The global semiconductor boom, driven by advancements in artificial intelligence, shows signs of cooling. South Korea recently reported a year-over-year drop in monthly semiconductor production, marking the first decline in over 14 months. According to government data released, September's semiconductor output fell by 3% compared to a significant increase of 11% the previous month. Additionally, the growth in semiconductor shipments slowed dramatically from August's 17% to just 0.7% in September.
On the positive side, South Korean semiconductor inventories are depleting rapidly, with a 41.5% reduction compared to the previous year. This indicates that the peak demand for memory chips might be tapering off, leading to a potential cooling in the semiconductor industry.
Highlighting this trend, Samsung Electronics (SSNLF, Financial), South Korea's largest memory chip manufacturer, released its quarterly financial report showing a downturn in the semiconductor sector. Samsung’s third-quarter operating profit from its semiconductor division was 3.86 trillion won, falling short of the market's expectation of 6.7 trillion won. Looking ahead, Samsung anticipates the subdued demand trend from the previous quarter will persist.
Earlier this month, Samsung issued a rare apology for its disappointing performance, citing delayed sales of advanced chips to a major unnamed client and increased traditional chip supply from Chinese competitors as reasons for its underperformance.
The performance of semiconductors, a critical driver of South Korea's exports and economic growth, is closely monitored by the Bank of Korea. Recently, the central bank cut its benchmark interest rate by 0.25 percentage points, from 3.5% to 3.25%, signaling a policy shift. Some economists predict that if economic momentum slows more than expected next year, the easing cycle could accelerate.
