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Sat, July 2, 2022 | 18:12
Tech
'Semiconductor shock' sinking Korea Inc.
Posted : 2019-01-13 18:08
Updated : 2019-01-13 18:20
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By Jun Ji-hye

Falling global semiconductor demand has begun taking a bite out of Korea's outbound shipments, painting a gloomy outlook for Asia's fourth-largest economy in 2019.

According to data submitted by the Korea Customs Service (KCS) Sunday, Korea's exports from Jan. 1 to 10 totaled $12.7 billion, down 7.5 percent from a year earlier.

The customs agency attributed the falling exports to a slump in the semiconductor business as shipments by chipmakers during the same period fell 27.2 percent.

Slowing global demand for semiconductors is dealing a blow to the Korean economy because their exports account for about 26 percent of the country's total.

Chipmakers rode high on a semiconductor super-cycle on the back of the emerging data economy in which global IT companies such as Google and Amazon became the main buyers of to increase their number of servers.

The nation's semiconductor exports, which rose 53.3 percent in January last year, continued to 20 percent to 40 percent increases by the end of October. But the figure nearly halved to 11.6 percent in November, and exports declined in December by 8.3 percent.

The semiconductor crisis comes as the United States-China trade conflict has raised uncertainty in the global economy, which led global IT companies to put their investments on hold.

A slowdown in global smartphone sales has also been cited as one of the reasons dragging down the semiconductor market.

Data from market research firm DRAMeXchange clearly shows the global DRAM and NAND flash memory chip markets, led by Samsung Electronics and SK hynix, are going downhill.

DRAM prices have fallen from $8.19 in August to $7.25 in December, while NAND flash prices have continued to fall from $5.60 in August to $4.66 in December.

DRAMs are crucial parts of computers, while NAND-Flash chips are used for mobile devices such as a smartphone.

Amid falling memory chip demand, Samsung Electronics' operating profit dropped significantly in the fourth quarter. According to the firm's October-December earnings guidance, its operating profit stood at 10.8 trillion won ($9.7), down by 38.53 percent from the previous quarter.

In bracing for a continuous slowdown in demand, Samsung Electronics and SK hynix are moving to scale down their expansion of production facilities.

The government has also appeared to acknowledge the semiconductor crisis, with the Ministry of Economy and Finance mentioning the uncertainty of the memory chip market in its official report for the first time.

"Retail sales have increased for two consecutive months, and in general, exports and consumption remain steady," the ministry wrote in its monthly report called the Green Book, Friday. "But uncertainty such as the U.S.-China trade conflict and the situation of the semiconductor market continues."

Experts raised concerns that the downturn in the chip market could shrink the nation's exports further, exerting a negative influence on economic growth this year.

"It would be premature to make a conclusion with the exports report covering only 10 days, but semiconductor prices are clearly on a downturn, which means the prices will go down further and negatively affect the nation's entire exports," said Lee Geun-tae, an analyst from the LG Economic Research Institute.


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