Chip stockpiles jump in South Korea amid tech slump concerns

South Korea’s chip stockpiles increased the most compared to others in the last four years, indicating that the industry is heading for a global slowdown in demand, according to the country’s statistics office.

The home of some of the world’s most prominent electronic makers has been the largest global producer of memory chips that go into things from smartphone to televisions and vehicles. The national stocks have jumped by 53.4% in May, compared to last year. The last time something similar happened was in 2018, when inventory jumped by 54.1%, which happened to coincide with slowing revenue growth in the memory chip industry. 

The increasing stockpiles this year come amid growing concerns over another global economic recession, driven by rising interest rates, the Russia–Ukraine war as well as mounting inflationary pressure. It’s not just memory chips that are seeing an increase in inventory sizes, semiconductors aren’t seeing expected sales in the global market. 

South Korea is the third-largest producer of semiconductors in the world sitting at 19%, behind Taiwan (21%) and China (24%). They are also the single biggest driving force of the country’s economy. Shipments have slowed, increasing just 8.9% in May last year, a report from Statistics Korea showed. Gains from production have also slowed to 24.3%.

Chipmakers from Samsung to SK Hynix saw their share decline in the last year posing questions about future demand as central banks worldwide tightened policy on investments in technology stocks.

However, overall productions has increased from April’s fall as lockdowns in China eased. Factory output went up by 7.3% in May compared to last year, a 3.3% increase compared to the 4% predicted by economists. 

Earlier this year, semiconductor stocks slipped considerably, companies like Qualcomm Inc saw a dip in their stocks even though the company reported earnings and forecasts that beat analyst estimates.