[Edaily Reporter Lee Jeong-yoon ] While the Korean economy is experiencing accelerated growth driven by the boom in artificial intelligence (AI) semiconductors, analysts suggest that the recovery in consumer spending may proceed more slowly than in Taiwan.

While Taiwan, which entered the semiconductor boom a year earlier than South Korea, saw export growth lead to improved consumption after a time lag, the analysis suggests that in South Korea—where the semiconductor industry accounts for a small share of total employment and the benefits of growth are concentrated among a segment of high-income earners—the spillover effect on consumption may be relatively limited.

◇Taiwan, Which Experienced the Semiconductor Boom First… Consumption Recovered in About a Year

According to the report titled “Characteristics of Taiwan’s Semiconductor Boom and Implications for the Korean Economy,” authored on the 15th by Lee Jun-ho, Section Chief, and Jeon Min-geun, Researcher, at the Bank of Korea’s Research Department, Taiwan’s economy grew by a cumulative 25.6% from the third quarter of 2024 through the third quarter of this year. This growth was driven by strong semiconductor exports resulting from expanded global AI investment.

Taiwan, which entered the semiconductor boom about a year earlier than South Korea, saw its growth accelerate sharply starting in the second half of 2024, driven primarily by semiconductor exports. South Korea, too, has seen its growth accelerate since the second half of last year, fueled by rising demand for AI semiconductors, meaning both countries are reaping the benefits of the semiconductor boom.

However, even in Taiwan, the semiconductor boom did not immediately translate into improved consumer spending. While the economic growth rate rose from 5.3% in 2024 to 8.8% last year, the growth rate of private consumption actually slowed from 3.2% to 1.4% over the same period.

Nevertheless, consumption began to recover starting in the fourth quarter of last year, driven by a strong stock market and government fiscal support. In the first three quarters of this year, Taiwan’s private consumption rose 5.4% year-over-year, more than double that of South Korea (2.1%). The Taiwanese government’s distribution of approximately 420,000 won per person in cash to all citizens from November of last year through April of this year also supported the recovery in consumption.

However, the research team assessed that since a significant portion of the improvement in consumption in Taiwan was attributable to increased stock trading and expanded overseas travel, the pace of recovery could vary depending on changes in stock prices and exchange rates.

◇ Low Share of Employment in Korea, Benefits Concentrated Among High-Income Groups… Constraints on Domestic Demand Expansion

While South Korea, like Taiwan, may see the semiconductor boom lead to improved consumption after a time lag, the pace of recovery is projected to be relatively slow. The research team cited three main reasons for this: the low share of employment in the IT manufacturing sector, the concentration of benefits among high-income earners, and a contraction in stock trading due to a market correction.

First, as of last year, the number of workers in South Korea’s IT manufacturing sector stood at 390,000, accounting for just 1.9% of the total workforce. In Taiwan, the figure was 910,000, or 10.6%, meaning South Korea’s employment share is about one-fifth that of Taiwan’s. In Taiwan, small and medium-sized enterprises (SMEs) are widely distributed across the entire AI hardware supply chain—including not only semiconductors but also servers and components—so the ripple effect of increased production on employment and income is relatively broad.

Another limiting factor is that the benefits of the semiconductor boom are concentrated among a select group of high-income workers. Even when their incomes rise, high-income earners tend to allocate a relatively small portion of their additional income to consumption, which may limit the extent to which improved earnings at semiconductor companies translate into overall consumption growth.

A decline in stock trading due to a market correction has also been identified as a variable. The average daily trading value by domestic retail investors rose from 34.5 trillion won in the fourth quarter of last year to 65.9 trillion won in the second quarter of this year, but then fell to 37.2 trillion won in the third quarter. This trend contrasts with Taiwan, where a strong stock market supported the recovery in consumption.

In particular, in South Korea, the recent rise in memory semiconductor prices has driven export growth, widening the gap between the IT and non-IT sectors. While strong semiconductor exports are boosting the economic growth rate, analysts suggest there may be limits to how effectively the benefits of this growth can spread to other industries and households.

Researchers at the Bank of Korea noted that the “K-shaped economic structure”—where the gap between IT and non-IT industries is widening in both South Korea and Taiwan—is constraining the recovery of domestic demand. They emphasized the need to improve the middle class’s spending power and alleviate the burden of living expenses on low-income households.

The researchers emphasized, “Given the strong linkages in AI semiconductor supply chains between South Korea and Taiwan and the significant expansion of their current account surpluses, we must be mindful of the possibility that shocks in the real and financial sectors could become synchronized and amplified should AI demand slow down.”

They further recommended, “To ensure that the current supply chain boom does not end with just another semiconductor cycle but rather sustains its growth momentum, we must strive to achieve broad-based productivity gains through the widespread adoption of AI and to alleviate structural constraints such as polarization.”