Electric and Electronics Sector's Export Outlook for Second Half Year Pessimistic... Growing Inventory Burden

Semiconductor Prices Fall, Causing Chain Impact on Parts Industry

[Asia Economy Reporters Sunmi Park and Chaeseok Moon] Due to the global raw material supply and demand shortage and supply disruptions, South Korea's export growth is expected to sharply decline in the second half of this year. In particular, exports in the key export sector of electrical and electronics are anticipated to drop significantly in the latter half of the year. Additionally, as consumer sentiment in major global countries such as Europe, the United States, and China has sharply frozen, inventories are piling up, increasing the sense of crisis in the electrical and electronics industry. With global demand for electrical and electronic products shrinking, semiconductor prices are falling, and the parts industry is also facing a chain reaction of impacts.

On the 1st, the Federation of Korean Industries commissioned market research firm Monoresearch to conduct a "2022 Second Half Export Outlook Survey" targeting the 12 major export sectors among the top 1,000 companies by sales. The results estimated that exports in the second half of this year will increase by only 0.5% compared to the same period last year.

The sectors driving South Korea's export economy, including ▲Electrical and Electronics (-3.8%), ▲Steel (-2.9%), and ▲Petrochemicals and Petroleum Products (-1.1%), are expected to see a decline in exports. This is due to weakened export competitiveness caused by rising raw material prices (41.2% of respondents), supply chain difficulties such as increased maritime and air logistics costs (21.9%), and worsening economic conditions in major export destinations (21.1%).

In particular, the electrical and electronics sector is expected to be hit harder as both domestic and international economies face rising interest rates, economic growth slowdown, and inflationary environments, leading to weakened consumption. In fact, inventories of smartphones and home appliances have sharply increased. According to the Financial Supervisory Service, Samsung Electronics' inventory assets in the first quarter amounted to 49.8477 trillion won, a 54% increase compared to the same period last year. The inventory turnover days (the time it takes for inventory to be converted into sales) in the second quarter of this year averaged 94 days, about two weeks longer than usual, marking a record high. Samsung Electronics has begun flexible operations to adjust production and inventory levels of products such as smartphones and home appliances, considering the declining demand atmosphere. LG Electronics' inventory assets in the first quarter also rose by 27.7% to 10.2143 trillion won.

As set manufacturers adjust inventories and production, the parts industry is also suffering a chain reaction. Multilayer Ceramic Capacitors (MLCCs), which regulate current flow to ensure stable circuit operation in electronic products, have accumulated inventory exceeding 90 days, more than usual. The average inventory days for display panel manufacturers increased by two weeks to 56 days.

With reduced IT product consumption, semiconductor prices are also clearly declining. According to market research firm DRAMeXchange, the average fixed transaction price of NAND flash for general-purpose products such as memory cards and USBs in June was $4.67, down 3.01% from the previous month. Prices, which had remained steady at $4.81 for ten consecutive months since last August, have now entered a downward trend.

DRAM prices also remain flat after declines of 9.5% and 8.09% in January and October last year, respectively, and 1.7% in May this year, with the average price for PC-oriented general-purpose DDR4 in June at $3.35. Memory semiconductor company Micron announced on the same day that it is adjusting production due to disappointing results below market expectations caused by reduced sales of computers and smartphones. Taiwanese market research firm TrendForce also expressed concerns about further semiconductor price declines, stating, "Although the COVID-19 situation is gradually improving, geopolitical conflicts and inflationary pressures are hindering the recovery of IT device demand."

This content was produced with the assistance of AI translation services.