South Korea's chip production suffers biggest drop since global financial crisis

South Korea's semiconductor production fell in November by the most since the global financial crisis, weighing on the country's industrial output and signaling a further cooling in overseas demand for technology components as the world economy slows, according to Bloomberg.

Chip production shrank for the fourth straight month, down 15 percent from a year earlier, the biggest drop since 2009, according to data released by the National Bureau of Statistics on Thursday. Overall industrial production contracted 3.7% from a year earlier, the biggest drop since the pandemic began.

The decline in economic activity points to a weakening recovery in a country closely tied to the world economy. Growth in South Korea is already under pressure from falling exports and rising domestic interest rates, with concerns fueled by a gloomy outlook overseas.

With the Federal Reserve leading a wave of monetary tightening to fight inflation and the Russia-Ukraine conflict continuing, the chances of major overseas economies including the United States slipping into recession are rising.

In a separate statement, South Korea's finance ministry said weak chip demand added to a host of factors making the country's economic outlook more uncertain, including the impact of the recently concluded truckers' strike and the tragedy of crowds in Seoul.

Chip production also fell 11 percent month-on-month, according to the latest output data, while semiconductor inventories rose 20 percent in November from a year earlier, up from 12.9 percent in the previous month, according to Statistics Korea.

Inventories have risen by double digits since October, underscoring a global glut of memory chips of which South Korea is leading the charge. Chipmakers are recalibrating their investment plans as they brace for falling domestic and foreign demand for their products.