Semiconductor Exports Turn 'Negative' After 16 Months...Double Trouble from Price Drops and Tariff Wars

Semiconductor exports, a key pillar of our exports, have recorded a 'negative' growth for the first time in 16 months, prompting calls for special countermeasures.

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According to the 'February Export-Import Trends' announced by the Ministry of Trade, Industry and Energy on the 1st, semiconductor export value was recorded at $9.6 billion, down 3% from the previous year. This marks a negative turnaround after 16 months. Semiconductor exports had maintained a streak of over $10 billion for eight consecutive months from $11.4 billion in May last year through January this year, but this trend has been broken. Semiconductor exports, which had recorded growth rates of 30-50% since the first half of last year, sharply dropped to 8% growth in January this year and eventually turned to a 3% decline in February.

As a result, the 'over $10 billion' export record, which had been continuously maintained from May last year to January this year, stopped after nine months. Semiconductors account for about 16% of our total exports and are a core item that significantly influences overall export performance.

The Ministry of Trade, Industry and Energy analyzed that despite strong performance in high-bandwidth memory (HBM), DDR5, used in the artificial intelligence (AI) industry, overall semiconductor exports decreased due to a sharp drop in fixed prices of general-purpose memory semiconductors such as DDR4 and NAND. The semiconductor market slowed down as the unit price of general-purpose memory semiconductors declined due to seasonal off-season factors.

The price decline of general-purpose memory is also influenced by the growth of Chinese semiconductor companies. In particular, the aggressive low-price supply of general-purpose memory by Chinese semiconductor companies led by Changxin Memory Technologies (CXMT) and oversupply have combined to cause a steep drop in the prices of general-purpose (legacy) memory, which is Samsung Electronics' main product.

In fact, fixed prices of memory semiconductors have significantly decreased compared to the same month last year. Prices of DDR5 16Gb (gigabit), DDR4 8Gb, and NAND 128Gb fell by 7.5%, 25%, and 53.1%, respectively, compared to last year. Accordingly, memory semiconductor export value in February also decreased by 4% to $5.8 billion. System semiconductor export value was $3.4 billion, down 2%.

There are many concerned forecasts that the decline in semiconductor exports this year will accelerate beyond a temporary seasonal off-season factor. This is because the contraction of U.S. IT product consumption amid the U.S.-China trade war could also affect the decrease in our semiconductor exports to China.

The Trump administration imposed an additional 10% tariff on China starting from the 4th of last month and has announced plans to impose another 10% additional tariff from the 4th of this month. The U.S. tariffs on China could shrink IT and home appliance consumption in the U.S., including iPhones, and lead to reduced production in China. This could have a chain reaction affecting Korea's exports of intermediate goods to China, such as semiconductors, displays, and wireless communication components.

According to the Korea International Trade Association, considering that 85.86% of Korea's $133 billion (about 195 trillion won) exports to China last year were intermediate goods including memory semiconductors, displays, and wireless communication components, the fallout from the U.S.-China trade war is expected to have a considerable impact on Korea as well.

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