"Canary" Warning: South Korea's October exports cooled significantly, with a slowdown in chip exports

Due to the significant decrease in demand for oil products and mobile phones, South Korea's export growth slowed in the first 20 days of October. On Monday, October 21st, the Korea Customs Service released the export data for the first 20 days of October, showing a slight increase of 1% in the total export value compared to the same period last year after adjusting for working day differences. In contrast, the total export value for the entire month of September, which was previously announced, increased by 7.5% year-on-year. The unadjusted export data showed a decrease of 2.9%, with overall imports declining by 10.1%, resulting in a trade deficit of up to 1 billion USD. Specifically, semiconductor exports remained steady, while sales of oil products and wireless communication devices saw a significant decline: Oil product exports plummeted by 40% year-on-year, while exports of wireless communication devices dropped by 21.7%, and semiconductor exports grew by 36.1%. South Korea is home to one of the world's largest oil refining industry clusters operated by companies such as SK Innovation, S-Oil, and GS Caltex. The country heavily relies on imports to meet its energy needs but also exports refined oil to drive economic growth, making it vulnerable to global oil price fluctuations. In addition, as the location of the world's two largest memory chip manufacturers, South Korea has also capitalized on the AI trend this year, exporting advanced semiconductors to the United States and other developed economies. However, in recent weeks, there have been doubts about whether the momentum in chip sales has peaked. Data shows that South Korea's semiconductor export growth has been slowing for several months. At the same time, the price growth of memory chip shipments in September has also slowed down. According to official data released earlier, South Korea's semiconductor exports in September reached 13.63 billion USD, hitting a historical high. Memory semiconductor exports surged by 60.7% year-on-year to 8.72 billion USD, while system semiconductors grew by 5.2% to 4.37 billion USD. Analysts believe that this does not necessarily mean that South Korea's policymakers will immediately change their outlook on chip exports. Historically, demand has remained robust even after reaching its peak, supporting economic growth. Monday's data shows that demand for memory chips remains strong, which may help offset the negative impact of declining sales in other products. It is worth noting that earlier this year, the Bank of Korea predicted that the chip boom would continue until 2025, with economic growth possibly reaching around 2.5%, faster than last year. Prior to the data release, Jeong Woo Park, an economist at Nomura Holdings, stated in a report: "Although export growth appears to have peaked and is preparing to decline, our calculations on the export cycle show that exports are transitioning from the recovery phase to the expansion phase. We expect chip exports to maintain double-digit growth rates and drive mid-term expansion throughout 2025." Meanwhile, economists Benson Wu and Ting Him Ho from Bank of America warned that "the potential rise in trade barriers and U.S. self-sufficiency could reduce overall demand for South Korean goods."