South Korea’s central bank has warned that unusually large bonuses in the semiconductor industry could feed inflation, as workers at Samsung Electronics and SK Hynix are set to receive payouts worth hundreds of thousands of dollars each. The article, published June 22, says the bank fears the bonuses may spill over into broader wage growth and push prices higher in an economy that is already running above target.
According to the report, the bank said in a June 17 assessment that this year’s inflation has been driven largely by higher energy prices linked to the war in Iran. It added that even if that conflict eases, inflationary pressure could gradually build as income conditions improve and wage growth becomes more widespread. The central bank forecasts full-year inflation of 2.7%, above its 2% target.
The biggest payouts are tied to performance agreements at the two chip giants. SK Hynix agreed last September to allocate 10% of operating profits to employee bonuses. Samsung workers reached a deal to direct 10.5% of the semiconductor division’s operating profit to special bonuses after threatening an 18-day strike in May. Reuters, citing an unidentified union source, said a memory-chip worker with an 80 million won base salary, about $52,400, could receive total bonuses of about 626 million won, or $410,000, more than eight times the average annual salary in the field.
Reuters also calculated that SK Hynix employees could receive more than 700 million won, or $454,851, each if the company posts annual profit of 250 trillion won this year. The bank said bonuses normally do not drive demand much because they are not a permanent income increase, but “special bonuses” that grow unusually large can spread wage gains to other sectors and intensify inflation from both supply and demand. Deputy Governor Lee Ju-yeol said sales had risen sharply in places such as Suwon and in luxury departments at department stores, and local media reported that some tech workers were spending heavily on luxury bags, jewelry and watches. Shinsegae’s Gyeonggi store reported luxury sales up 53.6% year on year in May, with jewelry up 146.3%, watches up 85.3%, and overall sales up 19%.
