Chip Output Adjustments Drag Down S. Korea’s Industrial Production in May

South Korea's industrial output fell in May from a month earlier due mainly to a decline in chip production caused by a base effect and volume adjustments, data showed on Tuesday, while retail sales rebounded slightly over the period.

Industrial production fell 0.3 percent last month from April, according to data from the Ministry of Data and Statistics, extending on-month losses for two consecutive months, reports Yonhap news agency.

Output in the mining and manufacturing sector, a key pillar of the economy, fell 3 percent due to a decline in the production of chips and pharmaceutical products, while that of the automobile sector increased.

The Ministry of Finance and Economy said the overall decrease in the industrial output came amid disruptions in the supply of raw materials following the Middle East war, along with an adjustment in chip production, which had recently increased sharply.

In detail, the production of the semiconductor industry fell 10 percent, with the data ministry citing a decrease in the shipment of memory chips, including dynamic random-access memory (DRAM), due to a base effect and volume adjustments.

"The fundamentals of the chip sector remain strong," Lee Doo-won, a senior official at the data ministry, told reporters. “With chipmakers' production capacity reaching its limits, there were some adjustments in line with shipment schedules.”

"If new chip fabs launch operations in a full-fledged manner, we believe there will be an increase not only in terms of value but also in volume," Lee added.

Output of pharmaceutical products fell 17.5 percent, while vehicle production gained 2.7 percent over the period.

The data ministry said output in the service sector rose 1.3 percent on-month in May, led by stronger performance in the finance and science industries.

Retail sales, a gauge of private spending, rose 0.1 percent over the period, led by automobile fuel and cosmetics.

In detail, sales of durable goods, such as automobiles, fell 3.4 percent over the period, while those of non-durable goods, such as fuel, as well as semi-durable goods, including clothing, moved up 0.9 percent and 2.3 percent, respectively.

Facility investment decreased 0.1 percent in May from a month earlier due to the weak performance of the machinery industry, the data showed.

Investment in the transportation segment moved up 0.2 percent, while that in the machinery industry, including precision equipment, fell 0.2 percent.