Semiconductor Price Hikes Boosted Private Consumption Starting Four Quarters Later

"Negative Effects of Oil Price Shocks to Gradually Ease, Consumption Recovery to Accelerate Next Year"
"No Need for Demand Stimulus... Employment and Wage Conditions Must Improve"

An SK hynix SSD for PCs is on display at the 28th Semiconductor Exhibition, held at COEX in Gangnam-gu, Seoul, on Oct. 14, 2026. Photo by Kang Jinhyung.

An analysis has found that rising semiconductor prices begin to have a positive effect on private consumption after a lag of about four quarters. The impact of oil price shocks becomes insignificant after six quarters, suggesting that private consumption will improve more in 2027 than in 2026.

On November 12, the Korea Development Institute (KDI) reported these findings in a policy report titled “The Effects of the Recent Semiconductor Boom and Rising Oil Prices on Private Consumption.”

The study found that the slow recovery in private consumption despite the recent semiconductor boom stems from the channels and time lags through which the semiconductor boom and rising oil prices affect consumption.

The study found that a shock from rising semiconductor prices begins to boost consumption after about four quarters, increasing it by a maximum of about 0.3% after seven to eight quarters, before the effect quickly fades. By contrast, an oil price shock lowers consumption immediately, with consumption estimated to fall by about 0.5% after three quarters. The decline then narrows, and no significant effect is observed after six quarters.

The effects of a semiconductor boom on consumption take time to materialize as they pass through corporate profits, performance bonuses, dividends, and employment. Rising oil prices, however, are quickly reflected in inflation and real purchasing power, immediately constraining households’ capacity to consume.

KDI said, “The shock from rising semiconductor prices is estimated to have had almost no effect on the growth rate of private consumption this year, while the oil price shock lowered it by about 0.4 percentage points. This suggests that the negative effects of this year’s conflict in the Middle East outweighed the positive effects of the semiconductor boom.”

Strong growth in semiconductor demand, driven by increased global investment in artificial intelligence (AI), caused major upward shocks to semiconductor prices in the fourth quarter of 2025 and the first quarter of 2026. The oil price shock began to emerge in the second quarter of 2026, when the war in the Middle East broke out. Accordingly, the negative effects of rising oil prices are expected to gradually diminish starting as early as the first quarter of 2027, while the positive effects of higher semiconductor prices begin to emerge, accelerating the improvement in consumption.

KDI estimated that “in 2027, the shock from rising semiconductor prices will raise the growth rate of private consumption by about 0.6 percentage points, while the oil price shock will lower it by about 0.2 percentage points.”

The researchers cautioned, however, that “if the conflict in the Middle East intensifies and triggers another oil price shock, the period during which consumption is constrained could be prolonged.” They also noted that the recent sharp rise in market interest rates and low wage growth in non-semiconductor sectors could constrain households’ capacity to consume.

Based on these findings, KDI recommended that “to ensure a sustained improvement in consumption, it is necessary to strengthen the foundation for recovery more broadly by improving employment and wage conditions through higher productivity in the semiconductor sector.”

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