[Insight & Opinion] The “K-Shaped Polarization” Hidden Behind the Bull Market

Semiconductor-Driven Growth... Widening Industrial Gaps
Urgent Need to Stabilize the Domestic Economy for Ordinary Citizens Amidst the Boom

Although the South Korean stock market underwent an adjustment in the first quarter of this year due to the outbreak of war between the United States and Iran, it achieved an unprecedented milestone. The KOSPI index surpassed the 6,300 mark for the first time, posting the highest stock price growth rate in the world. While the Nasdaq struggled with concerns over artificial intelligence (AI) profitability and overvaluation, South Korea soared on the back of its semiconductor technology advantage, government-led corporate governance reforms, and active shareholder return policies. However, behind the dazzling digital displays, we are also witnessing the chilling reality of “K-shaped polarization.” The temperature of the local economy is below zero. Diagnosing the reality of the uniquely Korean K-shaped polarization reveals the pain experienced by the majority of ordinary citizens.

Looking in detail, the first issue is the asymmetry in the industrial ecosystem created by the “semiconductor’s solo run.” The protagonist of this market rally is clear. Major semiconductor stocks, including Samsung Electronics and SK hynix, accounted for more than 40% of total market capitalization and drove the index upward. In the first quarter of this year, semiconductor exports are expected to have surged by at least 100 to 150 percent compared to the previous year. In contrast, the overall manufacturing operation rate remains in the low 70% range, similar to levels seen during the global financial crisis. While the advanced industries at the top compete for global supremacy, the basic industries at the bottom face extinction—a textbook example of a “growth gap.”

The dominance of “asset income” and the decline in real wages are also notable. The rise in Seoul real estate and the KOSPI has split the population’s lives in two, depending on whether they hold assets. Last year, the top 10% of households in terms of net assets owned 46.1% of the nation’s total net assets, the highest since statistics began in 2012. In contrast, households relying solely on earned income saw their real wages fall by 2.3% after accounting for inflation. While liquidity, which flowed into the domestic market amid the relative weakness of the Nasdaq, was a blessing for capital owners, it has become a threat to the survival of non-homeowners and wage earners, going beyond a mere sense of relative deprivation.

The dual structure of the job market caused by “AI automation” is another area of concern. A common factor among the global companies that boosted stock prices was aggressive “AI infrastructure investment.” These companies are posting record profits, but the space for human labor is shrinking rapidly in the process. While top developers in the tech sector receive performance bonuses worth hundreds of millions of won and see their incomes soar, office workers and those in distribution and service industries, whose jobs can be replaced by AI, are falling into the trap of unemployment and low wages.

There is also a qualitative difference in debt caused by the “polarization of credit.” With interest rates remaining high at around 4 to 5 percent, debt now has two sides. The upper tier, with high credit ratings, can access low-interest funds to seize opportunities in the stock market and grow their wealth, but self-employed individuals and mid-level workers are being pushed into high-interest private lending markets, with rates exceeding 12 percent per year. As of this year, more than 70% of all self-employed individuals are multi-debtors with loans from three or more financial institutions, and many of them are already unable to repay their debts, making this a ticking time bomb.

The rise of the KOSPI is certainly a proud achievement. Yet beneath it lie the tears of small business owners filing for closure and the sighs of young people who have given up on employment. The government must now break free from the obsession with an absolute rise in the stock market. The excess profits generated by the semiconductor and AI industries must be channeled into the domestic market and social safety nets through sophisticated recycling systems such as tax and funds. If we fail to lift the drooping tail of the “K,” the glory of the stock market will be nothing more than a castle built on sand. Before the champagne bubbles of the stock market dissipate, the most urgent task for the Korean economy is to look after the shadows of those facing a cold table.

Wonkyung Cho, Professor of Economics at Sejong University

This content was produced with the assistance of AI translation services.