In the winter of 1998, a grim form of death became specific to middle-class fathers in South Korea: jumping from the rooftop of an apartment they had paid off over ten years. The motivation was not despair, but calculation—a life insurance payout would cover the remaining mortgage, allowing their wife and children to keep the home. That year, the suicide rate for middle-aged Korean men surged by over 40%.
Twenty-eight years later, in 2026, a full generation has passed. Seoul housing prices have now risen for 74 consecutive weeks, the KOSPI index hit an intra-year high of 9,385 points, and a Samsung Electronics Co., Ltd. engineer can borrow 500 million won from the company at a 1.5% interest rate to buy a home in Dongtan, completely bypassing national lending restrictions.
Concurrently, South Korea's foreign exchange reserves stand at a massive $427.3 billion, and its current account surplus has reached a record high. On the surface, it appears 1998 will never return.
However, if you examine the nation's balance sheet—with household debt approaching 2,000 trillion won and stock market margin debt hitting a historical peak since records began in 1999—an uncomfortable reality emerges: South Korean households are once again standing on a high ledge. This time, however, what's under their feet is not foreign debt, but AI chips.
The External Fortifications
A repeat of the 1997-98 style crisis is not in the cards for South Korea.
Back then, the Thai baht fell first, panic swept Southeast Asia, and foreign banks refused to roll over short-term dollar loans to Korean corporations. South Korea's official foreign reserves were around $20 billion, but the usable amount at one point dwindled to just about $6 billion.
The Korean won collapsed from 800 to nearly 2,000 against the dollar, doubling the debt of companies that had borrowed in dollars overnight. Banks toppled, and the nation ultimately accepted a $58.4 billion IMF bailout along with a set of humiliating conditions.
Today, every step of that path is blocked.
The $6 billion in reserves has become $427.3 billion, sufficient to cover short-term external debt by 2.6 times. The current account deficit has turned into a surplus—reaching $123 billion in 2025 alone, a national record. The exchange rate floats freely, making a speculative attack on the won impossible.
An attack from the outside is no longer feasible. But this is precisely the problem: everyone is focused on the external fortifications built over 28 years, while few are looking down at their own feet.
The Internal Foundation
The latest data from the Bank of Korea, released on July 7, shows the household debt-to-GDP ratio fell to 85.3% in the first quarter, a quarterly drop of nearly 3 percentage points. This appears to be deleveraging, and at a rapid pace.
But at a financial stability report briefing three weeks prior, Bank of Korea Deputy Governor Chang Jongsuk punctured this sense of security with a statement: nominal GDP growth is highly concentrated in semiconductors, and "the incomes of households that borrowed money have not improved across the board."
The household credit balance reached 1,993.1 trillion won in Q1 and continues to grow by trillions each month. The ratio is falling solely due to the denominator—nominal GDP surged 17.1% year-on-year, the sharpest rise in thirty years, but this was almost entirely driven by chip sales from Samsung and SK Hynix.
The Bank of Korea's own breakdown shows that in the Q1 GDP deflator, the export component rose 23.5%, while domestic consumption rose only 2.1%; corporate operating surplus grew 17%, while labor compensation grew just 4%.
Money is flowing into semiconductor company profits, not into household bank accounts. Minister of Economy and Finance Kim Hyun-joo admitted at a briefing: the expansion of the nominal GDP growth rate can be expected to lower the ratios of household and government debt to GDP.
She spoke the truth—the ratios are indeed falling. But the reason is not debt repayment; it's strong chip sales. Debt is rigid; GDP is fluid. The pleasing figure of 85.3% is standing on a single chip.
So where are these trillions of won in new household debt flowing each month?
First, it flowed into the stock market.
The KOSPI rose 59% over three months in Q2, touching 9,385 points intraday in June. Retail investors not only poured in their own money but also borrowed heavily—margin debt soared to a record high of 38.6 trillion won in late June.
The Bank of Korea calculated an even larger figure in its financial stability report: as of the end of May, funds used for direct stock purchases, including margin and credit financing, totaled 39.4 trillion won, having increased by 11.2 trillion won year-to-date—the largest increase since records began in 1999.
This leverage is highly concentrated in just two stocks: by mid-June, margin debt for Samsung Electronics Co., Ltd. and SK Hynix combined reached about 9.1 trillion won, nearly quadrupling since the start of the year and accounting for over one-third of all KOSPI margin debt.
On June 23, the KOSPI plummeted 9.99% in a single day, shedding 910 points for the largest single-day drop in history, triggering its fourth circuit breaker of the year. On that day, foreign investors sold 4.1 trillion won worth of KOSPI shares, and institutions sold 4.5 trillion won. Retail investors, however, bought a record 8.5 trillion won.
By the end of June, the KOSPI had corrected about 10% from its peak, but margin debt had only retreated from its peak of 38.6 trillion won to 37.3 trillion won, barely moving. They did not close their positions; they are using leverage to buy the dip.
Another drop of similar magnitude could trigger forced liquidations—prices falling below margin requirements, broker systems automatically selling, those sales driving prices lower, and triggering the next round of margin calls.
Second, the money flowed into the property market.
After the June 23 crash, money did not return to banks. The increase in other loans that month shrank by about 1.6 trillion won compared to May—less borrowing for stock speculation—but the increase in housing mortgage loans actually expanded from 4 trillion won to 4.5 trillion won. While the overall increase is cooling, the structure shows leverage simply moving from one address to another.
And the destination seeing the fiercest price gains is not Gangnam, but the areas surrounding semiconductor foundries.
Hwaseong's Dongtan rose 1.29% in a week, and Suwon's Yeongtong rose 1.19%. The media calls this "semiconductor money." When the government designated Dongtan, Giheung, and Guri as speculative zones on June 30, prices didn't fall but rose instead, with hot money squeezing into neighboring Suwon, Namyangju, Seongnam, and Bundang.
Samsung Electronics Co., Ltd. finalized a labor agreement to provide internal housing loans to employees without homes at a 1.5% annual interest rate, up to 500 million won, exempt from DSR and LTV regulations, and is preparing for implementation. SK Hynix is demanding the same treatment. The Financial Services Commission stated the obvious on July 9: it's legally powerless to stop it. While the average mortgage rate is 6%, a Samsung engineer gets 1.5%. Regulation cannot reach it.
At this point, one thing becomes clear: whether it's stock market margin or property market mortgages, the flow of money points in every direction toward the same thing—semiconductors.
The KOSPI's rise is driven by Samsung and SK Hynix, while the KOSDAQ fell 18% over the same period. Property prices are rising in foundry regions. The nominal GDP growth that is pulling down the debt ratio is also fueled by chips. Four seemingly separate elements—stock market, property market, GDP, and leverage—are all standing on the same foundation.
If Chip Sales Slow
The last semiconductor downturn was not long ago, from 2022 to 2023. Back then, chip exports experienced negative year-on-year growth for over a dozen consecutive months. But at that time, household leverage wasn't this high, margin debt wasn't this extreme, and housing prices weren't tied this tightly to foundries.
This time, if AI-related capital expenditure slows—it doesn't need to crash, just slow—events would unfold step by step.
Nvidia's orders decrease first, followed by downward revisions to the earnings of Samsung and SK Hynix, and the KOSPI, burdened with 38 trillion won in margin debt, begins to fall. Then, apartments in Gyeonggi Province that rose on "semiconductor money" start to weaken, nominal GDP loses its engine, the household debt-to-GDP ratio rebounds from 85.3%, and vulnerable borrowers face widespread defaults...
But this does not mean a collapse is inevitable.
The current delinquency rate for South Korean household loans is 1.00%, below the long-term average, and banks are well-capitalized. The IMF assesses South Korea's "financial stability risks as manageable." Mortgages are primarily full-recourse loans, lacking the securitized contagion risk of U.S. subprime mortgages.
The $123 billion current account surplus in 2025 and its status as a net creditor nation form a solid defensive moat. In 2022, when the Bank of Korea raised rates from 1.00% to 3.25%, housing prices fell about 8% over two years without escalating into a systemic crisis. South Korea has the capacity to absorb a housing price adjustment.
If the AI infrastructure build-out cycle continues for five to ten years, the sustained expansion of nominal GDP would represent genuine deleveraging.
The "What If?" Scenario
The most critical indicator now is South Korea's semiconductor export growth rate. If it turns negative for two or three consecutive months, the negative feedback loop would begin.
In 1998, the last thing those fathers did before jumping was to calculate. They were not overcome by emotion; they were defeated by an arithmetic problem: the remaining mortgage balance, the life insurance payout, the living expenses for their wife and children. Once the calculation was done and the answer pointed in one direction, they went.
In 2026, South Korea is also calculating, but the variables in this equation have changed—it's no longer foreign debt and exchange rates, but AI capital expenditure and nominal GDP.
The nation's deleveraging, stock market valuations, housing prices in Gyeonggi Province, and the sustainability of 2,000 trillion won in household debt are all betting on the same assumption: that AI chips will continue to sell in massive quantities.
If the calculation is correct, everyone is safe.
If it's wrong—the fathers of 1998 knew exactly what that felt like.
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