While production in key sectors like semiconductors and shipbuilding has increased, a nearly 30% drop in automobile production has prevented a recovery in South Korea's manufacturing sector. Although exports from the 13 major industries have surged, manufacturing output remains uneven across sectors.
According to the National Assembly Budget Office's NABO Industrial Trends & Issues report released on October 25, manufacturing output fell by 2.4% in August compared to the same month last year. This marks a shift from increases of 6.5% in June and 4.3% in July.
The decline in manufacturing output is largely attributed to poor automobile production, which decreased by 29.4% year-on-year in August. Month-over-month, production dropped by 24.8%, the largest decline among major sectors. Temporary factors, such as reduced working days due to summer vacations, also contributed to this downturn.
Excluding automobiles, production trends in other major manufacturing sectors were mixed. Production of computers and peripherals fell by 15.1%, while textiles decreased by 9.9%. Production of petroleum and home appliances also declined by 3.1% and 1.0%, respectively.
In contrast, semiconductor production rose by 1.4% year-on-year. General machinery and shipbuilding saw increases of 13.5% and 13.0%, respectively, both achieving double-digit growth rates. Steel and wireless communication devices also experienced increases of 3.9% and 3.2%. Despite some sectors showing year-on-year growth, monthly trends indicate adjustments.
The decline in manufacturing output has impacted overall industrial production. In August, total industrial production increased by 1.9% compared to the same month last year, but the growth rate slowed from 4.5% in June and 3.1% in July. Month-over-month, total industrial production fell by 1.3%. While service sector production rose by 4.6% year-on-year and construction by 1.3%, mining and manufacturing, which includes manufacturing, saw a 2.2% decline. Month-over-month, mining production decreased by 4.8%.
A significant gap in manufacturing output between large and small enterprises was also evident. According to the National Statistical Office's KOSIS manufacturing production index by company size, the index for small enterprises in August 2026 was 83.9, down 4.0% from the same month last year. Large enterprises also saw a 1.8% decrease, but the decline for small enterprises was more than double.
From January to August this year, cumulative production for small enterprises fell by 0.8% compared to the same period last year, while large enterprises increased by 2.9%. Small enterprise production has now declined for four consecutive years since 2023. The semiconductor-led export boom has not translated into broader manufacturing recovery, and the 29.4% drop in automobile production in August has also impacted small suppliers that provide parts to finished vehicle manufacturers.
This production downturn contrasts sharply with export figures. The report indicates that in September, exports from the 13 major industries reached $103.84 billion, a 103.9% increase compared to the same month last year. This follows increases from $81.64 billion in July and $83.0 billion in August.
Notably, semiconductor exports surged by 262.8% year-on-year to $60.3 billion, driven by rising demand related to artificial intelligence and increasing memory chip prices. Semiconductors have been the primary driver of overall export growth.
However, it is premature to interpret the strong export performance as a sign of recovery in overall manufacturing production. In August, manufacturing output showed only a slight increase in semiconductors, while key sectors like automobiles experienced significant declines, and average manufacturing utilization rates and shipments also fell.
A representative from the Budget Office stated, "The August manufacturing production figures indicate that despite increases in semiconductors and some sectors, overall manufacturing production can still decline. To assess the recovery of the manufacturing sector, it is essential to examine not only total export figures but also production trends by sector and areas experiencing continued declines."
* This article has been translated by AI.
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