Korean Media: Competitiveness in South Korea's Industries Other Than Semiconductors Is Declining!
On July 11, Korean media outlet Finance News published an article stating that while South Korea’s economy showed slightly sluggish growth last year, it achieved significant expansion in the first quarter of this year, primarily driven by strong semiconductor exports—performance that exceeded expectations. Some major international media outlets even referred to South Korea’s economy as a "winner in the global economy." However, South Korea’s economy currently appears overly reliant on a single engine, with the semiconductor industry nearly entirely sustaining its continuous economic growth.
Recently, the Bank of Korea announced that real GDP growth in the first quarter reached 1.8%, surpassing the initial forecast by 0.1 percentage points. Preliminary data released in April also significantly exceeded market expectations, and the final figures were even higher. In contrast to the trend from last year—when GDP declined by 0.2% in the first quarter, rebounded to 0.6% in the second quarter, rose to 1.4% in the third quarter, and then fell again to -0.1% in the fourth quarter—the current rebound is highly significant. Nominal GDP growth reached 10.5%, marking a 50-year high. This is also why expectations for upward revisions to this year’s growth forecast are increasingly strong.
South Korea’s real national income (GNI) grew by 9.2% on a quarterly basis. With improving household income conditions, expectations for recovery in domestic demand are rising. According to the Financial Times of the UK, prosperity in key sectors such as semiconductors, defense, and shipbuilding is driving South Korea’s economic growth. Despite structural issues like dependence on imported energy, high prices, and youth unemployment, the growth engine remains in good working order. This means that critical industries have so far maintained their competitiveness.
Yet, this growth has also brought notable negative side effects. The GDP deflator, which reflects the level of domestic output and service prices, reached 12.9%. This indicates that although rising export prices have boosted nominal indicators, corporate cost burdens and inflationary pressures have simultaneously increased. Most of the profits earned by export-oriented enterprises are being eroded by rising costs of imported raw materials and energy—costs that may ultimately be fully passed on to South Korean consumers.
Professor Kim Young-han from Sungkyunkwan University offers a perspective that cannot be ignored. He stated: “South Korea has lost its comparative advantage in almost all industries except semiconductors.” This suggests inherent limitations in the current growth model. Moreover, the technological gap between South Korea and China is rapidly closing. If South Korea fails to secure a stable next-generation growth engine, the future following the semiconductor boom will remain uncertain. At the same time, concerns are growing that competitive advantages in multiple sectors—including machinery, batteries, and display technologies—are weakening.
Original source: toutiao.com/article/1870419732255936/
Disclaimer: The views expressed in this article are those of the author(s).