Turning the semiconductor boom into a national asset

Cho Yoon-je

The author is a special appointment professor at the Graduate School of Economics at Yonsei University. 

The pace of change has become so rapid that unexpected developments are quickly becoming reality. Artificial intelligence is already transforming how people and organizations work, and many believe it is approaching technological singularity, where AI continuously improves itself toward superintelligence. Humanity is entering a period of change that may rival or even surpass the Industrial Revolution. At the same time, widening inequality and political polarization in major economies have intensified geopolitical rivalry, while advanced technology and trade restrictions have become strategic weapons.

These forces have converged to drive an unprecedented surge in demand for semiconductors. Prices have climbed sharply, allowing Korean and Taiwanese chipmakers to enjoy extraordinary profits. For Korea, whose economy has struggled with structural slowdowns, the boom has provided an unexpected opportunity. Whether it ultimately becomes a blessing or a curse, however, will depend on how the country responds today.

The experience of other countries offers valuable lessons. The Netherlands discovered massive natural gas reserves beneath the North Sea in 1959, triggering a surge in exports, inflation, wage increases and a stronger guilder. As a result, manufacturing competitiveness weakened, employment declined and the phenomenon became known as "Dutch disease."

Norway chose a different path after discovering North Sea oil in the 1970s. Rather than spending its windfall immediately, it established a sovereign wealth fund that invested primarily overseas so that both current and future generations could benefit. Now worth roughly $2 trillion, it is the world's largest sovereign wealth fund. Norway's prosperity stems not simply from its oil wealth but from how it managed the revenues from it.

Britain provides yet another reference point. During the 1980s, the government of Margaret Thatcher used rising North Sea oil revenues to finance tax cuts, public spending and industrial restructuring. The stronger pound weakened manufacturing competitiveness and accelerated the country's shift from an industrial economy toward one centered on financial services.

Korea now faces a similarly important choice. Combined operating profits at Samsung Electronics and SK hynix are projected to exceed 600 trillion won (about $386 billion) this year, with some forecasts suggesting 800 trillion won next year and more than 1 quadrillion won the year after. The scale is unprecedented. As recently as 2024, when demand for high bandwidth memory first surged, the two companies combined earned about 56 trillion won in operating profit. The figure rose to roughly 90 trillion won last year before accelerating dramatically as AI investment, U.S. technology restrictions on China, corporate innovation and government support reinforced one another.

Like a tropical downpour, this extraordinary windfall is unlikely to last forever.

The question is how to convert this temporary windfall into a lasting national asset. I propose applying a somewhat higher corporate tax rate only to profits that substantially exceed normal levels, and placing the additional revenue into a dedicated National Future Fund rather than the general budget.

Korea currently applies a 25 percent corporate tax rate to taxable income above 300 billion won, although the effective rate is often lower because of various deductions. Until recently, few Korean companies earned more than 50 trillion won in annual net profit. Last year, however, both Samsung Electronics and SK hynix approached that level. If pre-tax profits above 50 trillion won and 100 trillion won were taxed at 27 percent and 30 percent respectively, with the additional revenue transferred entirely to the fund, the measure would function less as a permanent tax increase than as a temporary excess profits tax. Should the semiconductor boom continue as projected, the fund could accumulate hundreds of trillions of won over the next three years.

Those resources should be invested in Korea's future. Priorities include research and development in semiconductors, AI, quantum computing and biotechnology; infrastructure such as power grids, water supplies and industrial complexes; education and scholarships to cultivate scientists and engineers; support for industrial restructuring and stronger social safety nets; and sustained investment in basic science and the arts. Establishing world-class research institutes for advanced technology and international affairs would also leave an enduring legacy for future generations.

Such an approach would preserve market principles, maintain corporate investment incentives and avoid relying on ordinary tax revenue while ensuring that the benefits of today's semiconductor boom are shared by both current and future generations. It could also absorb excess liquidity, helping to contain inflation and property speculation while reducing pressure for higher interest rates, protecting vulnerable households and supporting financial stability. By preventing the semiconductor boom from weakening other manufacturing industries, it would reduce the risk of Korea suffering its own version of the Dutch disease.

Samsung Electronics and SK hynix would not simply post record earnings. They would also fulfill a broader national responsibility by helping transform a temporary boom into a permanent foundation for growth. As the AI era unfolds, Korea should begin redefining the role of public finance. The current semiconductor boom offers a rare opportunity to do so before the moment passes.