Chip stockpiles in South Korea rose 28% in a single month. That was January 2023, and the jump was the largest since February 1996, the statistics agency said. Compared with a year before, inventory stood 39.5% higher.
A second measure points the same way. The inventory-to-sales ratio of domestically made chips came in at 265.7% in January, the highest since 288.7% in March 1997, according to data compiled by Statistics Korea. A higher ratio usually means companies are struggling to sell what they build.
Samsung and SK hynix
The country is home to the world’s two biggest memory chipmakers, and both were sitting on more stock. Industry sources said Samsung Electronics’ inventory assets reached an all-time high of 52.2 trillion won ($4.03 billion) at the end of 2022, up 26% on the prior year. SK hynix’s rose 75% to about 15.6 trillion won.
Those sources expect the companies to cut output or lower prices again to keep selling, which would push chip prices down further.
Weak trade numbers
Chips supply about 12% of South Korea’s exports, so the damage spreads. Chip exports fell 42.5% from a year earlier to $5.69 billion in February, while total exports dropped 7.5%, the fifth monthly decline in a row. In January, factory shipments fell 25.8% from a year earlier and chip production slipped 5.7% from December, which the data tied to a sharp fall in selling prices.
The finance minister warned that the export downturn would continue unless chip sales recovered.
The US factor
Washington added pressure the same week. The US government published conditions for subsidies under the $53 billion CHIPS for America program. Recipients would be barred from expanding chip manufacturing capacity in countries such as China for a decade, and would have to share with the US government a portion of any cash flow that beat their projections.
Samsung and SK hynix make a lot of their memory in China. About 40% of Samsung’s NAND flash comes from its Xi’an plant, and SK makes half of its DRAM in Wuxi. Some market experts called the program a “poisoned chalice” for them. Meritz Securities analyst Kim Sun-woo said the companies “have to consider whether they will keep their Chinese plants in operation and what could be their exit strategies.”
In the US, Samsung is building a $17 billion chip plant in Taylor, Texas. SK was due to choose a packaging plant site there in the first half of the year. Seoul planned to meet Korean chipmakers on Tuesday to discuss support measures.
Sources
- South Korea’s semiconductor inventory hits 26-year high
- South Korea's Chip Inventory Surged 28% Month-on-month in January, The Larges… – Wenzhou Sico Spraying Tech. Co., Ltd .
