The United States consumer price index for May rose 4.2 percent year-on-year, according to data released Wednesday, the highest increase since April 2023. The figure raised the likelihood that the Federal Reserve will hold or raise interest rates before the year is out. In Japan, markets widely expect one or two rate hikes this year, including at the Bank of Japan's monetary policy meeting June 15-16. Bank of Korea Gov. Shin Hyun-song has also repeatedly said the path toward a benchmark interest rate increase is "clear," citing rising inflation and South Korea's strong economic growth following the monetary policy committee meeting on May 28. Against this backdrop, the share of domestic "zombie firms" — companies whose operating profit cannot cover their interest expenses — approached 40 percent last year, hitting a record high. Heavily indebted companies face sharply greater insolvency risk in a rising-rate environment, raising the likelihood of risk spreading through the financial system. This is a warning light flashing for the Korean economy.
The Bank of Korea's "2025 Corporate Management Analysis," released Wednesday, laid bare both the light and shadow of the semiconductor boom. Record earnings at semiconductor giants Samsung Electronics and SK Hynix lifted the overall operating profit margin for the manufacturing sector, but the revenue growth rate for all companies fell from the previous year, signaling a clear slowdown in momentum. The operating profit margin gap between large companies and small and medium-sized enterprises widened, and the share of zombie firms rose.
According to the Bank of Korea data, the operating profit margin on sales for 34,456 externally audited corporations stood at 6.2 percent last year, up 0.8 percentage points from 5.4 percent the year before. Excluding Samsung Electronics and SK Hynix, however, the figure was unchanged at 4.9 percent. Large companies saw their margin rise from 5.6 to 6.6 percent, while small and medium-sized enterprises saw theirs slip from 4.8 to 4.6 percent. The overall revenue growth rate fell from 4.2 percent in 2024 to 2.5 percent last year, and the share of zombie firms climbed from 38.5 to 39.9 percent. These figures reflect the structural vulnerabilities of the Korean economy — an overconcentration in semiconductors and a deepening polarization in sales and operating profit across company size and industry. Particularly alarming is the fact that nearly four in 10 companies cannot cover their interest payments through operating activities, exposing the inefficiency of an industrial and financial structure in which capital remains tied up in unproductive sectors.
Sweeping structural reform is urgently needed. Industrial restructuring must open fast-track rehabilitation pathways for viable companies while providing clear exit routes for those with no prospect of survival. Policy financing must also become more selective in distinguishing strong companies from weak ones. Among OECD member countries, South Korea has the highest ratio of government-guaranteed loans to small and medium-sized enterprises relative to GDP. Standards for listing and delisting on capital markets must be tightened as well. Alongside this, labor market flexibility should be expanded, and companies with genuine growth or recovery potential should receive expanded national support for AI adoption so they can build the competitiveness needed to survive.
suk@heraldcorp.com
