Semiconductor Investment and Manufacturing Industry Sentiment Rebound After Four Months

March Manufacturing Business Survey Index BSI Rises 7P to 70
All-Industry Business Survey Index BSI Turns Up After 7 Months

Despite the downturn in the semiconductor industry, manufacturing sentiment rebounded for the first time in four months as facility investments continued. Although economic uncertainty persists, demand is increasing mainly in upstream manufacturing sectors such as shipbuilding and automobiles, and the service sector is also improving, leading the overall industrial sentiment to turn upward for the first time in seven months.

According to the March Business Survey Index (BSI) released by the Bank of Korea on the 30th, the BSI for business conditions across all industries this month rose by 3 points from the previous month to 72. This marks the first increase in the overall industry BSI in seven months since August last year. This index reflects business owners' judgments and outlooks on current business conditions, with values below 100 indicating poor conditions.

By sector, the manufacturing BSI rose 7 points from the previous month to 70. Last month, the manufacturing BSI fell to its lowest level in 2 years and 7 months since July 2020 (59), but it rebounded this month after four months. The increase is also the largest since a 7-point rise in April 2021.

By detailed sector, electronics, video, and communication equipment (+9 points), primary metals (+15 points), and other machinery equipment (+13 points) led the gains. The increase in semiconductor equipment deliveries due to rising semiconductor facility investment demand improved the business conditions of electronics, video, and communication equipment, while the rise in steel product prices and increased demand from upstream industries significantly improved the primary metals sector.

Hwang Hee-jin, head of the Statistical Survey Team at the Bank of Korea's Economic Statistics Bureau, explained, "Although the semiconductor industry is sluggish and prices are falling, companies like Samsung Electronics and SK Hynix are continuing facility investments without production cuts amid expectations of improvement in the second half of the year," adding, "As a result, manufacturers of semiconductor equipment are showing favorable performance."

By company size, large enterprises (+7 points), small and medium enterprises (+6 points), export companies (+3 points), and domestic companies (+9 points) all rose compared to the previous month.

The non-manufacturing BSI rose by 1 point from the previous month to 74, driven by increases in construction (+8 points), real estate (+6 points), and arts, sports, and leisure-related services (+14 points). The non-manufacturing BSI has risen for two consecutive months.

In construction and real estate, business conditions improved due to increased progress in construction projects from seasonal factors and new orders for civil engineering works. The arts, sports, and leisure-related services sector saw significant improvement as demand for leisure activities increased with the arrival of spring and warmer weather, leading to more visitors to golf courses.

The BSI for all industries next month is expected to rise by 2 points from this month to 73.

The March Economic Sentiment Index (ESI), which incorporates the Consumer Sentiment Index (CSI) into the BSI, recorded 91.5, up 0.1 points from the previous month. The ESI reflects the economic sentiment of all private economic agents.