The economy of US is showing a dark cloud as signs of an end to the semiconductor-led export of exports to the US are coming to an end. In addition to semiconductors and petrochemicals, Korea`s main export items such as smartphones, displays, shipbuilding, and automobiles are on a downward slope.

Foreign economic conditions are also deteriorating, such as the uncertain Korean peninsula situation, won depreciation, oil price hike and US interest rate hike. It is pointed out that the stimulus measures and deregulation should stimulate corporate investment.

According to industry sources on May 27, exports of semiconductors, which account for 20% of total exports and led the Korean economy, are slowly slowing down.

According to market researcher IHS Markit, DRAM prices per gigabyte, which rose 43.9% last year, declined 7.8% this year, and gradually declined to USD 76.6 billion next year and USD 77.6 billion in 2020 after peaking at USD 82.7 billion this year and NAND flash is similar. However, sales growth of domestic memory semiconductor companies such as Samsung Electronics and SK Hynix is limited, and sales are unlikely to increase without price hikes.

According to market researcher DRAMExchange, the DRAM operating margin of the two companies surpassed 60% in the first quarter of this year, but sales growth only grew by 2% over the same period last year. Both companies have no plans to build new plants in addition to existing capacity additions.

As a result, the semiconductor export growth rate has slowed to 37.0% in April from 57.5% last year. It means that it is hard to expect explosive growth like last year.

Meanwhile, exports of other industries are also sluggish, with some except for petrochemicals. Petroleum products (53.6%) and petrochemicals (11.7%) are also affected by the rise in import prices of raw materials due to rising oil prices. In April, shipbuilding orders fell 75.0% Year on Year and wireless communications equipment 40.7% Year on Year. Display and consumer electronics also recorded double-digit decline in exports.

Instead, imports continued to increase since October 2016, and the cumulative trade surplus at the end of April was USD 19.9 billion, down USD 8.6 billion from USD 28.5 billion a year ago.

Companies are also worried about shrinking domestic investment and economic recession. Samsung Electronics, which last year invested KRW 27.3 trillion in semiconductors, plans to cut its investment this year in light of overcoming semiconductor oversupply.

The automaker recently faced an export crisis as the United States examined the imposition of a 25 % tariff on imported cars by applying Article 232 of the Trade Expansion Act. The IT sector, including home appliances and smartphones, has been largely outsourced, making it difficult for the domestic economy to recover. The price of Dubai oil increased from USD 60.39 per barrel on March 1 to 74.98 US dollars on March 23, increasing the cost burden.

The situation in which foreign capital in Korea is shifting to the US due to the reversal of interest rates between Korea and the US is also a stumbling block to the economic recovery. LG Economic Research Institute predicted this year`s economic growth to be 2.8 percent lower than the Bank of Korea (3.0 percent).

Experts advise that the government should actively improve regulation to improve the constitution, such as cultivating new industries and diversifying exports.

However, domestic U-turn companies are decreasing year by year, and overseas investment is steadily increasing. According to the Ministry of Commerce, Industry and Energy, and Kotra, the number of U-turn companies declined from 27 in 2014 to 4 in 2015, 12 in 2015, and 3 in 2017.

In contrast, foreign direct investment remittances last year reached a record high of USD 43.7 billion, up 11.8 % from USD 39.1 billion a year ago.

By Park Jung Il comja77@


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