[Economic Daily] The forecast for South Korea’s economic growth this year stands at just 2%. Both exports and domestic demand are sluggish, revealing the limitations of an economic structure heavily reliant on the semiconductor industry.
A recent luncheon on March 9th, hosted by President Lee Jae-myung with representatives from the Gwangju and Jeolla provinces, vividly illustrates this situation. Discussions centered around rumors of a potential relocation of companies targeted for the Yongin semiconductor cluster to the Honam region, involving Gwangju Mayor Kang Ki-jung, Jeolla Province Governor Kim Young-rok, and Democratic Party lawmakers. This underscores the desperation of local governments to attract businesses for regional survival.
However, this competitive pursuit risks placing all economic eggs in one basket – semiconductors. While semiconductors are a crucial export for the nation, with Samsung Electronics achieving record quarterly results last year, the sector is inherently volatile. A global slowdown in demand or oversupply could significantly destabilize the entire Korean economy.
Local government leaders should prioritize the development of new industries to ensure regional viability, but the current focus remains overwhelmingly on attracting semiconductor companies. There is a need to identify and nurture future growth engines such as biotechnology, artificial intelligence (AI), and eco-friendly energy, rather than prioritizing short-term gains.
If this situation persists, the Korean economy could face a severe crisis. A downturn in the semiconductor cycle could even lead to negative growth. The government must actively pursue policies to support the semiconductor industry while simultaneously fostering the development of new sectors. Local governments must also move beyond short-term competition and formulate long-term strategies for industrial diversification.
Transforming the economic structure is not an overnight process. Without preparation now, escaping the trap of 2% low growth will be difficult. Breaking free from semiconductor dependence and securing diverse growth drivers is a critical survival task for the Korean economy.
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