The chips are down, and Korea Inc. is feeling the pain

Consumers browse home appliances in a retail shop, Seoul. [NEWS1]

Semiconductors, Korea's biggest export, are not saving the day.

After 26 consecutive months of growth, chip exports fell, declining 7.8 percent on year in August.

The decline comes as demand for electronic devices flags and inventories, of devices and chips, balloon. It also comes as the prices of memory products, such as dynamic random-access memory (DRAM) and NAND flash chips, decline.

In the third quarter, DRAM prices are forecast to be down 10 percent on year, according to Kim Uno, an analyst at IBK Securities.

DRAM prices fell 0.6 percent to 3.4 percent in the first week of September, depending on the type of products, according to market tracker DRAMeXchange. NAND flash prices are on the decline too as clients already hold high levels of chip inventories.

"Since sellers are no longer locked into fixed pricing, NAND flash price declines in the third quarter expanded from the original forecast of 8-13 percent to 13-18 percent quarter on quarter," market tracker TrendForce noted in an August report featuring the latest revision of its forecast.

A fall in exports is significant for Korea, which has been running a trade deficit for five consecutive months, and for its largest companies, some of which are highly dependent on semiconductors for their growth and profit.

Chips, even more than K-pop, cars and phones, are central to the country's success.

"The outlook for the second half is far from good, and next year also shows no signs of recovery," Kyung Kye-hyun, the chip CEO at Samsung Electronics, said last week.

Micron CFO Mark Murphy blamed "broad-based inventory adjustments."

"Smartphones are those hit the hardest by weak demand, followed by PCs and servers," said Nam Dae-jong, an analyst at eBest Investment & Securities, projecting smartphone shipments to fall by 8 percent this year.

Global PC shipments will decrease by 17 percent, back to pre-pandemic levels.

The consensus estimates for third quarter operating profit at Samsung Electronics is now 13.6 trillion won, down from an earlier forecasts of 16.3 trillion won.

"We predict revenue of 79.1 trillion won and operating profit of 12.7 trillion won, which is below the consensus estimate of 13.6 trillion won. Ongoing won weakness will likely help revenue, but semiconductor chip shipments and prices are falling faster than expected due to anemic demand," Nam said in a report.

Doh Hyun-woo, an analyst at NH Investment & Securities, revised down his projection for SK hynix's operating profit for the third quarter to 2.32 trillion won.

"Sluggish sales of tech devices and lower investment by clients into data centers have weighed on demand for chips," the analyst noted.

Shares of Samsung Electronics are down 27 percent over the past year and hit a fresh 52-week low to close at 55,600 won on Thursday. SK hynix is down 15 percent over the past year. It was flat at 90,400 won.

Over the same time period, the S&P 500 is down 12 percent.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]