"Semiconductors Led, Construction Dragged Down"… Industrial Production Up 0.5% Last Year, Lowest in Five Years (Comprehensive)

Industrial Activity Trends for December 2025 and the Year

Last year, the growth rate of total industrial production reached its lowest level in five years. Although the manufacturing and service sectors, led by semiconductors, showed signs of recovery, the largest-ever decline in construction performance since statistics began served as downward pressure on the overall economic rebound.

According to the "Industrial Activity Trends for December 2025 and Annual Report" released by the National Data Office on January 30, total industrial production increased by 0.5% compared to the previous year. While positive growth was maintained, the increase was the lowest since 2020 (-1.1%), when the recovery from the COVID-19 pandemic began in earnest. It is also the first time in four years, since 2021, that production, consumption, and investment all recorded positive growth.

President Donald Trump signed a proclamation imposing a 25% tariff without exceptions on steel and aluminum products imported into the United States, and announced that tariffs on automobiles and semiconductors are also under consideration. On February 13, 2025, export vehicles were waiting to be loaded at Pyeongtaek Port, Gyeonggi Province. Photo by Jinhyung Kang

Production Driven by Semiconductors and Shipbuilding

The boom in semiconductors and shipbuilding led total industrial production last year. Mining and manufacturing output rose by 1.6% year-on-year, with semiconductor production increasing by 13.2%. The growth was driven by rising demand for high-performance memory for artificial intelligence (AI) servers and mobile application processors (APs). This increase in production had a ripple effect across the industry, positively impacting semiconductor components and equipment, related wholesale and retail, and facility investment, creating a virtuous cycle throughout the sector.

In shipbuilding, orders for high value-added vessels such as liquefied natural gas (LNG) carriers and special-purpose ships increased, driving a 23.7% rise in the production of other transportation equipment. Lee Dowon, Director of Economic Trend Statistics at the National Data Office, analyzed, "Last year, mining and manufacturing production was driven by semiconductors and shipbuilding focused on high value-added vessels."

On the other hand, the sluggish construction sector acted as a downward factor for production. Non-metallic minerals, including ready-mixed concrete and cement, declined by 12.3%, and primary metals fell by 3.3%. The downturn in construction negatively affected related industries such as steel and construction materials.

Retail sales, which had recorded negative growth for three consecutive years, turned positive for the first time in four years, increasing by 0.5% last year. After the temporary demand stagnation for electric vehicles (the so-called "EV chasm"), passenger car sales rose by 11%, leading to a 4.5% increase in overall durable goods consumption. However, consumption varied significantly by sector. Semi-durable goods such as clothing and footwear decreased by 2.2%, and non-durable goods like cosmetics also fell by 0.3%.

Investment: Facility Investment Recovers, Construction Sees Largest Drop at -16.2%

Last year, facility investment increased by 1.7%, driven by expanded investment in semiconductor manufacturing machinery, precision instruments, and electric passenger car facilities. This is seen as a partial activation of the typical economic recovery path, where production recovery leads to facility investment.

However, construction performance, which measures the value of domestic construction work completed by construction companies, decreased by 16.2% year-on-year as both building and civil engineering projects declined. This is the largest drop since the statistics began in 1998, and the biggest decline since the global financial crisis in 2008 (-8.1%). Director Lee explained, "Annual construction performance was extremely poor, and this was the biggest downward pressure on industrial activity last year."

Looking at the month of December last year, total industrial production grew by 1.5% compared to the previous month. Retail sales also increased by 0.9%. Sales of clothing and food products led the rise in consumption. Government payments of livelihood recovery support funds are believed to have had some impact.

In contrast, facility investment fell by 3.6%. While investment in machinery such as precision instruments increased by 1.3%, investment in transportation equipment, including ships and aircraft, decreased by 16.1%. Construction performance rose by 12.1%, with both building (13.7%) and civil engineering (7.4%) projects showing increased results.

The coincident composite index of cyclical indicators, which reflects the current economic situation, stood at 98.5, down 0.2 points from the previous month. This index has recorded negative growth for three consecutive months since a 0.4-point decline in October last year. The leading composite index of cyclical indicators, which forecasts future economic conditions, rose by 0.6 points from the previous month to 103.1.