Early data from South Korea, a global trade barometer, shows slowing export growth
Home to Samsung Electronics, one of the world’s biggest memory-chip makers, South Korea rode the wave of global demand for AI development.
SEOUL – South Korea’s early trade data showed that growth in exports has slowed so far in October, indicating the softening of a rally that has been led by global demand for semiconductors.
The value of shipments adjusted for working-day differences edged up 1 per cent from a year earlier in the first 20 days of October, according to data released on Oct 21 by the customs office. That compared with the 7.5 per cent gain reported earlier for the full month of September.
The monthly trade of South Korea, Asia’s fourth-largest economy, is considered a bellwether for world trade, and is the first to be released among major exporting economies.
Its manufacturers play an integral role in a wide range of global supply chains, especially in industries including semiconductors, cars and batteries. At the same time, they rely heavily on imports of energy and raw materials to assemble products destined for shipment overseas.
Home to two of the world’s biggest memory-chip makers, Samsung Electronics and SK Hynix, South Korea in 2024 rode the wave of global demand for artificial intelligence development along with Taiwan, by exporting advanced semiconductors to the United States and other developed economies.
But questions have loomed in recent weeks about whether the momentum in chip sales may be peaking out. Growth in South Korea’s monthly exports of semiconductors has been moderating for months. Meanwhile, price gains for memory-chip shipments also slowed in September.
That does not mean policymakers would immediately reverse their outlook for chip exports. Demand has stayed mature even after reaching a peak in the past, supporting economic growth. The Bank of Korea (BOK) earlier in 2024 forecast that the chip rally would last well into 2025.
“While export growth appears to have peaked and is set to start a downturn, reflecting fading base effects, our calculation of the export cycle suggests exports are transitioning to an expansion phase from a recovery phase,” Mr Jeong Woo Park, a Nomura Holdings economist, said in a note before the trade data.
“We expect chip exports to extend its double-digit growth rate and drive a mid-cycle expansion throughout 2025.”
The BOK expects that the economy will likely grow at around mid-2 per cent in 2024, faster than in 2023. Robust external demand allowed the central bank to keep focused on fighting inflation and debt bubbles until a policy pivot earlier in October.
South Korea’s trade performance will likely be impacted after the US presidential election. Republican candidate Donald Trump has vowed greater tariffs for China, while his opponent, Vice-President Kamala Harris, is expected to increase corporate taxes that could weigh on purchases from abroad.
Both the US and China are major export destinations for South Korea.
“The potential rise of trade barriers and the US’ self-reliance could also reduce the overall demand for Korea goods,” Bank of America economists Benson Wu and Ting Him Ho said in a report last week.
“If Chinese demand slows down materially due to higher tariffs, such a scenario could be a double-whammy for Korea.” BLOOMBERG
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