In October, Korea’s exports turned positive for the first time in 13 months, and the nation’s trade balance has been positive for five consecutive months since June. It was the first time in 20 months since February 2022 that exports rebounded and the nation posted a trade surplus at the same time.
According to October export and import data released by the Korean Ministry of Trade, Industry and Energy (MOTIE) on Nov. 1, exports increased 5.1 percent year on year to US$55.09 billion while imports were US$53.46 billion, down 9.7 percent from the same month of 2022. This resulted in a trade surplus of US$1.64 billion in October, continuing a streak of consecutive surpluses since June.
This was largely due to a strong turnaround in semiconductor exports, Korea’s main export item. In October, semiconductor exports amounted to US$8.94 billion, down 3.1 percent from the same month of 2022. The rate of decline was the lowest since August of last year.
Semiconductor export growth bottomed out at -40 percent in the first quarter of this year after turning negative (-3.9 percent) in the third quarter of last year. Since then, the growth rate has continued to climb to -34.8 percent in the second quarter of this year and -22.6 percent in the third quarter.
In particular, exports of memory semiconductors reached US$4.51 billion in October, up 1 percent from the same month of 2022. Compared to October of last year (US$4.47 billion and -35.7 percent), analysts regard it as a sign of a rebound after exiting a recessionary tunnel. This was driven by the visible effects of memory cuts by Samsung Electronics and SK hynix in the first half of the year and expanding demand for chips for new smartphones and high-value products for artificial intelligence (AI) servers.
Pricing conditions also improved in October, with both spot and fixed prices for DRAM and NAND flash rising.
Exports to China, once the country with which Korea enjoyed the largest trade surplus, have been on the skid for 18 consecutive months since turning into a deficit in May 2022. However, exports to the rest of the world showed signs of improvement, driven by a recovery in semiconductor exports. In October, exports to China reached US$11 billion, marking the third consecutive month of over US$10 billion in exports since August.
The decline of semiconductor exports to China also slowed down from -44.6 percent in the first quarter of this year to -34.7 percent in the second quarter, -34.8 percent in the third quarter, and -2.9 percent in the first 25 days of October. While concerns about China’s economic slowdown persist since the country’s reopening, the decline in Korea’s semiconductor exports to China has improved significantly. Semiconductors are Korea’s largest export item to China.
As a result, the decline of Korea’s exports to China was -9.5 percent, the lowest this year. On a year-over-year basis, the decline of exports to China has been on a steady decline, with -24.9 percent in July, -19.9 percent in August, and -17.6 percent in September, following -29.7 percent in the first quarter and -22.2 percent in the second quarter.
However, Korea’s trade deficit grew to US$1.55 billion in October, up from US$140 million in September. Its trade balance with China has also been on the decline this year. But the deficit swelled in October due to the launch of the iPhone 15 in Korea.
Much attention is being paid to whether Corporate Korea’s October export report, which broke the 13-month negative trend, can be seen as a sign of a full-fledged recovery.
The Korean government is hopeful that stable upward momentum will continue in exports for the time being. This is because the country’s main export items -- automobiles, ships, and general machinery -- are showing strong export growth momentum, and semiconductor exports are beginning to rebound.
Experts say that it remains to be seen whether Korean exports have fully recovered by the end of 2023 but it is positive that semiconductor exports to China are on the uptick after bottoming out.