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South Korea factory output slips in December as chips soar, cars slump

[SEOUL] South Korea's industrial production unexpectedly fell in December as a sharp contraction in car output erased the soaring memory chip sector's gains, statistics agency data showed on Wednesday.

Growth in Asia's fourth-largest economy remained solid thanks to soaring memory chip exports, the finance ministry said in a separate statement, as tech giants including Samsung Electronics report stellar profits and offer an upbeat outlook for the year.

"Growth remains on track," the finance ministry said after the output data was released early on Wednesday.

"Some (sectors) including the semiconductor industry are marking solid growth with record exports, but major manufacturing sectors including shipbuilding and the automobile industry will continue to suffer."

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Samsung Electronics reported 2017 annual profit of 53.7 trillion won (S$65.8 billion) on Wednesday, thanks to surging global demand for chips, outstripping the record 36.8 trillion won recorded in 2013.

Factory output contracted by 6 per cent in December from a year earlier, marking another sharp decline after a dropping 6.3 per cent in October, the biggest fall since 2013.

The median forecast of analysts surveyed by Reuters was for output to rise 0.1 per cent from November, and dip by 1.4 per cent from a year earlier.

"Growth momentum from the auto sector was weak in both November and December because of union strikes. Overall production growth is still led by the IT sector," said Park Sang Hyun, chief economist, HI Investment & Securities.

The output data showed car production dropped 11.4 per cent from a month earlier while output of machine tools fell 4 per cent.

Mr Park added the Bank of Korea will not be able to raise its policy interest rate in the first quarter given the uneven growth path, but "may be able to make a move in the second quarter should exports and the global economy hold up".

The BOK held its policy interest rate steady in January after raising it for the first time in more than six years to 1.50 per cent in November.

The bank flagged concerns over economic uncertainties and soft inflation, which remain hurdles to policy tightening this year.

Wednesday's data showed production of memory chips expanded 2.9 per cent from a month earlier while output of communications equipment surged 27.3 per cent.

In annual terms, car production contracted by 25.2 per cent, while output of electronic equipment grew 19.3 per cent, the statistics agency statement showed.

December service sector output gained 0.2 per cent from previous month after growing 2.5 per cent in November.

REUTERS

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