Invest KOREA

In October 2023, Korea's industrial activities fell by 1.6 percent and experienced a temporary adjustment following strong improvements in August and September.

Production of mining and manufacturing industries declined by 3.5 percent in October, led by retracement of production in semiconductors, which caused decreases in the semiconductor industry (△11.4 percent) and the machinery and equipment industry (△8.3 percent). Service industry production saw a decrease of 0.9 percent, with brisk leisure activities in the holiday season boosting the production of arts and sports (4.2 percent), but wholesale and retail (△3.3 percent) and transportation and warehousing (△1.4 percent) showing weak performance. Retail sales fell by 0.8 percent as the sales of durable goods (1.0 percent) and semi-durable goods (4.3 percent) increased, but those of nondurable goods (△3.1 percent) such as food and beverages fell. Capital investment decreased by 3.3 percent month-on-month due to declines in machinery [special industrial machinery] (△4.1 percent) and transportation equipment [automotive, etc.] (△1.2 percent). Construction investment grew for the fourth consecutive month as the civil engineering sector fell (△1.0 percent), but the construction completion of apartment units boosted the construction sector (1.3 percent). The cyclical change in the coincident index fell for five straight months due to declining imports and domestic sales, but the month-on-month decline narrowed (△0.1p). The Korean economy has recently began to recover gradually, led by manufacturing and exports, but upside and downside factors coexist. On the production side, the recent improvement in exports, the recovery of key industries such as semiconductors and shipbuilding, and the stabilization of international oil prices are positive factors, whereas the uncertain pace of major economies’ recovery, the possibility of prolonged high interest rates, and lingering geopolitical risks are weighing on the economy. Consumption and investment are supported by the favorable employment situation, accumulated household savings, and investment cooperation with major countries resulting from active summit diplomacy, but also burdened by sluggish construction orders and household debt burdens.

‘Domestic Consumption Fell for the Second Month, But Exports Grew in Double Digits’
→ In October, domestic consumption declined for the second consecutive month, falling by 4.7 percent year-on-year due to weak consumer sentiment and insufficient supply. Exports rose by 13.4 percent year-on-year in October, supported by strong EV exports. In September, the growth of production remained flat due to a combination of positive factors, such as strong exports of eco-friendly cars, and negative factors, such as strikes at some companies.

‘Production and Capacity Grew Together’
→ Production capacity of the shipbuilding industry increased in September to boost the industry’s production index by 9.7 percent year-on-year and shipments by 1.2 percent, whereas the industry’s capacity utilization rate fell by 0.7 percent. Exports increased by 101.4 percent in October, with the delivery of high-value vessels leading the jump. Imports fell by 43.6 percent in September, affected by the base effect of vessels imported a year earlier.

‘Production Continued to Slump, but Exports Grew Faster’
→ In September, production remained sluggish and fell by 8.7 percent year-on-year amidst strong export growth as the contraction of the domestic consumption prolonged. In October, exports increased by 10.4 percent from a year ago as major countries increased investment to rebuild their infrastructure and boosted demands for machinery, including construction equipment and industrial machinery. In September, imports decreased by 2.6 percent year-on-year, with machinery investment shrinking due to the delayed recovery of industries that require general machinery.

‘Production Jumped due to the Effect of Previous Year’s Disrupted Operation, and Exports Fell Slightly’
→ In September, steel production increased by 20.8 percent year-on-year as production normalized, recovering from disruptions caused by Typhoon Hinnamnor in September last year. Exports fell by 0.7 percent from a year ago in October, affected by weaker exports to China, the EU, and the Middle East and falling unit prices. Imports increased by 1.2 percent year-on-year in September, driven by a significant growth in import volumes from China, the US, India, and Vietnam, which offset weak unit prices of imported steel.

‘Exports Started Growing for the First Time in Eight Months as Export Volumes Jumped'’
→ September production decreased by 0.4 percent year-on-year as some Korean refineries continued regular maintenance. In October, exports grew by 18.0 percent, driven by strong exports to the ASEAN region.

‘October Exports Decreased by 4.5 percent YoY, Narrowing the Decline Since Q3'’
→ The global ICT industry and demands for semiconductors and computers, as well as smartphones, which have been sluggish since the second half of 2023, are expected to recover. Falling exports are forecast to turn around as major makers at home and abroad release new flagship models and see their inventories normalize in Q4 2023 and Q1 2024. In September, production fell by 18.2 percent year-on-year and shipments also declined by 15.9 percent from a year ago, leading to a decline in capacity utilization rates and a 26.7 percent increase in inventories. In September, the number of domestic mobile communication subscription lines increased by 5.2 percent year-on-year and 0.2 percent month-on-month. Imports in September fell by 20.7 percent year-on-year, mostly in the imports of smartphones and parts.

‘Semiconductor Industry Began a Moderate Recovery’
→ In September, semiconductor production gradually stabilized to grow by 23.7 percent year-on-year and 12.9 percent month-on-month. In October, exports decreased month-on-month to USD 8.9 billion, but the year-on-year decline significantly narrowed to -3.1 percent. The performance of Korean semiconductor makers is gradually improving as the unit price of memory semiconductors stabilize, and the global semiconductor market also began a moderate recovery.

‘Strong Demands for Smartphone OLED Panels Thrust Exports Upward’
→ In September, production continued to decline as LCD production cuts dampened demands for LCD components. In October, panel exports rose by 15.5 percent, driven by growing demands for smartphones and rising panel prices, and exports increased for three months in a row.