Semiconductor and AI Boom: A Blessing or Another Form of Concentration?

South Korea is riding a wave of prosperity driven by the booming semiconductor and artificial intelligence (AI) industries. The benchmark KOSPI index is nearing 9,000 points, and apartment prices in the Seoul metropolitan area are seeing double-digit annual increases in some regions. Those who own quality stocks and real estate in the capital region are reaping the benefits of rising asset values, while others face relative deprivation.

This economic surge is further amplified by substantial performance bonuses, projected to exceed 50 trillion won this year for companies like Samsung Electronics and SK Hynix. After taxes, over 30 trillion won could enter the market, likely flowing into stocks and real estate in the Seoul area. While increased investment in the stock market can stimulate economic growth and consumption, the housing market faces a different scenario. With limited supply, a large influx of liquidity could further inflate prices, intensifying housing burdens for middle-class and low-income households. The rising prices of apartments near employee shuttle bus routes for Samsung and Hynix are seen as an early indicator.

While South Korea's emergence as a beneficiary of the AI super-boom is cause for celebration, with improved economic growth forecasts and benefits for related companies and workers, this opportunity does not automatically translate into widespread societal welfare. Short-term challenges include worsening housing conditions for Seoul residents, and medium-term concerns involve job insecurity due to the increasing prevalence of AI and robots. These potential instabilities in housing and employment could lead to broader social unrest.

The term "resource curse" is often used to describe oil-rich nations that, despite abundant resources, suffer from wealth concentration, corruption, and political instability. Similarly, if companies in the AI and semiconductor sectors, with their high entry barriers and technological advantages, monopolize profits without distributing the gains to society, it could lead to asset bubbles and widening disparities. This widening gap can fuel populism and undermine democracy, as seen in the United States where rising inequality contributed to political polarization and the rise of Donald Trump.

Conversely, nations like Norway have leveraged their oil wealth through sovereign wealth funds to benefit future generations and maintain a stable democracy. The key lies in institutional design. South Korea needs to find its own solutions, which could include additional taxation on excess profits, new taxes like a robot or compute tax, or public funds investing in AI-related companies. Encouraging public ownership of these companies could also distribute the fruits of growth more directly. The government must take the lead in establishing a balanced approach that fosters a virtuous cycle of growth and distribution, ensuring that the excess profits from the AI boom are channeled into future investments and social returns, rather than solely benefiting workers and shareholders.