[Jaehoon Lee’s In-Depth Report 6] What Q3 Earnings Reveal About the Two Faces of Korea’s Economy

[CEONEWS = Chief Reporter Jaehoon Lee] The 2025 Q3 corporate earnings season has come to a close, and on the surface, the results appear solid. Export-driven giants led by semiconductors and automobiles posted “earnings surprises,” fueling optimism that Korea’s economy continues to perform well despite the global slowdown. Yet behind those dazzling numbers, worrisome cracks are widening. The gap between exports and domestic demand, between conglomerates and SMEs, is deepening—putting the “spine” of the Korean economy under growing strain.

■ The Triumphant Return of Semiconductors—But…

The undisputed star of Q3 was semiconductors. SK hynix, leveraging its dominant position in the HBM (High Bandwidth Memory) market, steered its DRAM division back into the black. Samsung Electronics’ DS division also returned to multi-trillion-won profitability for the first time in five quarters, signaling the comeback of the semiconductor supercycle. The AI boom has proven to be more than a passing fad—it is reshaping the industrial landscape.
The auto sector also made a winning bet. Hyundai and Kia’s focus on hybrid vehicles, rather than an all-in electric strategy, paid off handsomely in the U.S. and European markets, aligning with consumers’ cautious approach to EV adoption. Combined with a favorable exchange rate, the companies achieved record-high operating profits.

However, the celebration must be tempered with caution. These sectors’ strong performances do not necessarily reflect the overall health of Korea’s economy. In fact, they underscore the structural weakness of an economy overly dependent on a handful of export conglomerates.

■ The Harsh Reality of the Domestic Market

While semiconductors and automakers lit up the scoreboard, domestically focused companies struggled for survival. Retail giants like E-Mart and Lotte Shopping continued to see negative growth, while food and beverage companies faced profit erosion as cost increases met consumer resistance. The rise of ultra-low-cost Chinese e-commerce platforms like AliExpress and Temu has further squeezed traditional retailers.
Perhaps most alarming is the stagnation of IT platforms once seen as growth icons. Naver and Kakao were hit hard by a slump in the advertising market—the clearest signal of an economic downturn. Yet they cannot stop investing in AI and cloud businesses, placing further strain on profitability.
Foundational industries such as petrochemicals and steel are in even greater distress. A flood of cheap Chinese products and sluggish global demand have left companies like LG Chem, Lotte Chemical, and POSCO with near-break-even or deficit-level results. These struggles suggest that the entire industrial ecosystem is under pressure.

■ A Warning Sign: Entrenched Polarization

The core issue is not temporary weakness—it is structural polarization. A few export champions may lift headline indicators, but small and mid-sized domestic firms are collapsing. This disparity cascades into employment, income, and regional economies, amplifying the risks.
The outlook for Q4 is also mixed. Semiconductors may stay buoyant on AI demand, but autos face seasonally weaker sales and fiercer competition. Domestic demand remains bleak: high interest rates, persistent inflation, and looming risks in property project financing (PF) continue to cloud the horizon. Consumer sentiment recovery seems distant.

■ Time to See Beyond the Numbers

What we are witnessing is a half-sided boom. No matter how strong semiconductors and autos may appear, they cannot support the entire economy alone. A building with sturdy pillars still collapses if its midsection crumbles. Likewise, if Korea’s domestic market and mid-sized businesses—the “spine” of its economy—collapse, the export boom will be short-lived.
Now is the moment of choice: will we rest on the laurels of temporary figures, comforted by the illusion that “as long as semiconductors and cars thrive, all is well”? Or will we confront structural weaknesses head-on and pursue genuine solutions through domestic revitalization and industrial diversification?

Policymakers must relieve cost burdens on domestic firms and stimulate consumer confidence with practical measures. Businesses must adapt swiftly to changing consumption trends and strengthen their fundamentals through innovation. Above all, the warning light of deepening polarization cannot be ignored.
The message of the Q3 results is clear: the current boom rests on a fragile foundation—and the cracks are widening faster than expected. If we continue to overlook the shadow cast by weak domestic demand, the price will be far greater than the gains from export glory.

“Only by reading the truth beyond the numbers can we see the future.”