South Korea's semiconductor upcycle is lifting corporate profits, but the gains are flowing mostly to the country's biggest companies. The gap in debt-servicing capacity between large firms and small and mid-sized enterprises has reached its widest point since the Bank of Korea began tracking the figure in 2015.
Large firms are borrowing heavily to expand facilities, while smaller companies are mainly borrowing to keep the lights on. The divergence, reported by BigGo Finance based on central bank and commercial bank data, is raising questions about how evenly the chip-driven recovery is being shared.
A Record Gap in Interest Coverage
The interest coverage ratio measures operating profit against interest expense. In the second quarter of this year, large companies posted a ratio of 1,882%, meaning operating profit was roughly 19 times their interest bill. SMEs came in at 322%, or about three times.
The 1,560 percentage point difference is the largest since the series started in the first quarter of 2015, according to the Bank of Korea's Economic Statistics System.
How Quickly the Divide Opened
The widening has been rapid. A year earlier, in the second quarter of last year, large firms stood at 362% and SMEs at 226%, a gap of just 136 points.
By the end of last year the spread had grown to 345 points, then jumped to 864 points in the first quarter of this year as large firms reached 1,115% against 251% for SMEs. The second quarter pushed it past 1,500 points.
Manufacturing shows the sharpest contrast. Large manufacturers saw their ratio climb to 3,903% from 440% a year before, roughly a ninefold increase. Smaller manufacturers improved too, from 263% to 401%, but the gain was modest by comparison.
Borrowing to Grow Versus Borrowing to Survive
Lending data from the five major banks, KB Kookmin, Shinhan, Hana, Woori and NH NongHyup, reveals how differently the two groups are using credit. Facility-investment loans to large companies reached 75.803 trillion won, about $55.6 billion, at the end of September, up 16% from a year earlier.
Facility loans to SMEs rose only 1.3%, to about 337.85 trillion won. Total SME loans grew 3% to roughly 601.36 trillion won, and of the 17.5 trillion won increase, about 13.28 trillion won went to working capital such as wages and raw materials.
Large companies' total loan balance rose 19% to about 194.34 trillion won, with facility loans up 16% and working capital loans up 21%.
Corporate Cash Piles Reach New Highs
Savings deposits held in accounts with more than 1 billion won reached 960.115 trillion won at the end of June, the highest since records began in 2002 and up 10.6% from the end of last year. These large accounts made up 50.6% of all savings deposits, crossing the halfway mark for the first time in four years, and their number hit a record 102,000.
The Bank of Korea believes most of these accounts belong to corporations. Non-financial companies' net financial investment surged to 67.1 trillion won in the second quarter from 20.8 trillion won in the first, the largest since 2009, while their deposits with financial institutions rose from 17.8 trillion won to 84.3 trillion won.
Export income is also swelling. Inbound foreign remittances handled by the five banks totaled $621.79 billion from January to October, up 30.1%, and corporate dollar deposits reached $64.55 billion at the end of October, up 44%.
Why the Headline Numbers Can Mislead
Analysts caution that even the improvement in SMEs' ratios may not signal healthier business. A Bank of Korea official noted that in a weak economy, smaller firms may pay down debt and cut investment, which can raise the ratio without reflecting stronger operations.
Cho Young-moo, head of NH Financial Research Institute, said that when gains are concentrated, many economic actors see improving indicators as an "optical illusion." He added that a continued AI chip boom could lift exports, tax revenue and government spending, but warned that a downturn in the semiconductor cycle could squeeze public finances and make conditions harder.
What the Divide Means for Korea's Economy
The data underscores how dependent South Korea's growth has become on a single industry. Strong chip exports are boosting aggregate figures, but smaller firms and other sectors are not seeing comparable benefits.
For policymakers and business leaders, the challenge is spreading the gains beyond semiconductor giants. For smaller hardware suppliers and manufacturers, the numbers suggest access to growth capital remains tight even as the broader sector thrives.
Source: BigGo Finance
