Chip-driven growth could fuel Dutch disease risks: BOK
Semiconductor chips are displayed at Samsung Electornics' booth at Nano Korea 2026 held at KINTEX Exhibition Center in Goyang, Gyeonggi Province, July 8. Yonhap
While Korea's semiconductor boom is driving the country's economic growth, its benefits may not spread evenly across the broader economy and raise the risk of Dutch disease, the Bank of Korea (BOK) warned Sunday.
Dutch disease is an economic term that originated from the Netherlands' natural gas boom in the 1960s and refers to a phenomenon in which rapid growth in one sector draws capital and labor away from other industries, weakening their competitiveness.
The BOK warned that Korea could face a "semiconductor Dutch disease" if the semiconductor boom persists, as capital and labor become increasingly concentrated in a single industry, potentially widening imbalances across the economy.
"The domestic semiconductor industry still relies on imports for about 60 percent of its manufacturing equipment, while outbound investment has also increased as firms seek to reorganize global supply chains, limiting the spillover effects of investment on the domestic economy," the central bank said in a report on the economic impact of the semiconductor boom.
The BOK added that IT manufacturing’s share of total manufacturing output surged to 51 percent in the first quarter from below 30 percent in the past, while the sector accounts for only 2.6 percent of total employment. This indicates that the windfall from corporate profits and wage gains is staying trapped within certain industries, offering little lift to broader household spending.
To address these risks, the central bank said Korea should strengthen links between the semiconductor industry and other parts of the economy by fostering a more integrated industrial system.
"The benefits of the chip sector should extend beyond chipmakers to domestic suppliers of materials, parts and equipment, as well as the broader manufacturing sector, while strengthening industrial linkages around semiconductor clusters," the bank said.
The assessment comes as surging global demand for artificial intelligence chips has driven a sharp improvement in Korea's terms of trade. Semiconductor exports have been the main contributor to the gains, with soaring memory chip prices lifting export values.
In the first quarter, semiconductor prices jumped 92.5 percent from a year earlier, central bank data showed, with the IT sector accounting for 73.4 percent of the increase in the country's export prices.