Semiconductor Market Craters, Dragging Down South Korea’s Exports

Foundry manufacturing is the sole bright spot in otherwise grim times for South Korea's semiconductor production.

Semiconductor Market Craters, Dragging Down South Korea’s Exports

Photo: Samsung Electronics headquarters.  Credit: Samsung Electronics.

Live by semiconductors, die by semiconductors. In January, South Korea’s semiconductor exports fell 44.5 percent year-over-year, a drop not seen since 2009 in the wake of the global financial crisis. Because of the semiconductor slowdown, South Korea’s trade account balance for January was negative USD 12.7b, the largest deficit in Korean history. The trade account balance has been in the red for eleven straight months, a streak unseen since the run-up to the East Asian Financial Crisis in 1997.

Just a few years ago, South Korea and Taiwan were called “the New OPEC,” as the two countries duopolized much of the world’s semiconductor production. (See previous coverage, “The New OPEC of Semiconductors.”) But a global decline in demand for electronics, caused in large part by China’s COVID-related shutdowns, significantly undermined semiconductor prices.

Samsung Electronics 삼성전자, a semiconductor giant, reported a 69 percent year-over-year decline in profits for Q4 2022. SK Hynix SK하이닉스, the world’s third largest DRAM chip maker (behind Samsung), reported a loss of KRW 1.7t (USD 1.4b) in Q4 2022, the company’s first quarterly deficit in a decade.

A silver lining in South Korea’s semiconductor manufacturing was its foundry business, which manufactures the most sophisticated types of semiconductor. While the price of memory chips such as DRAM or NAND flash memory may fluctuate significantly based on market conditions, the price of non-memory chips manufactured by foundries, or fabrication plants, tends to be more stable.

While Taiwan’s TSMC has been the dominant force of foundry manufacturing with 55 percent of the global market share, Samsung Electronics (17 percent market share) has been engaged in a furious chase. In 2022, Samsung Electronics’ foundry division set a new record for revenue and profit, despite the overall slowdown in the market.

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