South Korea set a new record for exports. The Ministry of Trade, Industry and Energy (MOTIE) announced on January 1 that the amount of total exports came to US$573.9 billion (613 trillion won) in 2017. The figure went up by 15.8 percent from that of 2016, recording the highest since export statistics were first kept in 1956. The amount of daily average exports also reached a new record at US$2.13 billion (2.27 trillion won).
In addition, South Korea’s share in global exports increased to the largest ever at 3.6 percent. The nation is also expected to rank sixth in terms of global exports, climbing up two notches from eighth a year earlier. Its trade volume, including imports and exports, totaled US$1.05 trillion (1,120.38 trillion won), rebounding to the US$1 trillion level for the first time in three years. South Korea posted a trade surplus of US$95.8 billion (102.06 trillion won), up 7.4 percent from the previous year.
The export volume of 13 main items and promising consumer goods grew 16.3 percent and 13.1 percent, respectively, while that of eight new industries increased 27.5 percent, showing a double-digit growth. Nine out of 13 main items, which accounted 78 percent of the total exports, saw its exports rise. In particular, semiconductor posted US$97.9 billion (104.36 trillion won) in annual exports last year, becoming the first single item that surpasses the US$90 billion (95.94 trillion won) level.
By region, South Korea’s exports to all regions, except for the Middle East, increased. Its exports to the Association of Southeast Asian Nations (ASEAN), Vietnam and India hit a record high. As the country put up a good show in other markets, its share in exports to the Group of Two (G2), including the United States and China, slightly dropped from 38.5 percent in 2016 to 36.8 percent. This was largely due to South Korea’s efforts to diversify markets, according to market watchers.
However, it is too early to yell out a cheer. The big increase of exports last year partially stemmed from the base effect of sluggish exports of US$495.4 billion (528.44 trillion won) in 2016. South Korea should be wary of semiconductor illusion. The exports of memory chips last year grew a whopping US$35.7 billion (38.07 trillion won), or 57.4 percent, from a year ago. The figure took up 46 percent of US$78.4 billion (83.6 trillion won) of the total export increases. The rate of export increases, excluding the semiconductor sector, dropped sharply to 8.6 percent. In short, it is the result of the semiconductor boom rather than a recovery in overall exports.
With the upswing in exports, the share of semiconductor in total exports surged to 17 percent last year. The demand of memory chips is expected to maintain at the same level for a while thanks to expansion of data centers and growth of new industry, but its business can go bad quicker than expected. Yoo Jong-woo, an analyst at Korea Investment and Securities said, “With the slack in smartphone demands in China, the growth of the total smartphone memory adoptions is slowing down. It is propped up by memory chips for the server market at the moment, but the overall supply and demand is not desirable.”
In order to relieve exports weighted towards semiconductor, South Korea needs to focus on other large main industries such as automobile and vessel. However, the prospects for these industries are not so rosy this year. The car industry is facing a lower price competitiveness owing to a strong Korean won and a fiercer competition. The ship industry is also having difficulties in winning new orders and expected to see its exports of expensive offshore plants decrease.
Ju Won, a senior researcher at the Hyundai Research Institute, said, “Exports made up for a lower consumer spending and a lower investment in 2017 but it will not happen this year. When the export growth starts to flatten out earlier than expected, it can adversely affect the nation’s economic growth rate.”