Shulou(Shulou.com)11/24 Report--

South Korean giants Samsung Electronics and SK Hynix have said they plan to cut investment spending, and TSMC, the world's largest contract chipmaker, has expressed similar expectations.

South Korean exports have long been a barometer of global trade.

Major chipmakers Micron, Nvidia and Intel have all warned of weak export orders in recent weeks, Bloomberg reported Aug. 17.

Gartner predicts that one of the industry's biggest boom cycles is likely to end abruptly. The research firm cut its revenue growth forecast for 2022 to just 7.4% from 14% three months ago.

Memory chips are one of the most volatile parts of the $500 billion semiconductor market, and sales of Samsung and SK Hynix's DRAM are crucial to South Korean trade.

Demand for DRAM is likely to grow by 8.3 per cent next year, the weakest single-digit growth on record, and supply is expected to grow by 14.1 per cent, according to Jipang. Bit growth refers to the amount of memory produced and is a key barometer of global market demand.

South Korea's exports will be boosted when the growing demand exceeds supply. But with supply likely to grow almost twice as fast as demand next year, exports are likely to fall sharply.

Potential victims will also include Samsung, the world's largest maker of memory chips and the key to South Korea's trade-dependent economy.

Samsung achieved rapid sales growth when demand was strong relative to supply. As the outlook for chips darkens, Samsung shares have been falling this year, occasionally rebounding on better-than-expected profits.

Samsung and SK Hynix control about 2/3 of the global memory market, which means they have the ability to narrow the gap between supply and demand.

In recent years, the Philadelphia semiconductor index, including these companies, has fluctuated along with memory demand.

South Korean exports have long been closely linked to global trade, which means that the global economy faces disadvantages such as geopolitical risks and rising borrowing costs, which means their decline will add to signs of trouble.

Micron, the world's third-largest memory maker, last week warned of deteriorating demand, triggering a global sell-off in chip stocks.

The South Korean stock market has been one of the most important indicators of the country's trade performance, with investors selling shares before exports fell.

"this trend is important for Asia because its economic cycle is very dependent on technology exports," said Alicia Garcia Herrero, chief Asia-Pacific economist at Natixis SA. "the decline in new orders and the accumulation of large inventories mean that the East Asian technology industry will have a long destocking cycle and lower profit margins."

The International Monetary Fund lowered its global growth forecast last month and said 2023 could be harder than this year.

Deutsche Bank expects the United States to begin recession in mid-2023, and Bloomberg's economic model puts the likelihood of a recession in the United States at 100% over the next 24 months.

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