Chips’ inventory-to-sales ratio hits 26-yr high amid poor demand

Seoul: Inventory of South Korean chipmakers has increased to a nearly 26-year high in January, data showed Sunday, reflecting the sluggish global demand amid the economic uncertainties.

The inventory-to-sales ratio of chips came to 265.7 per cent in January, the highest since 288.7 per cent posted in March 1997, according to the data compiled by Statistics Korea.

A higher ratio generally indicates that companies are facing more hurdles in selling their products, although the figure may rise when manufacturers stock up for large shipments, reports Yonhap news agency.

A rise in the ratio may also induce chipmakers to reduce production or lower prices further to maintain sales.

Exports of semiconductors, the country’s key export item, dived 42.5 per cent to $5.96 billion in February from a year earlier amid the downcycle of the semiconductor industry.

With Asia’s No. 4 economy depending highly on the chip industry, South Korea’s exports fell for the fifth consecutive month in February, sinking 7.5 per cent on-year to $50.1 billion.

The country’s overall outbound shipments, meanwhile, edged up 0.8 per cent over the period, when excluding chips, separate data from the trade ministry showed earlier.

Last week, Finance Minister Choo Kyung-ho called for the National Assembly to promptly pass a bill on providing more tax incentives to chipmakers amid the prolonged downturn in exports.

Under the proposed tax code revision, the government will apply a higher tax credit rate of 15 per cent on facility investment in the chip industry for conglomerates, which is above the revision of 8 per cent passed at Parliament in December.