Chips' inventory-to-sales ratio hits near 26-year high amid sluggish demand

All News 09:33 March 05, 2023

SEOUL, March 5 (Yonhap) -- Inventory of South Korean chipmakers has increased to a nearly 26-year high in January, data showed Sunday, reflecting the sluggish global demand amid the economic uncertainties.

The inventory-to-sales ratio of chips came to 265.7 percent in January, the highest since 288.7 percent posted in March 1997, according to the data compiled by Statistics Korea.

A higher ratio generally indicates that companies are facing more hurdles in selling their products, although the figure may rise when manufacturers stock up for large shipments.

A rise in the ratio may also induce chipmakers to reduce production or lower prices further to maintain sales.

Exports of semiconductors, the country's key export item, dived 42.5 percent to $5.96 billion in February from a year earlier amid the downcycle of the semiconductor industry.

With Asia's No. 4 economy depending highly on the chip industry, South Korea's exports fell for the fifth consecutive month in February, sinking 7.5 percent on-year to $50.1 billion.

The country's overall outbound shipments, meanwhile, edged up 0.8 percent over the period, when excluding chips, separate data from the trade ministry showed earlier.

Last week, Finance Minister Choo Kyung-ho called for the National Assembly to promptly pass a bill on providing more tax incentives to chipmakers amid the prolonged downturn in exports.

Under the proposed tax code revision, the government will apply a higher tax credit rate of 15 percent on facility investment in the chip industry for conglomerates, which is above the revision of 8 percent passed at parliament in December.