Korean semiconductor production falls as AI demand slows; Samsung profits miss expectations.

Under the pressure of global demand changes,FXCM mobile trading platform South Korea's semiconductor industry saw its first production cut in 14 months, indicating that the AI-driven demand growth in the global market may be starting to wane. Data released by South Korea's statistics agency on Thursday showed semiconductor output fell by 3% year-on-year in September, marking a significant reversal from the 11% growth momentum seen in August. Additionally, shipment growth plummeted from 17% in August to a mere 0.7%. This trend reveals signs of a gradual cooling in the semiconductor market after the demand for storage chips has peaked.

Despite the overall drop in production, South Korea's chip inventories are depleting rapidly. Data shows that inventories in September were down 41.5% compared to the same period last year, indicating continued market demand but a noticeable slowdown in supply growth. Industry insiders pointed out that as demand for storage chips weakens, Korean chip manufacturers are facing growth pressure, and the forces such as AI and data centers that previously drove market growth might also be gradually cooling off.

Meanwhile, the financial report released by South Korean semiconductor giant Samsung Electronics on Thursday showed that its semiconductor division achieved an operating profit of 3.86 trillion Korean won in the third quarter, well below the market forecast of 6.7 trillion Korean won. This figure reflects weak market demand, putting pressure on Samsung Electronics' profitability. Samsung's semiconductor division has long been a vital pillar of the company's revenue, and its profit being below expectations further suggests the current slump in the chip industry.

The semiconductor industry has always been a major driver of South Korea's economy and exports. To respond to the risks of a global economic slowdown, the Bank of Korea has previously taken action to adjust its policy direction, lowering the benchmark interest rate in hopes of supporting economic growth. Some economists predict that if South Korea's economic growth further slows down in 2024, South Korea may accelerate its easing policies to stabilize the economic environment.

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