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South Korea's Industrial Shock: Semiconductor Plunge Amid AI Boom Mystery

South Korea's industrial production took a significant hit in October with the sharpest monthly decline in over five years. The semiconductor sector saw a dramatic 26.5% plunge despite the ongoing global AI boom driving demand. Government officials attributed the drop to a strong base effect from September's 20% production surge. Meanwhile, retail spending showed strength with a 3.5% increase, largely fueled by holiday shopping during the extended Chuseok period.

Key Points: South Korea Industrial Output Falls Sharply in October Data

  • Industrial production fell 2.5% monthly, steepest decline since February 2020
  • Semiconductor output plunged 26.5%, sharpest drop since October 1982
  • Retail sales jumped 3.5% driven by food and apparel during Chuseok holiday
  • Facility investment dropped 14.1% reversing previous month's rebound
2 min read

S. Korea: Industrial output falls in Oct on base effect of chip production

South Korea's industrial output drops 2.5% in October, with semiconductor production plunging 26.5% despite AI-driven global demand growth and base effects.

"Amid booming semiconductor production, the base effect appears to have played an exceptionally large role - Lee Doo-won, ministry official"

Seoul, Nov 28

South Korea's industrial output fell at the sharpest pace in over five years last month, government data showed on Friday, largely due to a base effect in semiconductor production despite the industry's ongoing upcycle.

Industrial production went down 2.5 percent from a month earlier in October, according to the data from the Ministry of Data and Statistics. It marks the steepest monthly fall since a 2.9 percent decline in February 2020, reports Yonhap news agency.

The output of the mining and manufacturing sector, considered the backbone of the economy, lost 4 percent on-month.

Notably, semiconductor production plunged 26.5 percent, marking the sharpest on-month drop since October 1982, when it fell 33.3 percent.

The ministry said the decline was driven largely by a strong base effect, as chip production had surged around 20 percent on-month in September, even though global semiconductor demand continues to rise on the back of the artificial intelligence (AI) boom.

"Amid booming semiconductor production, the base effect appears to have played an exceptionally large role," said Lee Doo-won, a ministry official.

Retail sales, a gauge of private spending, increased 3.5 percent on-month, rebounding after two consecutive months of decline.

This marks the highest increase since February 2023, though it is largely due to a base effect, the ministry said.

The growth was largely driven by higher sales of food and apparel, reflecting the impact of the extended Chuseok holiday that fell in early October.

Sales of semidurable goods, such as apparel, increased 5.1 percent, while nondurable goods, including cosmetics, jumped 7 percent. In contrast, sales of durable goods, such as home appliances, fell 4.9 percent.

Facility investment dropped 14.1 percent on-month in October, reversing the rebound recorded in the previous month, the ministry said.

Investment in machinery declined 12.2 percent, while investment in transportation equipment fell 18.4 percent.

- IANS

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Reader Comments

P
Priya S
The base effect explanation makes sense, but such sharp drops are concerning. South Korea is a manufacturing powerhouse, and if they're facing these issues, it could impact global supply chains. Hope this doesn't affect electronics prices in India! 📱
A
Arjun K
Interesting to see retail sales growing while industrial output falls. Shows consumer spending patterns are changing globally. In India too, we're seeing similar trends post-festival season. The AI boom should help semiconductors recover soon. 🤖
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Sarah B
The 26.5% drop in semiconductor production is alarming, even with the base effect. This could have ripple effects on our IT and electronics industries in India. Companies should prepare for potential supply chain disruptions. Better safe than sorry!
V
Vikram M
While the numbers look concerning, the ministry's explanation about base effect seems reasonable. September had exceptional growth, so October was bound to show correction. This is normal in cyclical industries. India's manufacturing data also shows similar patterns sometimes.
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Michael C
The 14.1% drop in facility investment is more worrying than the semiconductor numbers. This indicates businesses are pulling back on expansion plans. Hope this doesn't signal a broader global economic slowdown that could affect India's growth trajectory.

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