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(2nd LD) Chips production sinks 17 pct in Feb. despite overall industrial output gains

Economy 10:23 March 31, 2023

(ATTN: ADDS finance ministry's assessment, more details in last 7 paras)

SEOUL, March 31 (Yonhap) -- South Korea's semiconductor output sank 17.1 percent on-month in February, the sharpest decline in more than 14 years, though the country reported gains in the overall industrial production, private spending and facility investment for the first time in over a year, data showed Friday.

Industrial output grew 0.3 percent from a month earlier in February following a 0.1 percent rise each during the previous two months, according to the data from Statistics Korea.

But the combined output in the mining, manufacturing, gas and electricity industries fell 3.2 percent in February due mainly to the sharp decrease in the chips output, the backbone of the South Korean economy.

The 17.1 percent production fall of semiconductors was the largest on-month decline since December 2008, when the production of semiconductors dived 18.1 percent, the data showed. Compared with a year earlier, the chips output nosedived 41.8 percent.

Global demand for memory chips has weakened since the second half of last year, and the production of system semiconductors also has gone down recently, agency officials said.

But the service output rose 0.7 percent on-month in February, led by accommodation and food industries, as people's growing outdoor activities rose amid favorable weather conditions and eased COVID-19 restrictions, according to the agency.

This file photo taken March 21, 2023, shows a port in the southeastern city of Busan. (Yonhap)

This file photo taken March 21, 2023, shows a port in the southeastern city of Busan. (Yonhap)

Retail sales, a gauge of private spending, rose 5.3 percent, ending three consecutive months of declines.

Demand for foodstuffs, cars and clothing all grew last month on the back of a low-base effect, major promotional events and subsidies for buyers of electric vehicles, among other factors, according to the agency.

Facility investment also added 0.2 percent on-month.

It is the first time since December 2021 that the industrial output, private spending and facility investment all marked on-month growth, the agency said.

"The improvement in consumption is positive, but the semiconductor industry has not yet shown a sign of turnaround. As the national economy heavily depends on the chips industry, it remains to be seen how the economic situation unfolds," agency official Kim Bo-kyung said.

The finance ministry said in a separate report that China's reopening and the increased outdoor activities amid eased antivirus curbs are expected to help make an economic turnaround, but weak demand for chips and concerns about the global banking crisis could weigh on the South Korean economy.

"There have been some signs of an economic turnaround, but uncertainties remain high due mainly to dwindling exports and the subsequent sharp fall in production," First Vice Finance Minister Bang Ki-seon said during an emergency meeting on the economy held in Seoul earlier in the day.

"Exports are forecast to log a sharper fall in March compared with a month earlier. The government will make every effort to improve exports at an early date by extending policy financing and tax incentives for companies and helping resolve business difficulties," he added.

In February, South Korea's exports fell 7.5 percent on-year to $50.1 billion as outbound shipments of semiconductors dipped 42.5 percent over the period.

Exports have logged an on-year fall since October last year amid a global economic slowdown and have suffered a trade deficit for 12 straight months on high energy prices.

The ministry also vowed to enhance monitoring of the global and domestic financial markets, strive further for risk management following the recent failure of American lenders, and implement measures to spur spending.

Earlier this week, the ministry announced a series of measures to boost private spending, such as eased entry rules for foreign visitors, raising the number of international flights, and issuing subsidies and discount coupons for domestic travelers.


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