Chip cycle hits rock bottom but uncertainty lingers: Chey

The global semiconductor market has hit "rock bottom" but uncertainties remain high amid growing protectionism and lingering concerns about China’s economy, a key to the recovery pace of the global economy, SK Group chair said.

“I hope for a recovery (in the semiconductor cycle) in the first half of next year at the earliest but that remains to be seen,” said SK Group Chairman Chey Tae-won said during an end-year press conference held at the Korea Chamber of Commerce and Industry (KCCI) on Monday.

SK Group owns the world’s second-largest memory chip maker SK Hynix Inc., and Chey is also the chair of the Korean business lobby group.

“The semiconductor cycle is breaking away from rock bottom,” said Chey. “(But) chip prices should recover more, while chip supply and demand remain imbalanced.”

He noted that the recent chip market recovery has been led by DRAM, whereas the NAND flash memory market remains almost dormant.

SK Hynix has logged a cumulative loss of about 10 trillion won for four consecutive quarters since the fourth quarter of last year.

But it significantly narrowed loss in the third quarter ended in September this year after its DRAM division swung to a profit thanks to a surge in demand for high bandwidth memory (HBM) chips on the artificial intelligence boom.

NAND demand, however, shows no sign of a recovery amid fierce competition in the market.

PROTECTIONISM A THREAT

Chey also voiced concern that excessive investment to lead technology development amid growing protectionism on the global trade front could cause a setback in the global chip market.

Trade protectionism focusing on the protection of the local market will pose a threat to the Korean market, which is “small but crowded with many suppliers,” said Chey.

He also projected a recovery in the global and domestic economy in the latter half of next year, and the key to the recovery is the Chinese economy, the world’s second-largest after the US.

“An imminent recovery in the Chinese recovery is unlikely,” said Chey. “I expect China would start showing signs of a recovery at the end of next year, and our country (Korea) is expected to follow suit.”

He emphasized that it is important for Korea to maintain a partnership with China, as the world’s No. 2 economy is Korea’s largest trading partner.

He also reiterated the importance of forging a new level of economic ties between Japan and Korea.

“It is time to collaborate,” said Chey. “We are working with the Japanese Chamber of Commerce and Industry to find ways to create synergy.”

Regarding Beijing-Washington relations, the SK chief projected their political and economic tensions to continue, no matter who will be the next US president.

Write to Jeong-Soo Hwang at hjs@hankyung.com

Sookyung Seo edited this article.