South Korea may be getting too old to take advantage of its AI boom

South Korea is one of the biggest winners of the AI boom.

It’s home to Samsung Electronics and SK Hynix, the two largest manufacturers of memory chips.

Chip workers are flashing bonuses of around $400,000.

The KOSPI, Korea’s benchmark index, is up almost 60% for the year so far.

Yet a report from Goldman Sachs suggests that all that wealth might not make it to ordinary households.

Even as demand for chips has sent Korean exports and factory investment surging, retail sales are still close to whether they were in 2019.

Goldman calls it a “K-shaped cycle” where corporate balance sheets thrive while private consumption remains soft.

Goldman’s economists have an explanation: South Korea is getting too old, too quickly.

The East Asian country has one of the world’s lowest fertility rates, reporting 0.8 births per woman last year , far below the 2.1 rate to keep population levels relatively stable. (The U.S., by comparison, reported 1.6 births per woman ).

Twenty percent of Korea’s population is now over the age of 65.

The country’s postwar baby boomers are retiring just as its fertility rate remains below replacement level, leading to a shrinking pool of working-age Koreans supporting the elderly.

The United Nations projects Korea’s “dependency ratio”—the number of children and elderly people relative to the working-age population—will increase by 1.5 percentage points a year over the next decade.

That’s the fastest pace among the 70 large and midsized economies Goldman analyzed, surpassing even Japan during its most intense period of aging from 2000 to 2015.

Korea’s retirement problem To make matters worse, older Koreans behave unusually when they retire: They don’t spend.