Korea’s manufacturing sector to improve as chips, smartphones resurge

South Korea’s manufacturing industry is expected to see substantial improvement, driven by the resurgence of chips, smartphones, and other information and communication technology (ICT) sectors, an analysis showed Sunday.

According to the Professional Survey Index (PSI) data released by the Korea Institute for Industrial Economics & Trade (KIET), the manufacturing status index stood at 102 in January, continuing the upward trend for six consecutive months.

The PSI, with 100 as the baseline, indicates that opinions lean towards an improvement in business conditions when approaching 200 compared to the previous month and towards a deterioration when nearing zero.

Although the domestic demand index remained below 100 for two consecutive months at 98, both export and production indices have increased, to 106 and 108 respectively.

Sectors with indices surpassing 100 in January are semiconductors (145), mobile phones (118), home appliances (107), shipbuilding (106), and bio-health (117).

The February manufacturing outlook PSI is 104, surpassing the benchmark of 100 for two consecutive months. The export outlook index recorded the highest at 111 in four months, and domestic demand outlook index also exceeded the benchmark at 103 after four months. Production outlook index has also exceeded 100 for two consecutive months, with 107.

By sector, semiconductors (155), mobile phones (141), home appliances (107), as well as key ICT sectors, steel (108), bio-health (111), and others, have all exceeded 100 in the outlook.

The chip industry is anticipated to see a continued upward trend as shipment increases and inventory decreases, coupled with a sustained high factory operating rate, following improved demand.

In particular, with the expansion of artificial intelligence investments, sales of high-value-added DRAM are expected to increase, and chip prices are expected to rise as chip demand diversifies into areas such as automotive.

The mobile phone sector showed an upward trend driven by new product sales. This sector is expected to begin a significant improvement in February, with the global smartphone market showing a gradual recovery and the approaching replacement demand period centered on premium products.

On the other hand, the February manufacturing outlook PSI for the automotive sector, stood at 68, dropping by 32 points compared to the previous month, raising concerns about a potential downturn in the automotive industry.

“The decrease in working days due to the Lunar New Year, seasonal factors, and potential impacts of rising interest rates could lead to a slowdown in domestic demand and new car sales flow,” said an official from the KIET.