The semiconductor supercycle driven by the artificial intelligence (AI) boom boosted production and investment across industries in September. As semiconductor output logged the biggest increase in 2 years and 6 months, it, together with services, led overall industrial production. Investment in semiconductor manufacturing equipment and factory construction was also active, supporting the rise in investment. However, the Ministry of Economy and Finance said the impact of strong semiconductor performance was only partial, and that the effects of the new government's policies and previously increased construction orders were larger.
According to the September industrial activity trends that the National Data Office released on the 31st, the all-industry production index (2020=100) was 115.5, up 1.0% from the previous month. This was the biggest increase in three months since June (1.6%).
Mining and manufacturing production fell 1.2% due to weakness in automobiles and machinery, but service output rose 1.8% on increased stock trading and the distribution of consumer coupons, marking the largest gain in 31 months.
The standout sector was clearly semiconductors. Semiconductor production in September jumped 19.6% from the previous month, the largest increase since March 2023 (26.5%). The National Data Office analyzed that it was due to a surge in demand for high-performance memory amid expanding demand from AI and data centers.
The investment front also benefited from the semiconductor boom. As investment in semiconductor manufacturing equipment surged 28% from the previous month, facility investment rose 12.7% from a month earlier. It was the largest increase in seven months since February (21.3%).
Construction completed, which had been sluggish, also increased 11.4% from the previous month. It was the biggest gain in 20 months since January last year and rebounded for the first time in three months. By detail, the building segment rose 14.8% and civil engineering increased 2.9%.
Lee Du-won, Deputy Director General for Economic Trends and Statistics at the National Data Office, said, "As construction of semiconductor plants by Samsung and SK hynix has picked up, investment in the building segment increased significantly," adding, "Investment in semiconductors and transport equipment also led the broader investment expansion."
◇ National Data Office and Ministry of Economy and Finance (MOEF) split on semiconductor impact and outlook for production and investment
The Ministry of Economy and Finance's interpretation, however, is somewhat different. Cho Seong-jung, Director of the MOEF's Economic Analysis Division, said, "While construction of semiconductor plants did have some impact on the increase in construction completed, it appears to be the effect of the expansion in construction orders that has continued since the end of 2023," and added, "As uncertainty has been resolved through tariff negotiations and corporate sentiment has improved, there is a strong possibility this will lead to an uptrend in facility investment."
Assessments of the economic recovery also diverged. The National Data Office sees the semiconductor boom as having driven short-term improvements in production and investment, but is cautious that it is premature to view it as an economic recovery.
Deputy Director General Lee Du-won of the Data Office said, "Although construction completed increased significantly from the previous month, it was still down 4.3% from a year earlier," adding, "It is difficult to conclude this is a sustained recovery." The Data Office also added, "Facility investment shows large monthly volatility," noting, "There is also a possibility of a temporary increase."
By contrast, the Ministry of Economy and Finance viewed the impact of domestic demand-boosting policies and increased construction orders as larger than that of semiconductors, and expected that for the time being service output and construction completed would remain strong.
Director Cho Seong-jung said, "Since the launch of the new government, the recovery trend has continued," adding, "Although retail sales fell from the previous month, service output, which reflects service-sector consumption, posted the biggest increase in 31 months, indicating that the overall improvement in consumption and domestic demand is continuing."
Cho added, "There are expectations for the semiconductor cycle, and stock prices are also on the rise," adding, "It is difficult to capture in figures, but it will likely have a positive impact on fourth-quarter consumption."