South Korea’s Ministry of Trade, Industry, and Energy (MOTIE) reported a continued decline in exports for the eighth consecutive month in May. Semiconductor exports saw a significant year-over-year decrease of 36.2 percent in May. The total value of exports reached $52.24 billion, representing a significant 15.2 percent decrease compared to 2022.
This latest data release from the trade ministry highlights the longest and most sustained decline in exports from December 2018 to January 2020. The persistent drop in exports has become a major concern for the South Korean economy, as exports account for approximately 40 percent of Asia’s fourth-largest economy’s GDP.
In comparison to last year, imports also experienced a decline of 14 percent, reaching $54.34 billion. This decrease was primarily driven by lower energy imports, including natural gas, crude oil, and coal. The decline in semiconductor exports began approximately ten months ago in August.
Similarly, sectors such as petrochemicals (26.3 percent), petroleum products (33.2 percent), and secondary batteries (4.9 percent) have also witnessed a decline in exports. However, there have been increases in exports for products like automobiles (49.4 percent), secondary battery anode materials (17.3 percent), and general machinery (1.6 percent).
Challenges in the semiconductor industry impacting the economy
The Korean government is actively working to address the current challenges. The prolonged semiconductor scarcity has hindered economic growth and development in South Korea. Although semiconductor investors are increasing, the demand for semiconductors is decreasing. The stockpile of semiconductors grew by 83 percent in April year-on-year. Statistics Korea reports a 33 percent drop in factory shipments and a 20 percent decrease in production during the same period.
The global recession, geopolitical tensions, and the conflict in Ukraine have negatively impacted economies. They have also disrupted the demand and supply chains worldwide. Commodity prices and the inflation rate have risen globally. The economic challenges faced by China are further affecting Korea’s economy. It is prominently because China is one of the major trading partners of Korea.
South Korea is home to two of the world’s largest semiconductor companies, Samsung Electronics and SK Hynix. Technology-based exports play a significant role in the country’s economy, accounting for approximately 13 percent of its total share.
In May, South Korea recorded a trade deficit of $2.10 billion, marking the 15th consecutive monthly deficit. However, this was the smallest trade deficit since May 2022. It is expected that overseas demand will improve in the upcoming months, providing potential opportunities for recovery.
