Semiconductor Industry Booming, Yet Record 1,500 Corporate Bankruptcies Expected This Year

Up 15% from Last Year Through July

#Company A, a corrugated cardboard manufacturer established in 2016, was unable to withstand rising raw material prices and other escalating costs. In 2021, the company reduced its workforce from 20 to 10 employees, but sales remained at only 600 million won, and it recorded a net loss of 320 million won. Company A entered a simplified rehabilitation procedure in 2022 and obtained court approval for its rehabilitation plan, but failed to sell its assets and was unable to fulfill its debt obligations. In 2024, the rehabilitation proceedings were terminated and the company was declared bankrupt; asset liquidation procedures are currently underway. Asset liquidation is the process of converting the debtor's assets into cash to distribute to creditors.

#Company B, a factory automation software developer established in 2019, experienced worsening management conditions after failing to secure orders and attract follow-up investment. In 2022, the company's workforce dropped from about 50 to 10 employees within one year, but net losses reached 1.7 billion won and debt amounted to 4 billion won. Company B applied for simplified rehabilitation in 2024, but an investigation found that its liquidation value exceeded its going-concern value. The company applied for termination of rehabilitation proceedings and was declared bankrupt in February 2026. Asset liquidation procedures are currently underway.

The Law Times.

These two companies are among the recent cases of rapidly increasing corporate bankruptcies. According to the Court Statistical Monthly, there were 1,500 corporate bankruptcy filings between January and July 2026. This represents a 15.7% increase from 1,297 cases during the same period in 2025. The total number of corporate bankruptcy filings for the entire year of 2025 was 2,282, the highest since 2016, when monthly statistics first became available in the Court Statistical Monthly. At this rate, the total number of corporate bankruptcies this year is likely to surpass last year's record.

The increase in corporate bankruptcies is analyzed as stemming from three main factors.

First, although exports are booming, corporate polarization is deepening. According to provisional industry-specific trade statistics released by the Ministry of Data and Statistics, large companies recorded 206 billion dollars in exports in the second quarter of 2026, while small- and medium-sized enterprises (SMEs) registered 32.7 billion dollars. Compared to the same period in 2025, exports by large companies increased by 81.8%, whereas those by SMEs rose by only 13.1%. During this period, the share of exports from the top 10 companies in the total export value increased from 38.3% to 55.3%.

Second, SMEs are increasingly constrained in their ability to repay debt. According to the Financial Supervisory Service's provisional report on the delinquency rate of KRW-denominated loans by domestic banks as of the end of June 2026, the SME loan delinquency rate was 0.82%, up 0.08 percentage points from the same period in 2025. In May 2026, before banks cleared delinquent claims, the SME loan delinquency rate had reached 1%.

Third, SMEs are more likely to miss the "golden time" for rehabilitation. It is evaluated that in the earlier cases, Company A might have survived had it pursued asset sales and business downsizing sooner, and Company B might have had a chance if restructuring had been carried out earlier. There is also a lack of proactive rehabilitation support systems for SMEs. Jun Dae-Kyu, representative attorney at Jun Dae-Kyu Law Office (Judicial Research and Training Institute, Class 28), stated, "While individuals have debt relief agencies such as the Credit Counseling and Recovery Service, it's difficult for SMEs to adjust their debt obligations."

As a result, the majority of corporate bankruptcy cases involve SMEs. The bankruptcy of SMEs, in particular, is also found to impact individuals. Personal bankruptcy filings have increased at a similar rate to those of SMEs. Between January and July 2026, there were 25,896 personal bankruptcy filings and 96,734 personal rehabilitation filings, representing year-on-year increases of 9% and 12.2%, respectively, compared with the same period in 2025.

Lee Sangwoo, The Law Times Reporter

※This article is based on content supplied by Law Times.

This content was produced with the assistance of AI translation services.