South Korea's semiconductor production experienced a significant surge in February, marking the largest increase in 14 years and reflecting a sustained recovery in the country's crucial industrial sector and global tech demand. According to data released by the national statistics agency, semiconductor production soared by 65.3% compared to the previous year, marking the most substantial rise since late 2009. Concurrently, semiconductor shipments also increased by 59%, although this growth was slightly lower than the 62.7% recorded in January. Additionally, inventory decreased by 16.2% for the second consecutive month, indicating robust demand.
The noteworthy performance of the semiconductor industry, along with a larger-than-expected expansion in overall industrial production, suggests that the momentum in South Korea's domestic economic growth will persist. Semiconductors play a pivotal role in the country's exports, further highlighting their significance. Notably, the growth in semiconductor production for February might have been even more substantial if the lunar new year holiday had occurred in January instead of February, as it did the previous year.
The upward trajectory in semiconductor production likely extended into March, as evidenced by a 46.5% year-on-year increase in chip exports during the first 20 days of the month. The burgeoning demand for AI-related memory chips is a major driving force behind this growth, with SK Hynix Inc., the nation's second-largest chipmaker, anticipating continued positive momentum in its supplies to Nvidia Corp.
Expectedly, the output will continue to grow steadily in March, propelled by robust external demand for AI memory chips. However, a tentative recovery in China may exert pressure on orders for South Korea's products, potentially offsetting some of the traction gained from global chip demand.
The memory-chip market underlying South Korea's semiconductor industry is notorious for its cyclical nature of boom and bust. The current upswing in the market provides the Bank of Korea with increased confidence to maintain its tight policy measures in the ongoing battle against inflation.
Moreover, the report reveals that overall industrial output expanded by 4.8% in February, surpassing the economists' estimated growth of 4%. This positive trend in production prompted the Finance Ministry to express confidence in the recovery of economic momentum, with a commitment to swiftly execute fiscal spending in the first half of the year.
