Semiconductor and Won Strength Push Per Capita GNI to the Brink of $40,000… “Perceived Income” Shows a Temperature Gap

South Korea’s per capita gross national income (GNI) is now highly likely to surpass $40,000 for the first time in history this year. Having remained in the $30,000 range for 12 years since entering that bracket in 2014, South Korea’s economy is now moving into a new income tier.

Crossing the $40,000 threshold carries symbolic significance, indicating that South Korea’s national income has reached the level of major advanced economies. As of last year, only five countries with populations exceeding 50 million—namely the United States, Germany, the United Kingdom, France, and Italy—had per capita GNI above $40,000. If South Korea achieves this milestone this year, it will become the sixth country to do so.

The primary driver that has lifted South Korea to the $40,000 threshold is semiconductors. With a sharp surge in semiconductor prices and corporate profits, nominal GNI for the first half of the year increased by 21.8% compared to the previous year. Both nominal GNI and nominal gross domestic product (GDP) for the second quarter rose simultaneously by 26.4%.

Applying the government’s forecast for this year’s nominal GDP growth rate (12.3%) and projected population figures to last year’s nominal GNI yields a per capita GNI of approximately 59.1 million won. If the annual average won-dollar exchange rate remains at or below 1,478 won, the figure will exceed $40,000. Should the annual average exchange rate stay around the current level of 1,471.4 won (as of the 7th of this month), it is estimated to reach approximately $40,180. The recent decline in the won-dollar exchange rate to the low 1,300s range has contributed to an increase in income.

However, this does not necessarily mean that the living standards of individual citizens have risen proportionally. Per capita GNI is an average value calculated by dividing total income earned by corporations, the government, and households by the population. While a sharp rise in profits from certain export-oriented companies can boost overall national income, household wages and disposable income may not increase by the same magnitude.

In fact, gross operating surplus—a key indicator of corporate performance in the second quarter—surged by 18.5% compared to the previous quarter and by 48.2% year-on-year. Both growth rates represent the highest levels recorded since the quarterly distribution national income statistics were first published in the second quarter of 2010. In contrast, employee compensation, which reflects labor income such as wages, increased by only 1.9% compared to the previous quarter.

The Bank of Korea assessed that profit growth originating in the semiconductor sector is spreading to other industries, including chemical products, transportation equipment manufacturing, and wholesale and retail trade. The central bank explained that if corporate profits are transferred to households and the government through bonuses, dividends, and increased tax revenues, consumption and investment could rise with a time lag.

However, it remains uncertain whether the increased income will translate into actual consumption and domestic investment. While the total savings rate reached 45.6% in the second quarter—the highest since statistics began being compiled in 1970—the gross capital formation rate stood at just 24.2%, the lowest since the third quarter of 1975. This indicates that while income surged, consumption and domestic investment failed to keep pace.

The impact of exchange rates also warrants close monitoring. Since per capita GNI in dollar terms is calculated by converting won-denominated income using the annual average exchange rate, a stronger won leads to an increase, while a weaker won results in a decrease. Even if South Korea’s actual productive capacity and won-denominated income remain unchanged, whether the $40,000 milestone is achieved can still vary depending on exchange rate fluctuations.

Japan once surpassed $40,000 in per capita GNI but has since fallen back into the $30,000 range starting from 2024 due to economic stagnation and a weakening yen. Another potential variable that could lead to a weaker won is the possibility of increased demand for dollars driven by expanded overseas investment.

Reliance on semiconductors also poses a risk factor. The recent surge in nominal income was significantly influenced by a 56.6% spike in the export deflator centered on semiconductors. If semiconductor price increases slow down, exports, corporate profits, and nominal GNI could all decelerate simultaneously.

The Bank of Korea forecasts that semiconductor demand will continue to outpace supply for the foreseeable future as U.S. artificial intelligence (AI) investments persist. Kim Hwa-yong, Director of the National Income Division at the Bank of Korea, stated, “Even if prices decline in the future, we expect strong performance as long as the volume growth trend remains sustained.”