to be using Intel's acceptance of a price hike on High NA EUV equipment costing more than $400 million per unit as grounds to pressure TSMC.
2. National Debt Ballooning at Twice the U.S. Pace: Is China Running Out of 'AI Ammunition'?
- Key Summary: Net bond issuance by China's central and local governments in the third quarter of this year is expected to reach up to 4.4 trillion yuan (about 963.952 trillion won), breaking last year's third-quarter record high (3.8 trillion yuan). As a result of the Chinese government's reliance on government bond issuance to respond to the real estate downturn and to foster advanced infrastructure such as AI and semiconductors, the cumulative outstanding balance of government bonds as of May this year reached 100.6 trillion yuan (about 21,968 trillion won), opening the era of the first-ever 100 trillion yuan level. The International Monetary Fund (IMF) estimated that China's government debt-to-gross domestic product (GDP) ratio will reach 120.3% in 2029, a sharp upward revision from the forecast of 99.2% a year earlier. Some statistics show that including shadow debt, the figure has exceeded 125% of GDP, and the gap between the U.S. AI capital expenditure forecast for next year ($1.018 trillion) and China's ($123 billion) is expected to widen to 8.3-fold.
3. TSMC, With 77% Profit Jump, to Invest Additional $100 Billion in U.S.
- Key Summary: Taiwan's TSMC, the world's largest foundry (contract chip manufacturing) company, posted second-quarter net profit of 706.56 billion Taiwan dollars (about 33 trillion won), a sharp 77% increase from a year earlier, driven by AI chip demand. The figure exceeded the market forecast of financial information firm LSEG and extended double-digit net profit growth to a ninth consecutive quarter. With advanced processes of 7 nanometers (nm) or below accounting for 77% of total wafer revenue, the revenue share of the high-performance computing (HPC) segment, which includes AI chips, was 66%, up 20% from the previous quarter. TSMC Chairman C.C. Wei then said the company would inject an additional $100 billion into Arizona over several years, expanding total U.S. investment from the previous $165 billion to $265 billion. Meanwhile, Reuters reported that TSMC's market capitalization stood at about $1.97 trillion (about 2,921 trillion won), roughly double that of global rival Samsung Electronics (about 1,492 trillion won).
[Reference News for Global Investors]
4. 79 Trillion Won for a Faltering PayPal: What Is Stripe After?
- Key Summary: Payment service company Stripe and private equity fund (PEF) Advent International are pursuing an acquisition of PayPal (PYPL) at a corporate value of about $53 billion (about 79 trillion won). The proposed price of $60.50 per share reflects a 28% premium over the closing price on the 14th, and PayPal's stock surged 17.21% when the news broke. Stripe acquired stablecoin (blockchain-based digital currency) infrastructure firm Bridge in 2025 and holds token issuance infrastructure, and the Financial Times (FT) assessed the deal as an "unprecedented mega-deal that will completely change the landscape of the global payment and fintech industry." However, challenges remain before a final agreement, including PayPal's board's reserved stance and close scrutiny by antitrust regulators.
5. Shin Hyun-song: "Watch Chip Prices Rather Than Chipmaker Stock Prices"
- Key Summary: Bank of Korea Governor Shin Hyun-song said at a press conference after the Monetary Policy Board meeting on the 16th, "It would be better to watch chip prices rather than chipmakers' stock prices." Shin explained that while first-quarter gross domestic product (GDP) this year grew 3.8% from a year earlier, gross domestic income (GDI) surged 13.6%, and that this gap was driven more by rising chip prices than by export volumes. He then stressed that during the AI industry's expansion phase, chip prices affect terms of trade and GDI, and provide important implications for Korea's long-term growth and monetary policy judgment. He also offered the outlook that, driven by rising chip prices, the timing of the GDP gap (the difference between the real growth rate and the potential growth rate) turning positive could come earlier than originally expected.
6. Giving Back the Previous Day's Gains With a -6% Day: KOSPI Swings More Than 5% Every Five Days
- Key Summary: The KOSPI, which had recovered the 7,200 level the previous day, closed at 6,820.60 on the 16th, down 463.81 points (6.37%) due to the simultaneous plunge of Samsung Electronics (-8.77%) and SK hynix (-11.53%), giving back the previous day's gains in a single day. The number of KOSPI sidecar triggers this year reached 37, surpassing the peak during the 2008 global financial crisis (26), while circuit breakers were also triggered seven times this year alone, already exceeding the total of six times from 2000 through last year. Of the total 132 trading days, the KOSPI moved more than 3% on 45 days (34.1%), and on this day, trading in Samsung Electronics and SK hynix spot shares and 16 related leverage and inverse ETFs accounted for 96.3% of total KOSPI trading. Since the launch of single-stock leverage ETFs on May 27, the KOSPI's average daily fluctuation range rose from 2.44% to 3.7
