Bank of Korea, Report on 'Characteristics and Implications of Semiconductor Demand Structure'
Amid a global IT downturn that has worsened the semiconductor industry, a key export sector of South Korea, the future semiconductor market is expected to hinge on the recovery of smartphone consumption in China and data center investments in the United States.
According to the report titled 'Characteristics and Implications of South Korea's Semiconductor Demand Structure' released by the Bank of Korea on the 29th, the final demand structure for South Korean semiconductors shows a high dependence on smartphones and servers by application, and on the United States and China by region.
In particular, South Korea's semiconductor exports have the highest mobile share at 44%, indicating that the domestic semiconductor market is most influenced by global smartphone demand. The server sector follows with a significant estimated impact at 20.6%.
By region, the shares of the United States and China are high; for smartphones, the levels in the U.S. and China are similar, while the U.S. dominates in servers.
The report notes that U.S. smartphone consumption surged significantly during the pandemic period but is unlikely to expand substantially going forward due to factors such as high interest rates. Conversely, in China, smartphone consumption was relatively sluggish last year due to lockdown measures, but it is expected to gradually recover with a time lag following the reopening of economic activities, thereby alleviating the domestic semiconductor market downturn.
Additionally, U.S. data center investments temporarily contracted due to overinvestment during the pandemic and increased face-to-face consumption as daily life resumed, but are projected to steadily increase in the future, centered on high-performance servers, driven by digital transformation of the economy and expansion of artificial intelligence (AI) services.
Furthermore, the report analyzes that since the volatility of South Korea's semiconductor market is greater than that of other countries, efforts should be made to reduce market fluctuations through strengthening competitiveness in the non-memory sector and diversifying demand sources. This is because the volatility in the domestic semiconductor market is high due to the large proportion of memory semiconductors and the relatively high mobile dependence even in the non-memory semiconductor sector compared to other countries.
The Bank of Korea emphasized, "Going forward, it is necessary to reduce the amplitude of semiconductor market fluctuations by enhancing competitiveness in the non-memory sector, which has relatively low price volatility, and by diversifying demand sources away from mobile, which has entered maturity, and servers, which carry risks of demand concentration, toward automobiles, artificial intelligence (AI), and other sectors. As conflicts between the United States and China, which account for the largest share of domestic semiconductor demand, intensify, policy responses are needed to minimize the negative impacts arising from this."
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