In March 2025, Korea’s industrial activities shrank in the service sector (down 0.3 percent month-on-month and up 0.7 percent year-on-year), but increased in the mining and manufacturing sector (2.9 percent and 5.3 percent) and public administration (4.5 percent and 3.8 percent), resulting in an increase in the overall industrial production for the second consecutive month (0.9 percent and 1.3 percent).

In March, the manufacturing industry grew faster as semiconductor production hit record high backed by increased demand for AI servers and exports of pharmaceuticals expanded. The service sector saw a decrease, primarily in wholesale and retail trade and financial insurance, due to the base effect from the large increase in the previous month backed by the early distribution of EV subsidies and new product launches, as well as a decline in stock trading. Public administration saw the largest increase in twenty-two months as the government swiftly executed the budget. Even as sales of semi-durable goods (clothing) and non-durable goods (food and beverages) increased, retail sales decreased as sales of durable goods (vehicles and communication equipment) shrank. Equipment investment decreased slightly despite an increase in transportation equipment driven by higher ship imports, as machinery for general industries and other sectors declined. Construction completed fell month-on-month as both building and civil engineering activities declined. The cyclical change in the coincident index rose despite a decrease in construction output, as the number of employed persons and import volumes increased. The cyclical change in the leading index also rose despite falling construction orders, as the term spread widened and stock prices increased.

Production increased for two consecutive months, mainly in the mining and manufacturing and public administration sectors, but domestic demand, including consumption and investment, declined. Overall, economic sentiment weakened in the first quarter, and the growth rate of total industrial production slowed due to temporary factors (i.e., wild fires, accidents, heavy snowfall, and cold weather) and a slowdown in export growth. The government will make every effort to effectively respond to trade-related risks and revitalize domestic demand.

‘Exports Grew for the First Time in Fourth Month, Driven by a Surge in Exports of Hybrid Vehicles’
→ In February 2025, exports grew by 11.8 percent year-on-year, supported by robust global demand for South Korean hybrid vehicles. As a result, exports increased for the first time in four months. Domestic demand in January fell by 9.1 percent year-on-year despite an increase in the number of imported vehicles registered, due to sluggish sales of domestically produced vehicles. Production in January saw a double-digit decrease as both domestic sales and exports remained weak.

‘Exports Fell due to the Base Effect, But Production Continued Increasing’
→ In January 2025, production increased by 17.1 percent year-on-year, and shipments also rose by 10.8 percent. Exports in February decreased by 10.8 percent, affected by the base effect of the delivery of offshore plants in the same month last year. Imports in January increased by 194.4 percent due to the large influx of ships. All of South Korea’s three major shipbuilders have turned profitable for the first time in thirteen years, showing signs of improved profitability. However, concerns persist over intensifying competition amid China's growing share in new orders.

‘Production Turned Downward due to the Combined Impact of Sluggish Domestic and Export Markets’
→ In January 2025, production fell by 7.5 percent year-on-year, affected by weak domestic demand. February exports decreased by 12.3 percent year-on-year due to the continued decline in exports to the United States and the base effect. January imports increased by 9.0 percent year-on-year as capital investment rose.

‘Exports Continued to Decline due to Weak Unit Prices, While Production Fell Further due to the Impact of the Off-Season’
→ In January 2025, production declined by 10.8 percent year-on-year as demand weakened due to sluggish domestic demand, the industry entered the seasonal off-season, and the long Lunar New Year holiday slashed the month’s working days. In February, exports, affected by weak export unit prices, decreased by 4.4 percent year-on-year despite the growth in exports to major customers such as ASEAN and the United States. January imports fell by 10.7 percent year-on-year as demand weakened due to sluggish domestic demand and import volumes fell against rising prices of Chinese products.

‘Exports Fell by 12.2 Percent Year-on-year, Affected by Weak Refining Margins and Lower Volumes’
→ January production decreased by 4.3 percent year-on-year due to a downward adjustment in operating rates caused by weak refining margins and the aftermath of regular maintenance. February export revenue fell by approximately USD 540 million year-on-year, affected by a decline in unit prices and a reduction in volume caused by expanded regular maintenance.

‘February Exports Surged by 42.3 Percent, Driven by Continued Growth in Global Smartphone Shipments’
→In February, semiconductor exports surged, mainly due to the release of new flagship models by South Korean companies (February 7) and an increase in high-value-added components for AI and foldable smartphones. January production increased by 4.4 percent year-on-year, while shipments shrank by 6.5 percent. Inventory fell by 15.2 percent, and the operating rate rose by 15.0 percent. January imports shrank by 29.2 percent year-on-year, primarily driven by declines in smartphones (-25.8 percent), smartphone parts (-20.7 percent), and wireless communication device parts (-18.2 percent).

‘Exports Fell Year-on-year for the First Time in Sixteen Months’
→ In February 2025, exports fell by 3.0 percent year-on-year and reached USD 9.6 billion, but the amount was the third highest for the month of February. The semiconductor production index for January stood at 166.3 to fall by 20.8 percent decline year-on-year and 0.1 percent month-on-month, maintaining a downward trend for four straight months.

‘Despite Rebound in OLED Demand, Exports Continued Declining due to Falling Panel Unit Prices’
→In February 2025, exports fell by 5.8 percent year-on-year as panel unit prices weakened. The production index for January was 60.5, down 1.6 percent year-on-year and 8.1 percent month-on-month.