South Korea's semiconductor output fell in 2018 for the first time in more than four years, indicating that chipmakers are preparing for a slowdown in global demand.
Semiconductor production in August was 1.7% lower than the same period a year ago, a significant change from the 17.3% increase reported in July, according to data from Statistics Korea.
Output in the semiconductor industry fell in September for the first time since January 2018, according to new data from the Taiwanese government. This decline comes as chip inventories have soared by 67.3%, suggesting that producers are adjusting to a deteriorating international outlook. Factory shipments have also fallen for a second consecutive month in August, dropping by 20.4%.
Korean chipmakers are reducing production as stockpiles of chips remain elevated. This is likely due to the ongoing trade dispute between the US and China, which has led to reduced demand for Korean chips.
The year-on-year changes in the economy can have a big impact on businesses. For example, a change in interest rates can affect the amount of money that businesses have to pay back on loans. This can then have a knock-on effect on things like investment and hiring.
The latest evidence suggests that the global economy is headed for a downturn, led by cooling demand for electronics. This is a major source of economic growth, and the trio of indicators points to a slowdown in this area.
Micron Technology Inc. has forecasted a weak quarter in the US, citing slowing demand and production. The company is taking swift action to cope with the weakening market.
There are more signs that global demand is slowing down for Korea's exports. This is causing some concern for the country's economy.
Earlier this month, Samsung Electronics Co. warned of a gloomy outlook for the second half of the year. The market for dynamic random access memory (DRAM), Samsung's key cash driver, is tumbling so fast that it halved in size between May and July, according to IC Insights.
Chipmakers play a vital role in South Korea's trade-reliant economy, which is currently facing challenges such as high energy prices and a depreciating currency.
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