A boom in semiconductor chips is supporting South Korea's economic growth, but it may exacerbate imbalances in its industrial system. The Bank of Korea warned that an extended expansion of this component could attract more capital and labor, reducing competitiveness for other industries. This concern was outlined in a central bank report focused on the economic effects of favoring one industry over others.

The institute noted possible development of 'Malaise Olandese' - a term describing consequences of rapid growth concentrated in one activity. In economics, this expression describes the impact when resources are drawn to expanding sectors, subtracting investments and workers from other industries, weakening their competitive ability. According to the Bank of Korea, such risks emerge if positive cycles of semiconductors persist and resource concentration increases further.

The question concerns contribution of this sector to growth rather than amplitude of its repercussions on economy. Central bank fears benefits might remain confined and differences between sectors become more pronounced. Data from the first quarter show size achieved by information technology manufacturing.

Its share of comprehensive production rose to 51%, after staying below 30% previously, according to data reported by institution. No corresponding incidence on market of workforce: IT manufacturing represented only 2.6% total occupation. Discrepancy between production and employment is key element of warning.

Strong expansion of single-industry which requires limited portion of workers can significantly affect national economic data without distributing benefits proportionally. Report does not quantify however occupational consequences on other parts nor indicate amount resources already withdrawn from competing activities. Main drive came from export of semiconductors, boosted by price increase of memory chips.

First-quarter prices increased 92.5% compared to previous year, according to central bank data. This surge strengthened value of exports and reinforced role of component in overall performance of South Korean export. Information Technology generated 73.4% of price increase in same period.

Percentage indicates dynamic of export linked to specific market evolution - source did not provide duration of rise. Bank of Korea also drew attention to dependence of domestic industry on foreign supplies. Approximately 60% of equipment used for producing semiconductors imported still.

Consequently, part of demand driven by new investments translates into purchases abroad, limiting indirect effects on domestic businesses that could supply machines, components or services to chain. Additional limit comes from increasing international investment. Central bank explained that companies are reorganizing global procurement chains and thus added more capital at external borders.

Combination of imported apparatuses and overseas investments reduces available resources within economy and therefore limits boom's ability to activate wider growth. Report outlines so an economy sustained mainly by dominant sector in production and price increase of export but characterized by limited workforce presence and ties with suppliers and external investments. Uncertainty remains about whether cycle of chip persists and if capital and labor continue concentrating in this sector.