① Driven by the AI boom, South Korea's semiconductor inventory in April showed the biggest decline since 2014; ② This also marks the fourth consecutive month of decline in inventory, while South Korea's semiconductor exports rebounded. ③ The Bank of Korea expects the latest round of “chip demand boom” to continue until at least the first half of next year.
AFP, May 31 (Editor Hwang Gun-chi) Driven by the artificial intelligence (AI) boom, South Korea's semiconductor inventory saw its biggest drop since 2014. This highlights that demand is growing faster than supply as customers accelerate purchases of equipment needed to develop artificial intelligence technology.
According to data released by the Korea Statistics Agency on Friday, chip inventories fell 33.7% year on year in April, the biggest drop since the end of 2014. This also marks the fourth consecutive month of decline in inventories, while South Korea's semiconductor exports have rebounded.
Also, chip production increased by 22.3% in April, down from 30.2% in March. Factory shipments increased by 18.6%, also down from 16.4% in March.
AI detonates demand
Korea has two of the largest memory chip manufacturers in the world — Samsung Electronics and SK Hynix. The two companies are competing to supply Nvidia to develop a more advanced and profitable type of memory, particularly the one called HBM.
During the 2013-2015 memory chip boom, stocks did not increase for about a year and a half. Subsequently, during the 2016-2017 cycle, the decline in inventory continued for almost a year.
A report from the Bank of Korea shows that as the “artificial intelligence boom” drives demand in a manner similar to the 2016 cloud server expansion, the latest round of “chip demand boom” is expected to continue until at least the first half of next year.
Drive the economy
Semiconductors are the backbone of the Korean economy, driving investment in advanced equipment and industrial construction. In the first quarter of this year, South Korea's semiconductor exports increased by double digits year on year, and the economy grew 1.3% month-on-month, far higher than the 0.6% forecast.
The Bank of Korea raised its economic growth forecast for 2024 sharply last week, reflecting better-than-expected economic performance while keeping policy interest rates unchanged to curb inflationary pressure. However, the bank did not raise its inflation forecast for this year.
South Korea will release the latest export statistics on Saturday. Economists surveyed by the media estimate that shipments in May will increase 15.4% over the same period last year, up from 13.8% in April.