First announcement of the government’s semiconductor forecast…”The big cycle is coming to export 100 billion won”

Input 2021.01.05 11:00

“There is only semiconductor”… the government gives the first’semiconductor prospect’
This year, the world’s second largest semiconductor export and No. 1 investment… Prices and exchange rates are variables

The government predicted that this year, semiconductor exports will increase by 10.2% year-on-year, exceeding $100 billion in exports for the second time in history. In the past, import and export statistics have mentioned semiconductor export performance, but this is the first time that only semiconductors have been published separately. For export prospects, organizations related to industry and exports, such as the Korea Trade Association, Korea Development Bank, and Korea Industry Research Institute, all dispatched.

These changes can be seen in the government’s desperate need for’semiconductor export’ to save semiconductors amid the Corona 19 crisis this year and to rebound this year. As the demand for semiconductors surged due to the revitalization of the non-face-to-face economy and the increase in telecommuting due to the novel coronavirus infection (Corona 19), semiconductors accounted for nearly 20% of exports last year. It is also a scene that shows the cross-section of the Korean economy that there is no clear flagship industry that can lead the economic recovery except for semiconductors.

However, after peaking in 2Q, semiconductor prices and the strong won exchange rate are expected to be variables for this year’s semiconductor exports and profitability. In addition, it is also a homework to reorganize the semiconductor industry, which was previously centered on DRAM, into high value-added areas such as NAND flash and foundry businesses such as system semiconductors, image sensors, and communication chips.

◇ This year, the world’s second largest semiconductor export and No. 1 investment… Big cycle is coming

On the 5th, the Ministry of Trade, Industry and Energy predicted that this year’s semiconductor exports would increase by 10.2% from 107.5 billion dollars to 11 billion dollars (standard forecast of 109.3 billion dollars) from last year (99.2 billion dollars). This is because the demand for semiconductors in the fields of servers, 5G (5th generation), PC/smartphone, and mobile is rapidly increasing due to the Corona 19 incident. By institution, the Korea Trade Association predicted an increase of 5.1%, the Korea Development Bank 9.4%, and the Korea Industrial Research Institute 13.1%.

Semiconductor exports exceeded 100 billion dollars, the second time since 2018 (126.7 billion dollars) during the semiconductor supercycle. Through this, Korea is expected to become the second largest semiconductor exporter after the United States.

“This is the first time that a separate forecast for the semiconductor market has been released,” said Jo Ik-no, head of the Department of Industry’s Semiconductor Division. “We have made a forecast through data from world-renowned research institutes and our own analysis.”

The semiconductor industry has played a supporting role in the Korean economy by leading the recovery of exports in the global economic recession caused by Corona 19 last year.

In fact, along with Corona 19, even with Huawei’s sanctions, last year’s semiconductor exports recorded 99.2 billion dollars, an increase of 5.6% from the previous year (93.9 billion dollars). Semiconductor exports declined 0% in April last year due to Corona 19, and then turned to an increase of 5.6% in July. Since then, it has increased for six consecutive months, 2.8% in August → 11.8% in September → 10.4% in October → 16.4% in November → 30% in December.

According to DRAMeXchange, a semiconductor market research institute, global laptop shipments last year were 18.63 million units, up 14.4% from the previous year. In fact, the PC/laptop market, which was evaluated as a declining industry, is attracting attention again thanks to telecommuting and online education according to Corona 19.

The government predicted that the big cycle of the semiconductor industry will come this year. With the global economy expected to grow by around 5% and world trade by 7.2% this year, the global semiconductor market is expected to record a growth rate beyond that.

An official from the semiconductor industry said, “It seems that this is the first time that the government has announced the prospect of the semiconductor market directly, other than the prospect that comes out internally by the Semiconductor Association, etc.” “It seems that statistics came out in the sense of crisis.”

Market research firms Omdia, World Semiconductor Market Statistics Organization (WSTS), and Gartner forecast that this year’s global semiconductor market will increase by 8-10% compared to the previous year, and the memory market will increase by 13-20%. In particular, it is predicted that demand from downstream industries such as mobile (40%), server (35%), and PC (13%) will increase rapidly due to the expansion of the 5G market and the continuing spread of the non-face-to-face economy.

Investment this year is also expected to reach $72 billion, up 4% year-on-year due to improved semiconductor market conditions. According to the International Semiconductor Equipment and Materials Association (SEMI), global semiconductor equipment investment is expected to increase 4.1% this year and 6.4% next year. Through this, it is expected that Korea will retake the No. 1 position in facility investment, which was lost to China and Taiwan in 2019 after the 2017-2018 semiconductor supercycle, in two years.

◇Dram prices taken at the bottom are rebounding… Exchange rate is also variable

However, after peaking in 2Q, semiconductor prices and the strong won exchange rate are expected to be variables for exports and profitability. In addition, it is expected to reorganize the semiconductor industry, which was previously centered on DRAM, into high value-added areas such as NAND flash and foundry businesses such as system semiconductors, image sensors, and communication chips.

According to DRAMeXchange, the price per PC DRAM (DDR4 8Gb) reached $3.31 in June last year, and then dropped to $2.85 last month. That’s a 13.9% drop in price in six months. Considering the fact that it was $2.81 in December 2019, it means that the one-year increase was actually returned.

According to the Bank of Korea, the import and export price index in November last year was 91.96, down 0.8% from the previous month. Export prices, which fell four months from last August, reached the lowest level in 35 years and 11 months since December 1984 (91.09). The decline continued for 18 consecutive months, down 4.9% from the same month last year. This is because the won-dollar exchange rate is plummeting along with the drop in semiconductor prices such as DRAM (-2.4%) and flash memory (-4.7%).

Compared to the set (finished products) sector such as home appliances and mobile phones, which are mainly produced in overseas factories, parts such as semiconductors and displays, which are produced in Korea, are sensitive to fluctuations in exchange rates. On the 4th, the won-dollar exchange rate recovered to 1082 won after recording 1080.3 won at one time in the afternoon. The intraday exchange rate recorded 1080.3 won, the lowest level in about two years and seven months since June 12, 2018 (1072.70 won). Compared to the average exchange rate in September (1178.80 won), it plunged 8.4%.

However, experts predict that prices will rise as demand surges compared to the supply of DRAM from the first quarter of this year. Until the fourth quarter of last year, DRAM supply was 1.2% higher than demand. However, from the first quarter of this year (-0.9%) to the second quarter (-1.3%) → the third quarter (-3.0%) → the fourth quarter (-3.1%), supply is expected to become insufficient.

The Ministry of Industry is planning to improve the constitution through reorganization of the semiconductor industry. System semiconductor exports last year reached a record high of 30.3 billion dollars. On an annual basis, it surpassed steel and petroleum products to become the fifth largest export item (7th last year). This year, system semiconductors are expected to grow 5.5%, including growing demand for foundry consignment.

“The Korean semiconductor industry is centered on memory semiconductors such as DRAM and NAND,” said Han Tae-hee, a professor at Sungkyunkwan University’s Department of Semiconductor System Engineering. Samsung Electronics is expected to make significant progress this year in the high value-added semiconductor market such as foundries and image sensors, and Hynix is ​​also expected to strengthen its controller competitiveness in the mid to long term with the acquisition of Intel NAND.”