South Korea’s declining exports are predicted to turn around in the first quarter of next year on the back of rising demand for chips and recovery in the global economy, a trade association said on Oct. 27.
“The nation’s exports are expected to bottom out this month and turn positive from the first quarter of next year due to the recovery in chip unit prices,” said Moon Byung-ki, a senior researcher at the Korea International Trade Association’s trend analysis division, in a report released on the day.
Korea’s exports have declined for 10 straight months due to the sluggish global economy and a slowdown in demand for memory chips. In the period from January to September, exports amounted to $420.2 billion, down 9.8 percent on-year.
“Next year, Korea’s chip exports are expected to grow 10 percent due to rising demand for high capacity memory for smartphones, the 5G network and solid-state drives,” Moon said.
“Demand for NAND and DRAM will exceed supply from the first quarter and the second quarter next year, respectively. This will normalize inventory levels and prices will rebound,” the report said, adding the main factor is the recovery of demand for large-scale data centers from global tech firms, such as Google and Facebook.
KITA predicted the global chip market would grow 6 percent on-year and the global memory chip market would rise 12 percent in 2020. Currently, Korean chipmakers have a 64 percent share in the global memory chip market and a 19 percent share in the global foundry market.
The report also attributed the positive outlook to the global economic recovery. It predicted the growth rate of global trade would be at 2.7 percent next year, compared to 1.2 percent this year.
The global economy is expected to recover in line with the US and China’s closing in on small trade deals that lead to easing trade tensions and major nations’ stimulus effects, including quantitative easing, according to KITA.
“With the recovery of the global economy, exports are expected to rise, centering on chips, shipbuilding, machinery and new industries such as secondary batteries and bio-health,” the researcher said.
The diversification of Korea’s market share in major import markets such as the US, India, and Russia, will also contribute to the export recovery. “Currently, China is Korea’s biggest export destination, but the reliance on China has steadily been declining while exports to other markets have been growing,” KITA said.
By Shin Ji-hye(firstname.lastname@example.org)