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South Korea grapples with its AI chip boom
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- DeepHorus
South Korea's artificial intelligence chip boom is generating unprecedented wealth, but the benefits are flowing disproportionately to a small slice of the population, igniting a national debate over inequality. The stakes were underscored last month in a high-profile divorce case involving SK Hynixâs parent company, where the valuation of shares could alter business tycoon Chey Tae-wonâs assets by billions of dollars. The country is one of the worldâs largest producers of high-bandwidth memory chips essential for AI systems, and the resulting wealth surge is reverberating through the economy.
The boom is driven by two dominant firms, Samsung Electronics and SK Hynix, which together control the global supply of specialized chips that AI systems require. Analysts project their combined operating profits could rise nearly sevenfold this year, pushing South Koreaâs main stock index, the Kospi, to record highs. These profits are now trickling down to workers in unprecedented ways.
At Samsung, a memory-chip worker earning a base salary of 80 million won ($51,300) could receive bonuses close to 600 million won ($384,900) this year, most in stock. That is roughly 17 times the average annual salary at a small South Korean firm. SK Hynix paid its workers a bonus of nearly 3,000% of their monthly salary earlier this year, with next yearâs payout projected to be several times larger based on forecast profits.
The signs of flourishing wealth are visible across chip-centric cities. In the first weeks of May, jewelry sales at one department store surged 146%, while watch sales rose 85%. In Icheon, where SK Hynix has its main campus, imported car registrations jumped 108% in February. Apartment prices near semiconductor company bus routes are rising at four times the wider Seoul average. Even ordinary investors like retiree Brian Lee, who bought SK Hynix shares a few years ago, have seen returns of 1,264%.
Yet only a small fraction of the population is cashing in, prompting calls for broader distribution of the industryâs profits. Professor Kim Yong-jin of Sogang University argues that the semiconductor industry has benefited enormously from decades of government support, so it must think about society. The presidentâs chief policy adviser floated a âcitizen dividendâ in May, proposing to channel surplus tax revenues back to the public through structured investment, but critics labeled the idea communism, and the presidential office distanced itself from the plan.
Looking ahead, the wealth divide may widen as AI demand grows. Policymakers face mounting pressure to devise mechanismsâsuch as taxes or public investment fundsâto ensure that the gains from the chip boom are shared more evenly. The debate over who owns the profits is unlikely to fade, as South Korea grapples with the social consequences of its most valuable industryâs success.
