Semiconductor Industry Still in Trouble

The semiconductor industry, one of Korea`s devoted businesses, continues to have difficulties.

With the trade balance of the industry in a quagmire of deficits, the U.S and the European Union (EU) are carrying out an investigation to impose countervailing tariffs on the South Korean DRAM.

According to the Ministry of Commerce, Industry and Energy and semiconductor experts on April 22, the trade balance for March saw all-time high 646 million won in deficit with the export of 1.3 billion and the imports of 1.96 billion won. The cumulative deficit from January to March this year stood at 1.83 billion won, surpassing a total of 845 million won in deficit last year.

The trade balance of the nation’s semiconductor industry continued to rise for 13 years since it saw the surplus in 1988. However, it has been in the red since 2001 and is very likely to see a deficit this year for the three consecutive years.

“The important parts of the country’s key products, including mobile phones, PCs, and PDAs, are heavily dependent on imports,” said Choi Seok-po, a semiconductor industry analyst at Woori Securities. “Moreover, the rate of the local development of the parts is very low. So there is a structural problem that the more IT products are produced, the worse the trade balance becomes.”

The price of the major exporting memory chip DDR256M has fallen to 3.25 dollars, more than half down from 8.12 dollars in November last year. In addition, the growth rate of export for March has fallen for the first time since April last year.

The U.S. Department of Commerce decided to impose a high import duty of 56% on memory chip shipments by Hynix in its preliminary ruling at the beginning of this month. Now it is conducting an inquiry in Korea from April 21. The U.S will make a final decision at the end of August.

The export of DRAM to the U.S and the EU are highly likely to diminish further as the EU is expected to make a preliminary ruling of imposing countervailing tariffs on the South Korean memory chip.

In addition, Taiwan’s four memory chipmakers called the Taiwanese government for imposing countervailing tariffs on the Korean semiconductors on April 17, claiming that the Seoul government provided subsidies to the semiconductor company.

“It is worried that China will rapidly fill the gap of semiconductor competitiveness between the two countries while Korea’s semiconductor industry has been flinching,” said Analyst Choi.

Ja-Ryong Koo bonhong@donga.com