Semiconductor boom and won strength bring per capita GNI to the brink of $40,000... but household income feels a "temperature gap"

South Korea's per capita gross national income (GNI) is increasingly 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 as it indicates 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 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 second-quarter nominal GNI and nominal gross domestic product (GDP) 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 below 1,478 won, the figure will exceed $40,000. Should the annual average exchange rate stay at the current level of 1,471.4 won (based on the average up to 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 rising income levels.

However, this does not necessarily mean that living standards for all citizens have improved 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 increase in profits from certain export companies can raise overall national income, household wages and disposable income may not rise 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, marking the lowest growth rate since the data began publication.

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 as corporate profits are transferred to households and the government through performance-based bonuses, dividends, and increased tax revenues, consumption and investment may also 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 in 1970—the gross capital formation rate fell to 24.2%, the lowest level 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 higher figures, while a weaker won results in lower figures. Even if South Korea's actual productive capacity and won-denominated income remain unchanged, whether the $40,000 threshold is achieved can vary depending on exchange rate fluctuations.

Japan once saw its per capita GNI exceed $40,000 but has since fallen back into the $30,000 range starting in 2024 due to economic stagnation and a weakening yen. Increased overseas investment could also drive up demand for dollars, potentially triggering a weaker won as another variable.

High dependence on semiconductors remains a risk factor. The recent surge in nominal income was significantly influenced by a 56.6% spike in the export deflator centered on semiconductor prices. If semiconductor price increases stall, exports, corporate profits, and nominal GNI could all slow down 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, head 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 continues."