Global semiconductor sales have reportedly dropped for the first time since early 2020, marking gloomy news for the South Korean economy, which is heavily dependent on the sector and is finding it difficult to respond to the decline in demand.

As per figures from the Semiconductor Industry Association, Washington, global sales of semiconductors fell 3% in September compared to the same month last year. According to a separate report released on Monday by the national statistics office, South Korean chipmakers produced 3.5% fewer chips in the same month than they did a year earlier, worsening from a 0.1% decline in August.

The largest income source for the South Korean economy is semiconductors, which saw a slowdown in the third quarter owing to a weaker won amplifying trade imbalances and increasing interest rates globally weighing on consumer demand for the country's technology exports.

Chip demand frequently experiences booms and slumps, and the most recent downturn raises more questions for South Korean officials seeking to soften the economic blow caused by a credit crunch brought on by the failure of a local developer.

A fatal crowd crush over the weekend where over 150 people died is also expected to impact consumer sentiment.

The on-and-off Covid-19 lockdowns in China, the conflict between Ukraine and Russia, and the trade concerns between Washington and Beijing have obscured the financial performance of South Korean chipmakers like Samsung Electronics, whose Q3 net profit fell short of expectations. In its earnings call, the firm stated that it did not anticipate a recovery in sales until the second half of 2023.

Additional semiconductor data from Statistics Korea revealed that inventory growth stayed high, reaching 54.7% in September. Semiconductor factory exports appeared to be stabilizing, decreasing just 0.9% from a year before.

Meanwhile, South Korea's total industrial production increased 0.8% year-over-year in September, falling short of economists' expectations of 1% growth. As per the statistics office, it shrank by 1.8% from the previous month, more than the experts' anticipated decrease of 0.8%.

Source credit: https://www.straitstimes.com/business/global-chip-sales-shrink-for-first-time-since-2020