South Korea’s Semiconductor Output Rises by Most in 14 Years

(Bloomberg) -- South Korea’s output of semiconductors jumped the most in 14 years in February in an indication of ongoing recovery in the country’s most important industrial sector and global tech demand.

Production jumped 65.3% from a year earlier, the biggest rise since late 2009, according to data released Friday by the national statistics agency. Shipments of semiconductors also rose 59%, even though it was weaker than 62.7% in January. Inventory shrank 16.2%, falling for a second month in another sign of strong demand.

The favorable numbers, released in a report showing a larger-than-expected expansion of overall industrial production, suggest momentum in domestic economic growth will continue as semiconductors account for the biggest share of South Korea’s exports. Production might have been bigger had the lunar new year holiday taken place in January like last year instead of February.

The growth in semiconductor production likely continued in March as suggested by chip exports increasing 46.5% from a year earlier in the first 20 days of the month. Surging demand for artificial intelligence-related memory is among the biggest drivers of growth, with the nation’s second-biggest chipmaker, SK Hynix Inc., forecasting positive momentum to continue in its supplies to Nvidia Corp. in particular.

Related:South Korea Lays Out $470bn Plan to Build Chipmaking Hub

What Bloomberg Economics Says...

The memory-chip market that underpins South Korea’s semiconductor industry is notorious for its boom-and-bust cycle. Its upswing offers the Bank of Korea more confidence to hold its tight policy steady to continue the fight against inflation for now.

Overall industrial output expanded 4.8%, more than the 4% estimated by economists. Pointing to the rise in production, the Finance Ministry said the recovery in economic momentum is becoming more evident. The ministry pledged to carry out fiscal spending swiftly in the first half.