2 min

The semiconductor stockpiles in South Korea grew at the quickest pace since April 2016, threatening the export that produces the country’s economic growth.

Recent reports show that the semiconductor stockpiles of South Korea have seen rapid growth for more than six years. As a result, bad signs emerge related to the export outlook.

The statistics office revealed on Friday that the national inventory climbed to 79.8 percent from May to June. The inventory sat at 53.8 percent in the same period last year. Shipment and product inventory descended simultaneously, indicating a noticeable slowdown in the country’s most lucrative industry.

Huge inventory expansion

The result puts a deep hole in the economic outlook, where the central bank is in the middle of its annual tightening cycle. Memory chips are globally traded and support the power of the won, the lowest performing currency in Asia, as the trade shortfalls.

The chips stock in Korea jumped amidst a two-year export collapse, resulting in a massive rise of chip inventory by 104 percent in 2016.

The growth in stockpiles is driven by Samsung Electronics and SK Hynix, the world’s largest and leading memory chip manufacturers. Both firms warn that future sales in South Korea may decline, leading to increased concerns of global shortages as the price increases.

Memory chips are tiny but crucial components used in every smart device, from mobile phones and CPUs to cars. Both the companies’ share expenses multiplied in the last weeks as investors expect the companies may cut the capital export, a decision that would squeeze the overall supply.

According to economists, the overall trade production in South Korea increased by 1.4 percent in June, resulting in less than 2.1 percent sales.