Exchange Rate Surpasses 1300 Won... Semiconductor Industry Says "Beneficial but Raw Material Imports Must Also Be Considered"

[Image source=Yonhap News]

[Asia Economy Reporter Park Sun-mi] The rise in the won-dollar exchange rate due to the strong dollar is expected to benefit the semiconductor industry.

On the 23rd, the won-dollar exchange rate surpassed 1,300 won intraday for the first time in 13 years in the Seoul foreign exchange market. With Korea's semiconductor exports expected to maintain a robust growth rate of 10.2% this year, driven by strong foundry (semiconductor contract manufacturing) demand, the intraday breakthrough of the 1,300 won mark is seen as a positive factor for the industry.

An industry official said, "Most semiconductors produced domestically are for export," adding, "Although some raw materials and parts necessary for semiconductor manufacturing are imported, the large volume of exports means that, given the industry's nature of trading in US dollars, a strong dollar generally acts as a positive factor for earnings."

Another industry insider also explained, "Since semiconductors have a large absolute export volume, even if raw materials and equipment are purchased in dollars when the dollar value rises, it is still a positive factor," adding, "However, as semiconductor demand and supply conditions change frequently and exchange rate volatility is high, we continuously revise business plans to reflect market conditions."

However, even though the semiconductor sector is largely positively affected by the rising exchange rate, Samsung Electronics, which operates semiconductor, home appliance, and smartphone businesses together, cannot be said to benefit unconditionally in terms of earnings. This is because the set business divisions (MX, CE) are negatively impacted in operating profit by the exchange rate increase, unlike semiconductors.

While a rising exchange rate can be advantageous when selling products overseas, many factories are currently located abroad, and the cost of imported raw materials increases, which can be a burden. Nam Dae-jong, an analyst at Ebest Investment & Securities, stated, "For Samsung Electronics, the rise in the won-dollar exchange rate and raw material prices in the MX, VD, and home appliance sectors may cause profit margins to decrease in the second quarter of this year compared to the previous quarter."