'Semiconductors' Hindering Exports... Inventory Rate Highest in 26 Years

Inventory Rate 265.7%... Shipments Down 26% and Inventory Up 28% in One Month

Due to the global economic recession, the semiconductor inventory ratio in January reached its highest level in 26 years.

Statistics Korea announced on the 5th that the semiconductor inventory ratio in January was 265.7%, the highest level in 25 years and 10 months since March 1997 (288.7%).

The inventory ratio is calculated as a percentage by dividing the seasonally adjusted inventory index by the shipment index, showing how much inventory has accumulated relative to shipments.

The semiconductor shipment index in January was 71.7 (2020=100) on a seasonally adjusted basis, plunging 25.8% from the previous month. The inventory index rose sharply by 28.0% during the same period to 190.5.

A high inventory ratio indicates an oversupply relative to demand, suggesting that the semiconductor market could worsen further. To manage inventory, semiconductor production may need to be reduced, or semiconductor prices may have to be lowered further. Since semiconductors are a key export item for Korea, this adds to concerns about exports and the economy.

Juwon, head of the Economic Research Office at Hyundai Research Institute, said, "The market is facing a situation of weak demand and oversupply, so semiconductor prices may fall further until inventory is depleted," adding, "Semiconductor exports will improve only after the inventory ratio decreases to some extent."

In fact, the sluggish semiconductor industry is dragging down overall exports. According to the Ministry of Trade, Industry and Energy, excluding semiconductors ($6 billion), total exports last month amounted to $44.1 billion, up 0.8% ($300 million) from a year earlier. This was due to strong performance in other items such as automobiles and secondary batteries. Including semiconductors, total exports were $50.1 billion, down 7.5% ($4.1 billion) over the same period, marking a decline for five consecutive months. Semiconductor exports plunged 42.5% ($4.4 billion), falling for seven consecutive months.

With export sluggishness continuing and domestic demand shaken by high inflation and high interest rates, there are forecasts that the economy in the first half of this year will be more difficult than expected. The Bank of Korea recently lowered its GDP growth forecast for the first half from 1.3% to 1.1%. The Korea Development Institute (KDI), a government-funded research institute, also lowered its growth forecast for the first half from 1.4% to 1.1%.