The Bank of Korea warned that it should be mindful of the possibility of a so-called "Dutch disease," in which the semiconductor industry absorbs labor and investment from other industries and erodes the country's growth base. Dutch disease refers to the phenomenon in which, after the Netherlands made an unexpected windfall from discovering a North Sea gas field in 1959 and its currency value surged due to a massive inflow of foreign currency, it instead lost manufacturing competitiveness and fell into an economic slump.
It said the recent situation—where macro indicators such as exports and gross domestic product (GDP) growth look strong as semiconductor giants like Samsung Electronics and SK hynix post record results—should not be viewed with unbridled optimism. As state-run and private research institutes issue upbeat analyses about the semiconductor boom, the Central Bank's warning stands out.
◇ Wage gap widens further due to large performance bonuses
According to "Why is this terms-of-trade improvement different: real-economy spillover effects of the semiconductor upcycle," released by the Bank of Korea on the 19th, the nominal wage index for IT manufacturing was 133.6 in the second quarter of this year, up 10.8% from the same period a year earlier (120.5). By contrast, nominal wages in non-IT industries rose only 2% over the same period. Thanks to semiconductors, salaries of high earners working at large companies have increased.
Financial income from stock investments was also found to be higher among high-asset groups. Looking at estimated stock capital gains from 2020 to 2024, the top 20% by asset, the "fifth quintile," earned an annual average of 2.06 million won from stocks. That is 20 times the lowest first quintile (100,000 won). The fourth quintile came to 300,000 won, the third quintile 410,000 won, and the second quintile 230,000 won.
The Bank of Korea also judged that a significant portion of the money brought in by the semiconductor and stock market booms may not translate into consumption. High-income, high-asset groups tend not to increase spending much even when they earn more. In fact, for the top 20% by asset, when stock assets rose by 1 million won, consumption increased by only 10,000 won. Under the same condition, the bottom first to second quintiles spent an additional 140,000 won.
◇ "If reliance on semiconductors grows, growth potential falls and tax revenue volatility widens"
The Bank of Korea said the nation should guard against channeling labor and capital only into the semiconductor institutional sector. It said the greater the reliance on semiconductors, the more growth potential could deteriorate. An official at the Bank of Korea said, "If a specific area comes to drive economic growth, structural distortion can emerge."
It added, "If the semiconductor boom persists for a long period, as in cases of resource-exporting countries like Australia in the 2000s, there is a need to be mindful of the possibility of the so-called 'Dutch disease,' in which the high wages and returns on investment of a specific institutional sector absorb the labor and investment of other sectors and erode the growth base."
Concerns were also raised that if the semiconductor cycle turns down, the volatility of tax revenue could widen, including a reduction in taxes collected. When semiconductors were booming in 2021, tax revenue rose 20.6% from the previous year, but it fell 12.6% in 2023 due to weakening demand. The Bank of Korea said, "Since COVID-19, the correlation between semiconductor exports and the tax revenue growth rate has increased further," adding, "This heightens uncertainty in tax revenue forecasts and constrains the establishment of stable fiscal expenditure plans."
Although domestic investment by major semiconductor companies is on the rise, some observers said it may fall short of expectations. This is because domestic corporations are increasingly making direct investments abroad rather than at home to join the global artificial intelligence (AI) technology race. The Bank of Korea projected that capital expenditure across all industries, including IT, will rise about 20% from the previous year this year. However, it expected the growth rate in 2027 to slow to around 10%.