As expectations for key industries, including semiconductors, improve, the manufacturing sector's business sentiment has shown improvement for the second consecutive quarter. However, six out of ten manufacturing firms anticipate that their operating profits will fall short of initial targets, indicating ongoing cost pressures.
The Korea Chamber of Commerce and Industry reported on September 27 that the Business Survey Index (BSI) for the manufacturing sector in the fourth quarter of 2026 stood at 86, a 6-point increase from the previous quarter's 80.
A BSI above 100 indicates a positive outlook for the next quarter compared to the previous one, while a score below 100 suggests the opposite. Although the overall index remains below the baseline, it has shown a gradual recovery over two consecutive quarters.
Both export and domestic companies have seen improvements in their economic outlooks. The BSI for export companies rose by 5 points to 91, driven by strong exports in key items such as semiconductors and cosmetics. Domestic companies reported a 7-point increase to 85, attributed to stabilized exchange rates and reduced import raw material costs. This marks the first simultaneous increase in the BSI for both export and domestic companies since the third quarter of 2025.
Sector-wise, the semiconductor industry showed significant growth. The semiconductor BSI surged 26 points from the previous quarter's 113 to a record high of 139, the highest since separate statistics began being compiled. The semiconductor BSI has remained above the baseline of 100 for four consecutive quarters, with scores of 120 in the first quarter, 118 in the second, and 113 in the third.
The number of sectors with positive economic outlooks has also increased significantly. While only the semiconductor sector exceeded a BSI of 100 in the previous quarter, five sectors now do so in the fourth quarter: semiconductors (139), cosmetics (120), medical and precision instruments (108), shipbuilding (103), and pharmaceuticals and biotechnology (102).
Cosmetics and medical and precision instruments saw increases of 20 points and 28 points, respectively, from the previous quarter. The shipbuilding sector benefited from increased orders for high-value vessels, while the pharmaceuticals and biotechnology sector experienced growth in exports of biosimilar products, boosting economic expectations.
In contrast, the electronics and communications BSI fell 13 points to 80, impacted by rising costs of raw materials such as memory chips, copper-clad laminates (CCL), and logistics expenses. The non-metallic minerals sector, however, rose 27 points to 88, benefiting from stabilized exchange rates and the onset of the autumn peak season.
Despite improved business sentiment, companies' profitability outlook remains bleak. Over 60% of surveyed firms expect their operating profits to fall short of initial targets this year. Of these, 43.5% anticipate missing their targets by within 10%, while 16.9% expect to fall significantly short.
Only 31.7% of respondents believe they will meet their operating profit targets, and a mere 7.9% expect to exceed them.
The primary obstacle to achieving operating profit targets, cited by 43.2% of companies, is the rising costs of raw materials and energy. Other concerns include deteriorating sales and order conditions (24.9%), increased labor costs and difficulties in securing personnel (11.7%), exchange rate volatility (6.8%), and worsening trade conditions (4.1%).
“While the manufacturing sector's outlook index has risen for two consecutive quarters due to the strong performance of some key industries and improved sentiment among export and domestic companies, six out of ten firms still expect to miss their operating profit targets,” said Kang Min-jae, head of the economic policy team at the Korea Chamber of Commerce and Industry. “There is a need for policy support to improve business conditions, including stabilizing raw material supply and alleviating energy cost burdens.”
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.