Korea's economy posted a "surprise" growth rate of 1.7% quarter-on-quarter in the first quarter. The first-quarter gross domestic product (GDP) growth rate announced by the Bank of Korea on the 23rd nearly doubled the forecast (0.9%) and reached the highest level in five years and six months. What drove growth through the worst adversity of the Iran war was the semiconductor industry, which has boarded a super cycle. First-quarter semiconductor exports surged 139.1% year-on-year, leading strong export performance that contributed 1.1 percentage points to growth. SK hynix (000660.KS), which forms the semiconductor duo alongside Samsung Electronics (005930.KS), announced record-high quarterly results on the same day, with first-quarter revenue of 52.5763 trillion won and operating profit of 37.6103 trillion won—a more than 400% surge from a year earlier—once again proving the power of the unprecedented semiconductor boom.
However, we should not take the sudden rebound in the first-quarter growth rate as a signal of solid economic recovery and be complacent. Above all, the first-quarter GDP did not properly reflect the repercussions of the Iran war that broke out at the end of February. If negative impacts such as rising prices and raw material supply disruptions are fully reflected, facility and construction investment and private consumption, which showed strong performance in the first quarter, could significantly contract. With international oil prices hovering around $100 per barrel day after day and a supply crisis in naphtha—called the "rice of industry"—increasing cost burdens across industries, perceived economic conditions are already cooling rapidly. The April consumer sentiment index turned pessimistic for the first time in a year, and companies' business outlook for May contracted for two consecutive months. This means the economy, propped up by a "semiconductor illusion," could freeze over in an instant.
Although the semiconductor duo Samsung Electronics and SK hynix posted record-breaking performance, Korea's major banks classified more than 5,000 companies as high-risk on the verge of restructuring as of the end of last year. This is the bare face of a fragile economic structure that depends excessively on a specific industry. If we become intoxicated with the semiconductor boom and settle for a weak economic constitution, we cannot rule out the possibility that the economy will collapse helplessly when the boom cycle eventually ends. For the current "surprise" growth rate not to end as a mere flash in the pan, we must urgently pursue bold regulatory reform and structural reform now, while the economy catches its breath thanks to the semiconductor windfall. Only by cultivating new growth engines that can drive the national economy alongside semiconductors and by excising economic ailments to raise basic stamina can we continue sustainable growth.
