Samsung Electronics Inventory Assets Surpass 50 Trillion Won for the First Time
[Asia Economy Reporter Park Sun-mi] Last year, Samsung Electronics' inventory assets surpassed 50 trillion won for the first time in history, and the electronics and telecommunications industry, including semiconductors, expects the inventory situation to worsen further. The possibility of a prolonged decline in semiconductor exports has increased.
On the 21st, the Federation of Korean Industries (FKI) conducted a Business Survey Index (BSI) on the top 600 companies by sales, and the electronics and telecommunications equipment sector, which includes semiconductors, recorded a BSI of 80.0. This is 5.7 points lower than the previous month's survey, marking the largest drop among manufacturing sub-sectors. The electronics and telecommunications equipment BSI has been below the baseline of 100 for six consecutive months since recording 95.0 in October last year. A BSI below 100 indicates a pessimistic economic outlook. This six-month continuous downturn is the first in two years and four months since November 2020 (92.0).
In particular, due to decreased demand for semiconductors and related products, the inventory outlook for electronics and telecommunications equipment in March reached 125.0. An inventory outlook above 100 indicates an excess inventory state. In the same survey last March, the figure was 94.1, showing a stable inventory level, but since January this year, it has maintained a high level of excess inventory for three consecutive months. Since BSI is a leading economic indicator, the excess inventory situation in the electronics and telecommunications equipment industry in the first quarter of this year could become more severe than at the end of last year.
The industry is already suffering from a surge in inventory assets due to the sharp decline in demand for TVs, home appliances, and semiconductors caused by the global economic downturn. Samsung Electronics, a leading domestic electronics and semiconductor company, disclosed in its recently announced consolidated audit report that as of the end of last year, inventory assets amounted to 52.1878 trillion won, a 20.7% increase from 41.3844 trillion won at the end of 2021. This is the first time Samsung Electronics' inventory assets have exceeded 50 trillion won. By type of inventory assets, finished products and merchandise inventory increased by 23.4% to 16.0322 trillion won compared to a year ago, and semi-finished and work-in-progress products (products in the manufacturing process) rose by 32.8% to 20.0775 trillion won.
If companies' negative economic outlooks persist, investment and employment contraction could deepen the real economy's recession. The FKI points out that the combination of poor economic outlook and worsening excess inventory levels in the electronics and telecommunications equipment industry opens the possibility of a prolonged decline in semiconductor exports, Korea's largest export product.
Semiconductors, which have played a driving role in the Korean economy, are already experiencing a steep decline in exports. According to data compiled by the Ministry of Trade, Industry and Energy, semiconductor exports in January this year amounted to 6 billion dollars, a 44.5% decrease compared to a year earlier. The decline has been accelerating with -17.4% in November last year, -29.9% in November, -29.1% in December, and -44.5% in January. As semiconductor exports plunge, Korea's overall exports have been declining for four consecutive months.
The government and business circles are striving to reverse the continuing decline in semiconductor exports, which accounted for the largest share of Korean exports last year (19.8%). Minister Lee Chang-yang of the Ministry of Trade, Industry and Energy inspected semiconductor equipment development and production companies struggling with export slumps yesterday and said, "Although export conditions are expected to remain difficult due to global economic slowdown and decreased demand this year, all ministries will unite their efforts to fully support exports."
Choo Kwang-ho, head of the FKI Economic Headquarters, argued, "It is necessary to promptly pass the bill to strengthen tax support for national strategic industries such as semiconductors and to halt discussions on the amendment to the Labor Union Act (known as the ‘Yellow Envelope Act’), which causes deterioration in labor-management relations, to restore weakened corporate sentiment."
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