South Korea slashes chip production for first time in over 4 years

SOUTH KOREA’S semiconductor output fell for the first time in more than 4 years in a sign chipmakers are bracing for a slowdown in global demand.

Semiconductor production slid 1.7 per cent in August from a year earlier, a sharp reversal from the 17.3 per cent gain reported in July, Statistics Korea data showed Friday (Sep 30).

The first fall in output since January 2018 coincides with chip inventories soaring 67.3 per cent, suggesting producers are adjusting to a deteriorating international outlook. Factory shipments also fell for a second consecutive month in August, dropping 20.4 per cent, the statistics office said.

The trio of indicators offers the latest evidence that the global economy is headed towards a downturn, led by cooling electronics demand that has been a major source of economic growth.

In the US, Micron Technology delivered a weak forecast for the current quarter, saying it’s acting swiftly to cope with the weakening demand, including slowing production.

Earlier this month, Korea’s Samsung Electronics also warned of a gloomy outlook for the second half of the year. The market for dynamic random access memory, Samsung’s key cash driver, is tumbling so fast that it halved in size between May and July, according to IC Insights.

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Chipmakers are the biggest industrial sector in South Korea’s trade-reliant economy, which is battling high energy prices and a currency that has depreciated the most in Asia this year outside the yen. BLOOMBERG