'Share semiconductor profits vs. reinvest them': Cabinet split over windfall debate

Ministers diverge on what to do with semiconductor boom earnings; planned forum postponed indefinitely

Minister of Employment and Labor Kim Young-hoon speaks at a press roundtable held at the Government Complex Sejong on May 27. [Ministry of Employment and Labor]

A proposal by Minister of Employment and Labor Kim Young-hoon to share "excess profits" from the semiconductor boom with society at large has sparked an open rift within the government, going beyond a dispute over bonuses to a fundamental disagreement over where the windfall should go.

At a press roundtable on May 27, Kim raised the controversy over Samsung Electronics' bonus payments and said "social dialogue is the only solution for distributing large corporations' excess profits across society." He also signaled that gains from the semiconductor sector should flow to subcontractors and the broader industrial ecosystem.

The economic team saw it differently. Two days later, Minister of Trade, Industry and Energy Kim Jung-kwan posted on X that the country was at "a critical juncture where semiconductor industry profits must be channeled into productive reinvestment for the future," adding that South Korea should "strategically leverage the AI boom to secure a growth engine for an industrial leap forward."

Minister of Employment and Labor Kim Young-hoon left a comment on a post by Minister of Trade, Industry and Energy Kim Jung-kwan on X. [Captured from Kim Jung-kwan's X account]

Fiscal authorities aligned with the trade ministry's position.

Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol said on May 30 that South Korea must "boldly invest in the next memory chip," while Minister of Planning and Budget Park Hong-keun said the country should "invest boldly in advanced industries as future growth drivers, while also investing in the social safety net." Both statements placed the emphasis on directing excess profits — and any surplus tax revenue — back into future industries.

Officials in the government district of Sejong widely read the remarks as a de facto public rebuttal of the labor minister's position.

The Ministry of Employment and Labor did not back down, however. Kim Young-hoon replied to Kim Jung-kwan's post, writing, "Let's create real growth together with labor through co-prosperity with subcontractors," pushing back with a call for cooperation between prime contractors and their suppliers.

The presidential office declined to mediate. Spokesperson Kang Yu-jung said only that "the labor minister spoke from the perspective of labor, and the trade minister spoke from the perspective of industry." Officials in Sejong took that as a signal that the government had yet to settle on a unified position.

"The moment the government holds a forum and a minister personally puts an issue on the agenda, markets have no choice but to read it as a policy signal," one official at an economic ministry said. Another said it was "a separate question entirely how persuasive it will be to lead a public debate while insisting there is no intervention." Among reporters covering the government, a running joke has emerged that the two ministers — Kim Young-hoon and Kim Jung-kwan — need to face off in a debate of their own.

Experts say a profit-sharing scheme of this kind would be structurally difficult to implement in practice, largely because the concept of "excess profit" is too vague to be workable. The Korea Economic Research Institute noted in a related report that while economics recognizes the concept of normal profit, excess profit is in reality extremely difficult to measure. Critics have also asked why only profits should be shared when losses are not.

Ultimately, the Ministry of Employment and Labor's emergency forum on a social solidarity wage has been postponed indefinitely — it cannot realistically be held until after Minister Kim's trip to the International Labour Organization next week at the earliest. Within government circles, the view is growing that internal consensus had not been sufficiently established before any broader social consensus was sought. The episode has laid bare that the government has yet to fully work through the very question it raised about what to do with the profits generated by the semiconductor boom.

"Sejong Back Briefing" is a series in which The Herald Business's Sejong-based correspondent delivers off-the-record insights on government policy announcements, the meaning between the lines, and behind-the-scenes stories from the government district.

fact0514@heraldcorp.com