Market Update: Industrial output slides for first time in 3 months in January on chip slowdown – Full Analysis

 

Korea’s industrial output fell for the first time in three months in January as semiconductor production slowed. A rosier outlook had been forecast for the spring season, but uncertainties in the Middle East keep authorities on alert.

 

Korea’s Total industrial output, a key indicator of overall production, fell 1.3 percent in January from the previous month to 114.7 — with 2020 serving as the 100-point benchmark — data released by the Ministry of Data and Statistics showed on Wednesday. Production had recovered with a 0.7 percent increase in November of last year and a 1 percent increase in December after declining 2.2 percent in October.

 


 

The decline was driven by falling output in semiconductors and transport equipment, which pushed overall mining and manufacturing production down 1.9 percent. Semiconductor production fell 4.4 percent from the previous month, while the output of other transport equipment dropped 17.8 percent as shipbuilding slowed following large vessel deliveries late last year.

 

“The decline reflects a temporary adjustment after strong production growth,” Lee Doo-won, director general for economic trends statistics at the Data Ministry, said. “Semiconductor production appears to have peaked in September last year, and output growth has been limited since then.”

 

“Production also seems to have adjusted after two consecutive months of increases in November and December of last year due in part to base effects,” Lee added. “The timing of new smartphone launches also appears to have delayed shipments of semiconductor-related products.”

 

Despite a slowdown in production, chip exports remained strong. The value of customs-cleared semiconductor shipments surged 102.8 percent from a year earlier in January, while export volume rose 18.5 percent.

 

Lee Doo-won, director general for economic trends statistics at the Ministry of Data and Statistics, presents the January 2026 industrial activity report at the Government Complex in Sejong on March 4. [NEWS1]

 

“Semiconductor exports are increasing not only because of higher unit prices but also because of rising shipment volumes,” Cho Seong-jung, director of the economic analysis division at the Ministry of Finance and Economy, said. “Production is undergoing a temporary adjustment after strong growth, but semiconductors continue to contribute positively to the overall economy.”

 

Consumption and investment both increased on the spending side.

 

The retail sales index, which reflects consumer spending trends, rose 2.3 percent from the previous month as sales of clothing and cosmetics increased. Facility investment also climbed 6.8 percent from the previous month as spending on machinery, such as semiconductor manufacturing equipment, rose 4 percent and investment in transport equipment, such as electric vehicles and ships, expanded 15.1 percent.

 

Compared to a year earlier, facility investment rose 15.3 percent, marking the largest increase in 18 months.

 

A visitor examines SK hynix’s HBM4 chip on display at the 27th Semiconductor Exhibition at Coex in Gangnam District, southern Seoul, on Oct. 22, 2025. [NEWS1]

 

Construction activity, however, remained weak.

 

Work performed by construction companies fell 11.3 percent from the previous month as building construction declined, marking the largest decrease since January 2012, when the indicator fell 13.6 percent.

 

New construction orders, a leading indicator for future construction activity, increased 35.8 percent from a year earlier as orders rose in both building construction, such as housing, up 24.1 percent, and civil engineering projects, including railways, up 70.5 percent. The increase was the largest in five months.

 

The government remains cautiously optimistic about the economic outlook, but warns that geopolitical developments in the Middle East could create uncertainty.

 

“Rising oil prices related to the Middle East situation could affect domestic demand through inflation,” Cho said. “If the conflict continues and slows global economic growth, exports could also be affected.”

 

“Authorities are closely monitoring the potential economic impact with related agencies,” he added.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.

BY NAM SOO-HYOUN [[email protected]]