Changyong Rhee, former governor of the Bank of Korea, described the semiconductor supercycle as a major opportunity for South Korea's economy while identifying the potential catch-up by Chinese chipmakers as a key risk. With Chinese firms building up cash reserves on the back of rising memory prices, they could rapidly narrow the gap with Korean rivals if they pursue aggressive capital spending during the next downturn, he said.
Speaking at the KB Financial Group Korea Conference on the 9th, Rhee was asked whether the semiconductor supercycle was a curse or a benefit. "If it continues for five to 10 years, I think it would be a really big benefit," he said, while cautioning about the pursuit by Chinese semiconductor companies.
He drew particular attention to the ample cash that Chinese firms have secured recently, helped by rising memory prices. His warning was that if they use those funds to expand capital investment once the chip cycle turns down, they could accelerate the pace at which they catch up with Korean producers.
Rhee also stressed that the current chip boom cannot be explained by the competitiveness of Korean companies alone. U.S. sanctions on China have limited Chinese firms' access to advanced lithography equipment from ASML and other suppliers, creating relatively favorable conditions for Samsung Electronics and SK hynix, he said. If geopolitical circumstances change or China becomes able to produce such equipment domestically, that competitive landscape could shift as well, he added.
He also pointed to the concentration of the chip boom's gains at Samsung Electronics and SK hynix as a challenge. "If the benefits are concentrated only in semiconductors, job creation will not be substantial, and concentration in two companies could become a problem," Rhee said. The point was that policymakers need to examine whether rising chip exports and corporate profits are spreading sufficiently across the wider economy, including employment and domestic demand.
He assessed that uncertainty surrounding the macroeconomy remains. Rhee said rising government bond yields tied to expanded fiscal spending in major economies, along with large-scale capital investment related to artificial intelligence, are putting pressure on global funding markets. As key variables for South Korea's monetary policy going forward, he cited movements in international oil prices stemming from the war in Iran, the Korean government's fiscal policy and the U.S. midterm elections in November. He stressed that the impact of the U.S. election results on trade and investment policy, as well as on Federal Reserve policy, also warrants attention.
