South Korea’s semiconductor production last month fell by the highest rate since the global financial crisis, weighing on the nation’s industrial output and pointing to a further cooling of overseas demand for tech components as the world economy slows.
Chip production shrank for a fourth straight month, falling 15 percent from a year earlier in the largest drop since 2009, data released yesterday by Statistics Korea showed.
Overall industrial production contracted 3.7 percent from a year earlier for the biggest fall since the start of the COVID-19 pandemic, the data showed.
Photo: Reuters
The drop in activity speaks to weakening recovery momentum in a nation closely tied to the world economy. South Korea’s growth is already under pressure from falling exports and rising interest rates at home, with the gloomy outlook overseas adding to concerns.
The probability of recessions in major overseas economies such as the US is rising as the US Federal Reserve leads a wave of monetary tightening to combat inflation, and as Russia’s invasion of Ukraine continues.
Although China’s about-turn on its “zero COVID-19” policy suggests its economy might regain strength, a surge in infections would complicate the picture.
The weakening chip demand adds to an array of factors making South Korea’s economic outlook more uncertain, including the implications of a truckers’ strike that recently ended and a crowd-crush tragedy in Seoul, the South Korean Ministry of Economy and Finance said in a separate statement.
The cloudy outlook gives the Bank of Korea more reasons to be cautious as it mulls the end of its tightening cycle. The central bank has been hiking rates for more than a year, and is debating whether to carry out one or two more next year.
The latest output figures showed chip production was down 11 percent on a month-on-month basis, while semiconductor inventories climbed 20 percent from a year earlier last month, picking up from 12.9 percent the previous month, Statistics Korea said.
The double-digit increases in inventories since October underscores a global oversupply of memory chips, a sector in which South Korea leads production. Chipmakers are recalibrating their investment plans as they brace for a drop in demand for their products at home and abroad.
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