Semiconductor Production Down 17%... Largest Drop Since December 2008 (Comprehensive)

Statistics Korea, February Industrial Activity Trends
Service Industry Production Up 0.7% · Retail Sales Up 5.3%

Last month, consumption recovered, leading to an increase in service sector production. However, manufacturing production continued to decline for the fifth consecutive month, with semiconductor production dropping by more than 17% due to worsening exports. While domestic consumption improved as the COVID-19 pandemic subsided, manufacturing production remained sluggish due to export deterioration.

On the 31st, Statistics Korea released the February Industrial Activity Trends report containing these details.

Last month, overall industrial production increased by 0.3% compared to the previous month, as production rose in the service sector (0.7%) despite a decline in mining and manufacturing (-3.2%). However, manufacturing production fell by 3.1% month-on-month, continuing its downward trend for five consecutive months, with decreases in semiconductors (-17.1%) and automobiles (-4.8%). Notably, the decline rate in semiconductor production in February was the steepest since December 2008 (-18.1%).

The manufacturing production slump is attributed to worsening exports. In February this year, export value was $50.1 billion, down 7.5% year-on-year. This was due to significant drops in exports of semiconductors (-42.5%), petrochemicals (-18.3%), displays (-40.9%), and steel (-9.8%) amid global demand slowdown.

On the other hand, as the COVID-19 pandemic eased and favorable weather increased outdoor activities, service production rose by 0.7% month-on-month. By sector, production decreased in information and communication (-4.0%) but increased in transportation and warehousing (5.4%) and accommodation and food services (8.0%).

On the 28th, Myeongdong Shopping Street in Jung-gu, Seoul, was bustling with foreign tourists and citizens. Photo by Dongju Yoon doso7@

Consumption also improved significantly. Sales of nondurable goods such as food and beverages (6.4%), durable goods like passenger cars (4.6%), and semi-durable goods such as clothing (3.5%) all increased, resulting in a 5.3% rise compared to the previous month. Consumption rebounded in February after three consecutive months of decline: -2.3% in November, -0.2% in December, and -1.1% in January.

Facility investment increased by 0.2% month-on-month, despite a decrease in transportation equipment such as automobiles (-3.0%), due to increased investment in machinery like special industrial machines (1.3%).

Kim Bo-kyung, Economic Trend Statistics Officer at Statistics Korea, said, "The rise in retail sales is due to the base effect following three consecutive months of decline, large-scale discount events, and the resumption of electric vehicle subsidies. Production, consumption, and investment all rose together for the first time in 14 months, but we need to monitor semiconductor recovery and other factors to understand future trends."

The coincident composite index, which reflects the current economic trend, rose by 0.4 points month-on-month, escaping a five-month consecutive decline. This was due to increases in construction output and retail sales indices, despite decreases in the mining and manufacturing production index and domestic export index. Conversely, the leading composite index, which predicts future economic conditions, fell by 0.3 points month-on-month. Although construction orders and the KOSPI increased, declines in the short- and long-term interest rate spread and the machinery domestic export index contributed to the drop.

Officer Kim added, "The leading index reflects conditions 5 to 6 months ahead and has recently shown a downward trend. We need to watch for positive sentiment indicators in the consumer sentiment index and business sentiment index to be released in March."