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Korea's chip biz faces exploding trade gap

Exports != imports

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Korea continues to import more chips than it's exporting, the country's Semiconductor Industry Association has announced - but during the first quarter of the year, the trade gap ballooned by a massive 1.29 trillion win ($1.08 billion).

During Q1, Korea exported 4.89 trillion won ($4.08 billion) worth of semiconductor products. It imported 6.19 trillion won ($5.16 billion) worth.

The gap widened explosively from the middle of the quarter onwards. January's exports outweighed imports by $4 million, but by March that figure had become a $650 million deficit.

Trade deficits are not unusual for Korea's semiconductor industry. Last year, Korea's chip industry only experienced a trade surplus in March ($10 million), April ($120 million) and June ($1 million) - none of them huge sums. And the Korean chip industry has been in deficit for the last two years after posting a $6.08 billion surplus in 2000.

However, the Korean Semiconductor Industry Association (KSIA) fears that this time the longer terms effects could be much worse than before, primarily because they come on top of the problems the region is facing coping with SARS. The KSIA doesn't blame the disease for the industry's woes - at least not directly. Instead, it blames weakening DRAM prices - and thus revenues. DRAM is traditionally a key Korean export. And one of its major producers, Hynix, will soon face significant tariffs on memory exports to the US and Europe. Meanwhile, the market as a whole is weakening.

So much for exports - what about imports? Increased demand among Korean manufacturers for non-memory parts - not one of Korea's strengths - is proving harder for local manufacturers to satisfy. The upshot: imports are ballooning - likewise, the Korean chip business' trade gap. ®

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