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LinesFlashbackFirstpost AmericaHomeWorldSouth Korea cuts chip production as memory, processor chip demand slows down amid financial crisisSouth Korea cuts chip production as memory,

processor chip demand slows down amid financial crisisMehul Reuben Das• March 31, 2023, 14:36:38 ISTWhatsappFacebookTwitterThe global economic downturn has adversely affected the demand for

semiconductors and memory chips. As a result, major South Korean chip manufacturing companies have decided to cut their production short for this year.read moreAdvertisement

South Korean chipmakers have cut their output by the most for the first time since 2008 in February this year, indicating that the decline in semiconductor demand may be deeper and

longer-lasting than previously anticipated. According to figures from South Korea’s National Statistics Office, production fell 41.8 per cent year on year, worsening from a 33.9 per cent

decline in January. Inventories rose by 33.5 per cent, while manufacturing exports dropped by 41.6 per cent, indicating an ongoing decline. Chipmakers are one of the key components of South

Korea’s trade-dependent economy, accounting for roughly 12 per cent of total shipments in February. The deterioration in worldwide chip demand adds to the difficulties facing the country’s

economy, which already shrank from the previous three months last quarter. Also read: US-China Tech War: South Korean companies on high alert for leaks amid mounting sanctions on China

Seoul’s officials are expecting for a rebound in the second half and are keeping an eye on semiconductor investment as a critical development engine for the economy. The country’s government

authorised a boost to the semiconductor sector on Thursday, offering firms tax breaks to encourage investment. Rising trade tensions between the United States and China, as well as a

possible economic recession, pose risks to South Korea’s chip sector, as central banks restrict policy to fight inflation. Growing layoffs by US technology firms indicate a waning interest

in investing. Separately, South Korea’s total industrial production dropped 8.1 per cent year on year in February, exceeding the median estimate of a Bloomberg poll. The cyclical leading

indicator also dropped 0.3 per cent from the previous month. “The slowing global economy and large inventories have weighed on demand.” Customers aren’t purchasing semiconductors because

demand has dropped, according to JJ Park, an expert at JPMorgan in Seoul, as per a Financial Times report. “Inventory destocking will be completed over the course of next year, and the

market may recover in 2024."Also read: After Japan and Netherlands, the US goes after South Korea to block their chip trade with China To compensate for the excess, chipmakers are reducing

their spending plans. SK Hynix, along with US rival Micron Technologies and Japan’s Kioxia Holdings, are slashing spending, though Samsung is not considering an output cut. Samsung

anticipates that the memory chip industry will stay slow until the end of 2023. Analysts said the industry leader was sticking to its previous plan of raising capital expenditure during the

downturn to gain market dominance. “Samsung is backstabbing its fellow oligopoly competitors,” wrote Dylan Patel, principal researcher at semiconductor research firm SemiAnalysis, earlier

this month in a report. “Samsung seeks a Pyrrhic market share victory." During its third-quarter earnings conference in October, Samsung stated that its capital expenditure this year would

total 47

.7 trillion South Korean Won or $37.5 billion. According to Patel, the fourth-quarter expenditure will nearly double that of the second and third quarters. Read all the Latest News, Trending

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