While semiconductor exports are reaching record highs, the domestic manufacturing sector is struggling to recover. Following declines in manufacturing sales and the business sentiment index (BSI) in the third quarter, expectations for a rebound in the fourth quarter are dimming.
According to a report released by the Korea Institute for Industrial Economics & Trade on October 18, the BSI for manufacturing sales in the third quarter fell to 87, down 6 points from the previous quarter's 93. The BSI for business conditions also dropped by 1 point, from 90 to 89 during the same period.
The BSI is an indicator reflecting the economic conditions perceived by businesses. A score above 100 indicates improvement compared to the previous quarter, while a score below 100 suggests deterioration. This survey was conducted from September 7 to 18 among 1,500 domestic manufacturers.
The sluggish sentiment in manufacturing contrasts sharply with the record export performance. According to the Korea Customs Service, exports last month reached $121.1 billion, a staggering 83.7% increase compared to the same month last year, marking the highest level ever recorded. Of this, semiconductor exports surpassed $60.5 billion for the first time, exceeding the $60 billion mark. From October 1 to 10, semiconductor exports also reached $12.2 billion, setting a record for that period.
However, the disparity between export figures and business sentiment remains evident. The BSI for semiconductor sales in the third quarter fell to 89, a significant drop of 15 points from the previous quarter's 104. Other sectors, including automotive (79), steel (75), and textiles (73), also showed notable declines. In contrast, sectors such as displays (97), secondary batteries (95), and oil refining (94) reported improvements compared to the previous quarter.
Businesses also expressed negative evaluations regarding domestic and export conditions. The BSI for domestic sales in the third quarter decreased by 2 points to 88, while the export BSI fell by 4 points to 92. Both facility investment and employment figures remained below the benchmark at 99.
The outlook for the fourth quarter is similarly bleak. The BSI for manufacturing outlook remains unchanged at 97, while the sales outlook BSI dropped from 99 to 97. The domestic outlook is at 96, and facility investment is at 99, both below the benchmark. Exports and employment are expected to remain stable at 100, matching the previous quarter's levels.
By sector, the BSI for the information and communication technology (ICT) sector's fourth-quarter sales outlook is at 99, close to the benchmark. Machinery and new industries are at 97, while materials lag behind at 95. Only the wireless communication devices (103) and displays (102) sectors exceeded the benchmark.
Disparities based on company size were also evident. The fourth-quarter sales outlook BSI for large companies is at 104, exceeding the benchmark for two consecutive quarters, while small and medium-sized enterprises remain at 95. In the third quarter, the sales BSI for large companies was 93, compared to 84 for small and medium-sized enterprises.
Factors complicating business operations include increased raw material costs, cited by 53% of respondents. Other concerns include weak domestic demand and inventory accumulation (38%) and ongoing external uncertainties (34%).
* This article has been translated by AI.
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