Worries about future lurk behind chip boom in SK
The craze for smartphones, social media and universal connectivity is generating immense wealth but also deep unease in South Korea, source of a large share of the computer chips that make them work.
Soaring demand for microchips used in smartphones, computer servers and data centers is driving profits for chip and smartphone maker Samsung Electronics and its smaller rival SK Hynix sky high, helping sustain growth in Asia’s fourth largest economy.
Samsung reported yesterday that its annual net profit rose 84 percent to a record 41.3 trillion won (US$38.6 billion) in 2017 on annual sales of 239.6 trillion won, up 19 percent from the previous year.
But pressures are building as youth unemployment approaches 10 percent and many elderly Koreans scrimp and scavenge to get by.
Combined, Samsung and SK Hynix control about three quarters of the global market for DRAM semiconductors, used in devices that help gadgets and data centers run more programs and data faster. They hold about half the market for NANDs, which store pictures and other digital data.
In 2017, Samsung and SK Hynix had combined revenues of 270 trillion won, equivalent to about 17 percent of South Korea’s GDP.
The chip boom reflects South Korea’s success in adapting to changing times, but such a heavy reliance on one sector of the economy, which one economist likened to Saudi Arabia’s oil-driven wealth, is a mixed blessing.
“I see a huge risk. It’s not a time to be rejoicing over South Korea’s 3 percent growth,” Yoo Seung-min, an opposition lawmaker and economist said in an interview. “Except for the semiconductor illusion, there is nothing to be relieved about.”
Led by robust exports of computer chips, the South Korean economy in 2017 expanded at its fastest rate in three years and is forecast to grow 3 percent this year.