South Korea economic polarization deepens amid semiconductor boom

South Korea is experiencing a significant economic divergence driven by a massive surge in semiconductor and shipbuilding exports. While the semiconductor sector's contribution to total exports rose to 44.7% in October, the benefits of this growth are increasingly concentrated within large corporations.

According to the Bank of Korea’s ‘2025 Annual Corporate Management Analysis,’ the average operating profit margin for domestic companies rose to 5.2%, the highest since 2021. This was largely propelled by large enterprises in the electronics and shipbuilding sectors. In contrast, small and medium-sized enterprises (SMEs) saw their operating profit margins decline to 2.8%.

A critical indicator of this gap is the interest coverage ratio. The proportion of companies unable to cover their interest expenses with operating profits reached a record high of 42.9%, the highest since statistics began in 2009. Additionally, 34.4% of companies reported operating losses, meaning they could not cover interest costs at all.

The disparity extends to the labor market as well. Data shows a widening wage gap between regular and non-regular workers, which reached a record high. While large-scale semiconductor investments drive national growth forecasts upward, the capital-intensive nature of the industry means the impact on employment and domestic consumption remains limited compared to the export surge.