South Korea's central bank: Korean chips are too dependent on the Chinese market!

June 12, 2023
Latest company news about South Korea's central bank: Korean chips are too dependent on the Chinese market!

South Korea's central bank said on Monday that the country's semiconductor industry is more vulnerable to economic and industrial shifts in its major export markets than its rivals Taiwan and Japan due to its heavy reliance on the Chinese and US markets, as well as smartphone and data center businesses.

The Bank of Korea's latest economic outlook report in May pointed out that the volatility of South Korea's exports over the past 10 years was 1.9 times that of Taiwan and 2.7 times that of Japan.

The reason for such high volatility in chip exports is mainly because South Korea's chip industry relies heavily on a few markets such as China and the United States, as well as on memory chips widely used in smartphones and data centers.

In terms of dependence on the Chinese market, according to the report of the Central Bank of Korea, by country/region, 55% of South Korea's semiconductor exports in 2022 will be shipped to the Chinese mainland, followed by Vietnam 12%, China Taiwan 9%, and the United States 7%.

Because of this, the decline in Chinese demand for South Korean chips is the primary reason for the downturn in South Korean chip exports. It is reported that since August last year, South Korean chip shipments have been in a downward spiral after reversing the year-on-year upward trend.

They fell 24.5 per cent in the fourth quarter of last year, 39.2 per cent in the first quarter of this year and 40.5 per cent in April. In addition, South Korea delivered 55 percent of its total chip exports to China last year, down 12 percentage points from 67 percent in 2018.

Rhee Chang-yong, governor of the Bank of Korea, said China's growing chip production capacity was one of the main reasons for the decline in South Korea's exports to China, its largest trading partner. He said the top priority is how to improve South Korea's export competitiveness and maintain a healthy level of exports to China.

In addition, the Central Bank of Korea report noted that South Korea must diversify its chip export market to reduce its export volatility; Expand exports of non-memory chips, where prices are less volatile, while producing more system chips for cars and artificial intelligence.

At the same time, we should continue to explore new markets. Among them, Vietnam has become an alternative market and manufacturing base for China due to its still low labor costs and proximity to China. India is also touted as another global hub for chip manufacturing.

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