Industrial output down in May on chip volume adjustments

Containers are stacked at a port in Busan, July 31. Yonhap

Korea's industrial output fell in May from a month earlier due mainly to a decline in chip production caused by a base effect and volume adjustments, data showed Tuesday, while retail sales rebounded slightly over the period.

Industrial production fell 0.3 percent last month from April, according to data from the Ministry of Data and Statistics, extending on-month losses for two consecutive months.

Output in the mining and manufacturing sector, a key pillar of the economy, fell 3 percent due to a decline in the production of chips and pharmaceutical products, while that of the automobile sector increased.

The Ministry of Finance and Economy said the overall decrease in the industrial output came amid disruptions in the supply of raw materials following the Middle East war, along with an adjustment in chip production, which had recently increased sharply.

In detail, the production of the semiconductor industry fell 10 percent, with the data ministry citing a decrease in the shipment of memory chips, including dynamic random-access memory (DRAM), due to a base effect and volume adjustments.

"The fundamentals of the chip sector remain strong," Lee Doo-won, a senior official at the data ministry, told reporters. "With chipmakers' production capacity reaching its limits, there were some adjustments in line with shipment schedules."

"If new chip fabs launch operations in a full-fledged manner, we believe there will be an increase not only in terms of value but also in volume," Lee added.

Another official from the finance ministry echoed the view, noting the decline in chip output is just a temporary adjustment.

"Chip exports during the first 20 days of June shot up 188.4 percent, maintaining their growth," the finance official said. "Considering the data, (chip output) could rebound in the June report."

Output of pharmaceutical products fell 17.5 percent, while vehicle production gained 2.7 percent over the period.

The data ministry said output in the service sector rose 1.3 percent on-month in May, led by stronger performance in the finance and science industries.

Retail sales, a gauge of private spending, rose 0.1 percent over the period, led by automobile fuel and cosmetics.

In detail, sales of durable goods, such as automobiles, fell 3.4 percent over the period, while those of non-durable goods, such as fuel, as well as semi-durable goods, including clothing, moved up 0.9 percent and 2.3 percent, respectively.

Facility investment decreased 0.1 percent in May from a month earlier due to the weak performance of the machinery industry, the data showed.

Investment in the transportation segment moved up 0.2 percent, while that in the machinery industry, including precision equipment, fell 0.2 percent.

Looking ahead, the finance ministry said major industrial indicators are expected to improve down the road following peace talks between the United States and Iran, which led to a sharp decline in global crude prices.

The finance ministry added the government will spare no effort to reduce the burdens on small and medium-sized businesses amid the strong U.S. dollar and high consumer prices.