South Korea's production of semiconductors rises by most in 14 years

By Sam Kim

South Korea’s output of semiconductors jumped the most in 14 years in February in an indication of ongoing recovery in the country’s most important industrial sector and global tech demand.
 

Production jumped 65.3 per cent from a year earlier, the biggest rise since late 2009, according to data released Friday by the national statistics agency. Shipments of semiconductors also rose 59 per cent, even though it was weaker than 62.7 per cent in January. Inventory shrank 16.2 per cent, falling for a second month in another sign of strong demand.

The favorable numbers, released in a report showing a larger-than-expected expansion of overall industrial production, suggest momentum in domestic economic growth will continue as semiconductors account for the biggest share of South Korea’s exports. Production might have been bigger had the lunar new year holiday taken place in January like last year instead of February.

The growth in semiconductor production likely continued in March as suggested by chip exports increasing 46.5 per cent from a year earlier in the first 20 days of the month. Surging demand for artificial intelligence-related memory is among the biggest drivers of growth, with the nation’s second-biggest chipmaker, SK Hynix Inc., forecasting positive momentum to continue in its supplies to Nvidia Corp. in particular.

What Bloomberg Economics Says...
 

“We expect output to grow steadily in March, driven by strong external demand for AI memory chips. A fragile recovery in China may weigh on orders for South Korea’s products, offsetting part of the traction from global chip demand.”

— Hyosung Kwon, economist

The memory-chip market that underpins South Korea’s semiconductor industry is notorious for its boom-and-bust cycle. Its upswing offers the Bank of Korea more confidence to hold its tight policy steady to continue the fight against inflation for now.

Overall industrial output expanded 4.8 per cent, more than the 4 per cent estimated by economists. Pointing to the rise in production, the Finance Ministry said the recovery in economic momentum is becoming more evident. The ministry pledged to carry out fiscal spending swiftly in the first half.