"Semiconductor Industry Production Growth Turns Negative After 14 Months... Caution on Momentum Slowdown"

"Potential Impact on Domestic GDP Growth Rate in Q4"

On the 1st, iM Securities diagnosed that the momentum of the domestic semiconductor industry may weaken, considering that the production growth rate of the semiconductor sector in September recorded negative growth for the first time in 14 months.

Previously, the domestic semiconductor sector's production growth rate in September recorded negative growth of -3.0% compared to the same month last year. The decline in the semiconductor sector's production growth rate is the first in 14 months since July 2023.

Researcher Park Sang-hyun stated, "Given that strong semiconductor exports and robust production growth in the semiconductor sector have driven the domestic manufacturing economy, the decline in semiconductor production could act as another downside risk to the domestic economic cycle," adding, "If the semiconductor industry's momentum weakens after the shock in the third quarter's domestic gross domestic product (GDP) growth rate, the possibility that the fourth quarter's domestic GDP growth rate will again fall short of expectations cannot be ruled out."

However, he added, "It is necessary to observe further whether the semiconductor production growth rate will trend downward," explaining, "Despite the decline in the semiconductor sector's production growth rate, the 'semiconductor shipment-inventory' cycle, which represents the industry cycle, is maintaining a solid trend."

He continued, "Looking at the trend of the semiconductor inventory index, inventories are decreasing, so the possibility of a sharp contraction in production due to increased inventory burden, as seen before, is low," and "Moreover, semiconductor exports are still maintaining a favorable trend."

He also said, "The semiconductor export growth rate in September was 48.1% compared to the same month last year, maintaining a high growth rate, and the semiconductor daily average export amount, considering the number of working days, recorded an all-time high."

There is a discrepancy between semiconductor export performance and production.

Researcher Park said, "Although the decline in the semiconductor production growth rate in September may be a temporary phenomenon, it is necessary to keep in mind the possibility that the momentum of domestic semiconductor exports and production may somewhat weaken," adding, "Semiconductor exports may gradually slow down due to the base effect, and depending on the outcome of the U.S. presidential election, semiconductor demand may temporarily weaken."