South Korea's semiconductor production in November fell by the most since the global financial crisis, weighing on the nation's industrial output and pointing to a further cooling of overseas demand for tech components as the world economy slows.
Chip production shrank for a fourth straight month, falling 15% from a year earlier for the largest drop since 2009, according to data released Thursday from the national statistics office. Overall industrial production contracted 3.7% from a year earlier for the biggest fall since the start of the pandemic.
Credit: Bloomberg
The drop in activity speaks to weakening recovery momentum in a nation closely tied to the world economy. Korea's growth is already under pressure from falling exports and rising interest rates at home, with the gloomy outlook overseas adding to concerns.
The probability of a recessions in major overseas economies including the US is rising as the Federal Reserve leads a wave of monetary tightening to combat inflation and Russia's war on Ukraine continues. While China's about-turn on its Covid Zero policy suggests its economy will regain more strength going ahead, a surge in infections will complicate the picture near-term.
The weakening chip demand adds to an array of factors making Korea's economic outlook more uncertain, including the implications of a recently ended truckers' strike and a crowd-crush tragedy in Seoul, the Finance Ministry said in a separate statement.
The cloudier outlook gives the Bank of Korea more reasons to be cautious as it mulls the end of its tightening cycle. The BOK has been hiking rates for more than a year and is debating whether to carry out one or two more next year.
The latest output figures showed chip production was also down 11% on a month-over-month basis, while semiconductor inventories climbed 20% from a year earlier in November, picking up from 12.9% in the previous month, according to Statistics Korea.
The double-digit increases in inventories since October underscores a global oversupply of memory chips in which Korea leads production. Chipmakers are recalibrating their investment plans as they brace for a drop in demand for their products both at home and abroad.
Credit: Bloomberg
