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Multiple Factors Likely To Keep Chip Exports Supported In Coming Months

SOUTH KOREA
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A surge in exports of semi conductors to the US in June, could be symptomatic of companies forecasting a Trump win in November and an increase in protectionism.

  • Semi conductor exports rose by $13.4bn or 51% year on year, shipments to the US were up 15%. Shipments to China were up only 1.8% for a fourth consecutive month of growth, despite PMI's pointing to a contraction.
  • At the same time, a weaker local currency (the won) has fed into falling import demand for the country as Korean firms call for stability in the currency as a policy initiative.
  • Korean government policy has been focusing on initiatives to boost supply chain resilience and reduce dependence on China. The chart below shows that in recent months the US has passed China in terms of the largest export destination for South Korea.
  • This recent export/chip export print is likely a combination of policy impact and potential movement ahead of November and is projected to continue into year end. The BoK also stated the chip export cycle would remain a key driver of overall South Korea growth trends. The broader tech outlook, supported by continued AI investment is another support point.
  • Note next Monday we get a fresh trade update, with the first 20-days trade data for July out in South Korea.

Fig 1: South Korea Exports By Major Economy/Region, US Has Overtaken China

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A surge in exports of semi conductors to the US in June, could be symptomatic of companies forecasting a Trump win in November and an increase in protectionism.

  • Semi conductor exports rose by $13.4bn or 51% year on year, shipments to the US were up 15%. Shipments to China were up only 1.8% for a fourth consecutive month of growth, despite PMI's pointing to a contraction.
  • At the same time, a weaker local currency (the won) has fed into falling import demand for the country as Korean firms call for stability in the currency as a policy initiative.
  • Korean government policy has been focusing on initiatives to boost supply chain resilience and reduce dependence on China. The chart below shows that in recent months the US has passed China in terms of the largest export destination for South Korea.
  • This recent export/chip export print is likely a combination of policy impact and potential movement ahead of November and is projected to continue into year end. The BoK also stated the chip export cycle would remain a key driver of overall South Korea growth trends. The broader tech outlook, supported by continued AI investment is another support point.
  • Note next Monday we get a fresh trade update, with the first 20-days trade data for July out in South Korea.

Fig 1: South Korea Exports By Major Economy/Region, US Has Overtaken China

Keep reading...Show less