South Korea witnessed a significant surge in semiconductor output, marking the most substantial increase in 14 years. This surge signals a continued rebound in the nation's crucial industrial sector, driven by robust global tech demand. According to data unveiled by the National Statistics Agency, semiconductor production soared by 65.3 percent compared to the previous year, representing the largest uptick since late 2009. Shipments of semiconductors also experienced a notable rise of 59 percent, albeit slightly weaker than January's 62.7 percent. Additionally, inventory levels decreased by 16.2 percent for the second consecutive month, underscoring persistent strong demand in the market.
The encouraging figures, revealed in a report indicating a more significant expansion of overall industrial production than anticipated, imply that the momentum in domestic economic growth will persist, given that semiconductors constitute the largest portion of South Korea's exports. It's possible that production could have been even higher if the Lunar New Year holiday had occurred in January, as it did last year, rather than February.
The upward trend in semiconductor production is expected to have persisted into March, as evidenced by a 46.5 percent year-on-year increase in chip exports during the initial 20 days of the month. A significant factor driving this growth is the soaring demand for memory chips related to artificial intelligence applications. SK Hynix Inc., South Korea's second-largest chipmaker, anticipates continued positive momentum in its supply to Nvidia Corp., highlighting the robust demand in this sector.
“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, which serves as the foundation for South Korea's semiconductor industry, is renowned for its cyclical nature of rapid expansion followed by downturns. The current upswing in the market provides the Bank of Korea with increased assurance to maintain its tight policy stance in its ongoing efforts to combat inflation.
The overall industrial output grew by 4.8 percent, surpassing economists' expectations of 4 percent. This increase in production, according to the Finance Ministry, indicates a strengthening of economic momentum. The ministry has committed to promptly implementing fiscal spending in the first half of the year.