South Korea’s semiconductor boom is creating a new policy challenge for the Bank of Korea: higher pay at Samsung Electronics and SK hynix could spread through wages, consumer spending, service prices and housing markets, strengthening pressure for further interest-rate increases. Nominal GDP surged 21.9% in the first half of 2026 from a year earlier, driven largely by higher semiconductor export prices. Growth accelerated from 17.1% in the first quarter to 26.4% in the second, with improved terms of trade contributing 15 percentage points, or about 70%, of the increase. The Bank of Korea expects the effects of the semiconductor-led income gains to spread gradually beyond technology companies, although it has warned that benefits could remain concentrated among a limited group of firms and workers. The central bank’s analysis of the 2016-2017 semiconductor boom found that higher information-technology wages were followed by stronger service-sector wages about three months later and higher service prices roughly four months after that. Because service inflation is relatively persistent and contributes significantly to core inflation, broader wage gains could raise underlying price pressures. Higher incomes could also increase consumer spending and demand-side inflation. There are already signs of stronger local spending. After Samsung Electronics and SK hynix paid performance-based incentives in January 2025, monthly spending on cars, home appliances, furniture and department stores was up to 4% higher in Icheon, Hwaseong and Cheongju than in other parts of the country, according to a Bank of Korea analysis released in August. Large bonuses may also increase demand for homes in the Seoul metropolitan area, where prices have risen in semiconductor hubs including Hwaseong Dongtan, Yongin and Suwon Yeongtong. The semiconductor upturn has also strengthened profitability in shipbuilding, machinery and other manufacturing industries, supporting facility investment, tax revenue and corporate earnings. The Bank of Korea expects earnings and capital spending to remain strong next year, but cautions that income directed toward real estate or other assets could amplify price gains, borrowing and financial imbalances. Household debt remains high by international standards even when rapid nominal GDP growth lowers the debt-to-GDP ratio. The central bank raised its base rate from 2.5% to 3.0% through consecutive increases in July and August. Kim Jong-hwa, a member of the BOK’s Monetary Policy Board, said the strength and speed of the semiconductor export spillover into domestic demand and inflation would be important in determining the timing and pace of further increases. The durability of the expansion also depends on global artificial-intelligence investment, whose growth the Bank of Korea expects to peak this year before slowing from next year amid profitability, financing and infrastructure risks.