[Semiconductor Cold Season①] Export Faces 'Negative' Crisis After Over 2 Years... Prices Plummet

Customs Service Announces Early August Export Performance
If August Ends in Deficit, First in 2 Years and 2 Months
Semiconductor 'Winter' Predicted After Pandemic Boom

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[Asia Economy Reporter Moon Chaeseok] Global semiconductor companies including Samsung Electronics and SK Hynix are facing a 'harsh winter.' In particular, Korean semiconductors are at risk of turning to a monthly export deficit for the first time in over two years. Concerns are growing that increased inventory due to price declines could weigh on corporate profitability. As the semiconductor industry's super boom enters a downturn, it is expected to become a significant burden on the Korean economy.

According to the government and industry sources on the 15th, the trade balance recorded a deficit of $7.7 billion (approximately 10 trillion KRW) in early this month, raising concerns about declining corporate earnings. Although the export performance measurement unit, notified every ten days by the Korea Customs Service, is considered less reliable due to its short period, it is generally agreed that these statistics, which underrepresent sectors like shipbuilding where orders take a long time to translate into performance, help detect the export sentiment in the Korean industry to some extent.

According to the Korea Customs Service announcement on the 11th, the semiconductor slump significantly impacted the trade deficit from the 1st to the 10th of this month. During this period, semiconductor exports amounted to $2.991 billion (approximately 3.9 trillion KRW), down 5.1% compared to the same period last year. If the August performance announced by the Ministry of Trade, Industry and Energy and the Korea Customs Service on the 1st of next month records a negative figure, it will mark a return to deficit for the first time in 2 years and 2 months since June 2020. The growth rate has already been declining in May (14.2%), June (10.8%), and July (2.5% provisional figure).

Concerns are emerging that semiconductor export performance, which struggled in the first half of the year (-1.1%), could worsen in the second half. Because of this, the term "semiconductor cold season" is also being used. (Data from the Ministry of Trade, Industry and Energy)

Concerns are growing as signs of declining memory semiconductor exports, which serve as the cash cow for Samsung Electronics and SK Hynix, are detected in various places. The price decline of key memory semiconductor products such as DRAM and NAND flash is significantly affecting performance, and the continuation of this downward trend is a major worry for the industry. The semiconductor export slump has continued since the first half of the year, recording -1.1% compared to the same period last year. Some expect the slump to persist for a long time.

The concerns are supported by figures. According to Taiwan's semiconductor market research firm DRAMeXchange, as of the 29th of last month, the fixed transaction price for PC DRAM general-purpose products (DDR4 1Gb*8) was $2.88 (approximately 3,761 KRW), a sharp drop of 14.03% from $3.35 (approximately 4,375 KRW) the previous month. This was the highest decline rate in 3 years and 5 months since February 2019. The fixed transaction price for NAND flash (MLC 128Gb standard) in July was also $4.49 (approximately 5,838 KRW), down 3.75% from the previous month. NAND flash prices fell for two consecutive months after declining last month for the first time in 11 months. Fixed transaction prices refer to contract transaction amounts agreed upon between memory semiconductor manufacturers and their customers and are used as a key indicator to assess memory demand and supply conditions.

Projections that factors worsening memory semiconductor profitability, such as price declines and inventory adjustments, will continue globally for a long time are gaining traction. In particular, the industry takes seriously the downward revision of earnings by Micron, the U.S. company ranked third in the global DRAM market share after Samsung Electronics and SK Hynix. Micron recently filed a document with the U.S. Securities and Exchange Commission (SEC) stating that its revenue forecast for the fourth quarter of fiscal year 2022 (June to August) is expected to fall below the $6.8 billion to $7.6 billion (approximately 8.9 trillion to 9.93 trillion KRW) range projected at the end of June. Lee Seung-woo, head of research at Eugene Investment & Securities, said, "Micron lowering its guidance means that the demand slowdown and inventory adjustments could spread widely beyond PCs and smartphones to cloud and other sectors."