Global Semiconductor Prices on the Decline

The price of semiconductors is on the decline. Although the global semiconductor industry boom is still ongoing based on a solid demand, the decline in price can have a negative impact on South Korea’s total exports this year in view of the item’s large proportion.

According to the Bank of Korea, South Korea’s semiconductor export price index, which is based on the U.S. dollar and has a reference value of 100 with 2010 as its reference year, fell from 55.98 to 55.48 between January this year and last month. This means the price of the semiconductor products exported by local companies such as Samsung Electronics and SK Hynix fell 0.9% during the period.

The NAND flash memory export price index fell 5.3% on a won basis in April.

Especially, the NAND flash price index showed a decline of 11.8% from 46.40 to 40.92 during the same period. The DRAM price index, meanwhile, showed little change. “The flash memory export price index fell 5.3% on a won basis last month,” the central bank explained, adding, “The domestic flash memory price was affected by an increase in flash memory supply from China.”

Concerns are rising over how the oversupply from China will affect South Korea’s semiconductor exports. Last year, the item accounted for 17% of South Korea’s total exports on a value basis. In the first quarter of this year, the ratio rose again to 20.2% with the other major industries such as automobile, shipbuilding and steel remaining sluggish.

Besides, South Korea’s exports fell 1.5% from a year ago last month. Likewise, its year-on-year semiconductor export growth, which used to reach 50% to 60% last year, stood at 53.3% in January and 37% in April this year. This downtrend is likely to accelerate over time in that the growth of the South Korean economy is forecast to slow down in the upcoming second half.

Still, many experts are predicting that the growth of South Korea’s semiconductor industry will continue this year even at a slower pace. In addition, the impact of the slower growth of the industry on the South Korean economy as a whole is likely to be rather limited with the ongoing petrochemical industry boom offsetting the negative impact.