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Editor’s note: Korea’s current semiconductor supercycle was the result of exogenous variables that dovetailed with AI investment and new supply chain strategies by Big Tech companies such as Intel and Apple. Industry observers expect the supercycle to persist for a considerable period as a structural trend, unlike previous demand cycles that tend to repeat every three to four years. If profit remains concentrated in the semiconductor sector for long, disparities are likely to widen across multiple dimensions of Korean society, including industrial structure, income and wages, and capital and property. This series will explore how the semiconductor boom is driving polarization.Korea’s current semiconductor “supercycle,” which came as a complete surprise, originated at the Intel headquarters in California, about 9,000 kilometers away from Seoul.Lip-Bu Tan, who became Intel CEO in March 2025, boldly moved to increase production of central processing units (CPUs) in the second half of the year. Tan’s goal was to maintain the company’s dominance of the market for PC and server CPUs and fend off challengers. That market has been a mainstay for Intel despite the rapid growth of mobile devices.A little-known practice in the semiconductor sector is for CPU and memory chipmakers to privately share information about upcoming order volumes outside of official procurement channels.But when an unexpectedly large volume of CPUs (analogous, in computing terms, to the human brain) began flooding the market, the supply of the memory chips that go hand in hand with CPUs was quickly exhausted. If CPUs handle calculations, memory chips serve as the data storehouse and pipeline. So an increasing supply of CPUs assumes that more memory chips will be available to support them.Simply put, supply created demand.The semiconductor supercycle produced through the combination of global tech firms’ investment in artificial intelligence and aggressive management decisions is a roaring tempest.The biggest beneficiaries of the supercycle have been Samsung Electronics and SK Hynix. Projections put their combined operating income for this year around 620 trillion won (figures provided by market tracker FnGuide). Next year, their operating income is expected to reach around 830 trillion won, much higher than the government’s total spending in this year’s supplementary budget (753 trillion won).That brings us to the role played by Apple. The company’s executives are regarded as mavens of supply chain management: the company has never missed a shipment despite outsourcing all its smartphone and tablet production to third parties.“When signs appeared of a supply crunch in memory chips because of Intel, Apple alums at IT firms around the world moved immediately to secure supply,” an industry source said.That’s what drove up the price of memory chips.The semiconductor boom is a blessing for the Korean economy, which has been floundering in the low-growth bog. But there are vocal concerns about the dark side of that achievement.The Korean economy’s continued overreliance on semiconductors could widen disparities not only among industries but also among companies and workers, exacerbating polarization.“If the supercycle causes the semiconductor industry to represent an oversized share of the national economy and profits are concentrated in a handful of companies, increasing the gap between the haves and have-nots, the industrial ecosystem will certainly lose diversity and the economy as a whole will grow imbalanced. There are concerns that this is another risk factor for the Korean economy,” said Kwon Nam-hoon, the president of the Korea Institute for Industrial Economics & Trade.Unfortunately, the semiconductor sector’s domination, with its propensity to cause polarization, could become even further entrenched. Even as competition intensifies between tech firms determined to gain an edge in the field of AI, it’s not feasible for the world’s small number of chipmakers to ramp up production in a short time.Another factor behind these pessimistic predictions is that even if multiple semiconductor plants open in the future, leading to a steady decline in the price of memory chips, the investment boom in infrastructure supporting AI innovation is slated to continue. Past trends show that periods of heavy investment in new areas of technology — such as personal computers, the internet and mobile devices — last about a decade. That’s behind the push for the government to take measures to mitigate these disparities.These projections are supported by indicators showing that supply in the memory market is unable to keep up with demand.Market research firm Omdia’s projection for this year’s volume of DRAM wafer production by the three memory chipmakers of Samsung Electronics, SK Hynix and US-based Micron is 18.42 million units.While that’s a 6.1% increase from the previous year’s production, the rate of increase is down from last year’s rate of 7.4%. The lower rate of increase is due to a more conservative approach to new investments at companies dealing with poor performance amid a business downturn.But Big Tech’s demand for investment is climbing rapidly, inflating the value of memory chipmakers.In a report published this month, the US-based National Bureau of Economic Research predicted that the yearly AI infrastructure spend of five major tech companies — Google (Alphabet), Microsoft, Meta, Amazon and Oracle — would increase from US$381 billion last year to US$1.09 trillion next year.JP Morgan expects the fundamental shortage will continue through 2028 for DRAM and at least through next year for NAND flash.But even when the semiconductor supercycle winds down as supply is stabilized, that doesn’t necessarily mean lean times for memory chipmakers.According to a report published in February by the Oxford Martin AI Governance Initiative, the global AI market is projected to grow to US$4.8 trillion, around the size of the entire German economy, by 2033.Samsung Electronics and SK Hynix are also expected to experience some short-term slowdown in earnings, but they are likely to continue benefiting from the ongoing boom in long-term AI infrastructure investment.“As the AI industry shifts its focus to physical AI and robotics, there’s a chance that related investments could increase,” predicted Choi Byung-ho, a professor at Korea University's Human-inspired AI Research Lab. Kwon outlined concerns about the uneven economic effects from the long-running chip boom.“Considering that a prolonged supercycle could exacerbate economic imbalances, the government and businesses should consider effective policy responses to ensure that profits from the chip sector are more widely distributed across the economy,” he suggested.By Park Jong-o, staff reporter; Bae Ji-hyun, staff reporterPlease direct questions or comments to [english@hani.co.kr]
