Despite Semiconductor Boom, October Production Plunges 26.5%... Here's Why (Comprehensive)

Industrial Activity Trends for October 2025
Total Industrial Production Down 2.5%, Facility Investment Drops 14.1%
"Record-High Base Effect from September's Semiconductor Output"

Last month, semiconductor production saw its largest decline in 43 years, and construction output also recorded the biggest drop since statistics began. While the government attributes these results to temporary factors such as the long Chuseok holiday and an unusual base effect from the previous month, some point out that these figures highlight the structural risks of the Korean economy, which relies heavily on key sectors like semiconductors.

According to the “Industrial Activity Trends for October 2025” released by the National Data Office on November 28, total industrial production fell by 2.5% compared to the previous month. This is the largest decrease in five years and eight months since February 2020 (-2.9%). After declining in August and rebounding in September, total industrial production dropped again in October, continuing its fluctuations.

The manufacturing sector decreased by 3.9%, which significantly contributed to a 4.0% drop in mining and manufacturing production. In particular, semiconductor production plummeted by 26.5%, marking the largest decline in 43 years since October 1982 (-33.3%). Lee Dowon, Director of Economic Trend Statistics at the National Data Office, analyzed, “The base effect from September’s record-high semiconductor production played a role, and a roughly 20% surge in semiconductor prices, based on the producer price index, led to a temporary sharp drop in production based on volume index.” The industrial activity statistics are calculated based on volume, not value.

While automobiles (8.6%), machinery and equipment (6.7%), and pharmaceuticals (9.8%) saw increases, facility investment plummeted by 14.1% due to the base effect from the previous month’s 19.8% surge in semiconductor production. Investments declined across machinery such as semiconductor manufacturing equipment (-12.2%) and transportation equipment like automobiles (-18.4%).

The construction sector also contracted by 20.9%, with both building construction (-23.0%) and civil engineering (-15.1%) recording declines in performance. This is the largest decrease since relevant statistics began in 1997. Director Lee explained, “Given the overall weakness in the construction business and the impact of the extended holiday, the effective number of working days likely decreased.”

On the other hand, consumption recovered significantly. The retail sales index rose by 3.5%, rebounding after three months. This is the largest increase in 32 months since February 2023 (6.1%). While sales of durable goods such as passenger cars declined (-4.9%), sales of nondurable goods (7.0%) and semi-durable goods (5.1%) increased. This is attributed to increased consumption during the Chuseok holiday, coupled with the government’s distribution of consumption coupons to boost livelihoods.

Economic indicators presented mixed signals. The coincident index of cyclical variation, which reflects the current economic situation, dropped by 0.49 points from the previous month to 99.0, reversing the upward trend seen earlier this year. In contrast, the leading index of cyclical variation, which forecasts future economic trends, remained flat at 102.2 compared to the previous month.

The Ministry of Economy and Finance stated, “Last month’s retail sales saw a significant increase for the first time in three months, and the extended Chuseok holiday contributed to substantial monthly volatility. However, despite these monthly fluctuations, major industrial activity indicators are generally continuing to improve.”

Regarding semiconductors, the ministry offered an optimistic outlook, saying, “With the global industry remaining strong, a sharp increase in exports in November, and a trend toward rising production toward the end of the quarter, the upward momentum is expected to resume.” The ministry also noted that while mining and manufacturing production in October decreased by 4.0%, excluding semiconductors, it actually increased by 1.1%.

The ministry further explained that, considering the Chuseok holiday in September, when looking at September and October together, production in services, construction, and investment increased compared to August. On average, compared to August, service sector production rose by 1.7%, facility investment by 4.6%, construction output by 0.6%, and retail sales by 1.7% over September and October. The Ministry of Economy and Finance projected, “This month, consumer sentiment has risen to its highest level in eight years and business sentiment has reached a 13-month high, both of which are expected to have a positive impact on the economy going forward.”