South Korea’s central bank has warned that unusually large bonuses in the semiconductor sector could add to inflation, as workers at Samsung Electronics and SK Hynix are set to receive payouts worth hundreds of thousands of dollars each. The article says the phenomenon is concentrated in the country’s top chipmakers, where performance bonuses have reached exceptional levels after strong profits and labor negotiations.
In a June 17 report, the Bank of Korea said this year’s inflation has been driven largely by higher energy prices linked to the war in Iran. But it added that even if that conflict eases, inflationary pressure could keep building as incomes improve and wage growth spreads more broadly. South Korea is already above target, and the bank expects full-year inflation of 2.7%, above its 2% goal.
The biggest bonuses are being paid at SK Hynix and Samsung Electronics. SK Hynix agreed last September to allocate 10% of operating profit to bonuses for employees. Samsung workers agreed that 10.5% of the semiconductor division’s operating profit would go to special bonuses after threatening an 18-day strike in May. According to a Reuters source in a union, a memory-chip worker earning a base salary of 80 million won, or $52,400, could receive a total bonus of about 626 million won, or $410,000, more than eight times the average annual pay in the field. Reuters also calculated that SK Hynix workers could receive more than 700 million won, or $454,851, each if the company hits 250 trillion won in annual profit.
The central bank said bonuses usually do not strongly affect demand because they are not permanent income increases. But it warned that when special bonuses grow “abnormally and significantly,” wage growth can spread to other sectors and intensify inflation through both demand and supply channels. Deputy Governor Lee Jae-ho said retailers were already seeing the effects, noting that “sales have risen significantly in places like Suwon and in the luxury goods sections of department stores, and this may spread gradually.” Local media reported that some tech workers have been spending heavily on luxury goods such as bags, jewelry and watches, with luxury sales in South Gyeonggi, where Samsung and SK Hynix are headquartered, rising sharply. At Shinsegae’s department store in Gyeonggi Province, luxury jewelry sales jumped 146.3% and luxury watch sales rose 85.3% in May, while total sales increased 19%.
