Korea: Long-term growth implications of the tech boom

Research evidence excerpt

Korea: Long-term growth implications of the tech boom

und a higher nominal equilibrium. The key sustained AI-related demand could allow nominal semicon-

macro question is whether this terms-of-trade windfall can be ductor earnings to stabilize meaningfully above the pre-AI

converted into real productive capacity through corporate equilibrium even after price growth peaks. Assuming volume

capex, public infrastructure, and capital deepening. If so, growth broadly similar to recent trends and to our memory

Korea’s potential growth path could deviate upward from the model, together with the current expected price path, Korea’s

pre-AI baseline of steady decline, with implications not only nominal semiconductor export index could converge toward

for medium-term GDP growth but also for the neutral-rate the 700 level by end-2027, with 2020 set at 100. In other

debate. words, the year-over-year price impulse may slow, but the

level of nominal earnings could remain materially above the

Tech boom: cyclical or structural? pre-AI standard.

A key question is how much of Korea’s current tech sector A balanced interpretation, therefore, is that Korea’s semicon-

boom is cyclical and how much is structural. The term “wind- ductor sector may be moving from a price-led windfall to a

fall” — which usually implies an irregular or temporary gain higher nominal equilibrium, even if nominal exports remain

— remains useful because part of the positive income shock cyclical around that new and higher level. The key macroeco-

is likely to fade as the memory cycle turns. Semiconductor nomic question is whether this nominal terms-of-trade gain

cycles should persist: prices can overshoot, demand can be can be converted into real productive capacity through corpo-