Korean chipmakers forecast delayed export recovery: BOK

The Korea Times

The Korea Times

Finance

Wed, November 29, 2023 | 08:44

Economy

Korean chipmakers forecast delayed export recovery: BOK

Posted : 2023-06-27 08:05

Updated : 2023-06-28 08:12

SK hynix employees check semiconductor fabrication equipment at the company's Icheon plant in Gyeonggi Province, in this undated photo. Courtesy of SK hynix

By Lee Yeon-woo

Korean semiconductor firms anticipate that a full recovery in exports could prove to be challenging, and possibly will only be achieved during the latter half of next year despite China's reopening, according to a report released by the Bank of Korea (BOK), Monday.

The BOK noted that structural factors, including the rise of protectionism in the U.S. and Europe, coupled with weakened global demand for semiconductors, are contributing to the delayed recovery of the industry.

These insights emerged from a BOK survey conducted between May 11 and 31, where 343 manufacturing companies were asked about the ripple effects caused by China reopening its exports.

The companies surveyed expect the impacts ― from China's reopening ― to increase from the second half of this year, despite their currently limited impact. 56.3 percent believe that their exports have fully recovered, or will improve within this year, compared to last March when China enforced border restrictions.

Still, 31 percent anticipate that a full recovery will not occur until after next year, while 12.7 percent deem a full recovery unlikely even beyond that time frame.

By industry, sectors such as rechargeable batteries, shipbuilding, automobiles and parts, and steel have shown the greatest recovery in exports.

However, the IT industry, which faces intense competition with China in the global marketplace, is experiencing a slower recovery.

Two-thirds of exporting companies voiced concerns about them lagging behind due to the advanced technological competitiveness of Chinese exports. This sentiment was shared by a majority of respondents across all industries, with the sole exception of the petrochemical sector.

Among semiconductor companies, 71.2 percent reported addressing the challenges by expanding research and development into new technologies. However, the remaining 27.2 percent indicated that they have no suitable strategies to cope with it. Notably, the ratio of semiconductor firms expressing "no viable solutions" was markedly higher compared to that in other industries.

Moreover, the rise of protectionism in the U.S. and Europe, exemplified by measures like the Inflation Reduction Act (IRA), also serves as a barrier. One out of five firms reported negative impacts from such measures up until the second quarter of this year, while two out of five anticipate these measures to start to cause an impact in the third quarter.

Major corporations are responding with strategies such as increasing local production. However, the majority of small and medium-sized corporations are neither preparing nor finding it necessary to prepare for these changes.

By industry, the automobile and secondary battery sectors indicated that they are already adapting by expanding local production. The steel industry, meanwhile, appears to be responding by introducing carbon reduction technology.

yanu@koreatimes.co.kr