South Korea Chip Stockpiles Drop Amidst Surge In AI Chip Demand

Semiconductor inventories in South Korea drop by biggest amount since 2014 as Samsung, SK Hynix see surging demand for AI infrastructure

South Korean semiconductor firms’ inventories have fallen by the largest amount since 2014 in the latest sign of how demand for generative artificial intelligence (AI) infrastructure is driving chip sales.

Inventories declined by 33.7 percent in April over a year earlier in the largest drop since late 2014, according to data from South Korea’s national statistical office.

April marked the fourth month of declines in inventories, a sign that demand is outstripping companies ability to supply it.

Chip production rose 22.3 percent year-on-year in April, down from 30.2 percent a month earlier.

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AI chip demand

Factory shipments increased 18.6 percent compared to 16.4 percent the previous month.

South Korea’s Samsung Electronics and SK Hynix are both memory suppliers to graphics chip maker Nvidia, whose dominance of the market for AI acceleration chips has seen its shares rise about 129 percent this year, valuing the company at more than $2.7 trillion (£2.12tn), just behind Microsoft and Apple.

The latest surge in chip demand is expected to last at least through the first half of 2025 due to strong demand for AI infrastructure, similar to the way cloud expansion drove a boom in 2016-2017, South Korea’s central bank said.

Semiconductor exports in the country grew for a seventh straight month in April with a 56.1 percent increase over the same month a year earlier to $56.26bn, higher than expected by economists, as the country’s economy in the January-March quarter grew by 1.3 percent over the preceding quarter, far higher than a consensus forecast of 0.6 percent.

Premium memory

Nvidia last month forecast second-quarter revenues above analysts’ expectations, in a sign that the boom in AI investment is continuing, as companies rush to build out the heavy server capacity required to drive generative AI services.

But a study from Reuters Institute and Oxford University indicated that user interest in the technology is more moderate, with routine usage of generative AI not yet having taken hold and many who had used the technology saying they had used it only once or twice.

In January Samsung said it expected strong growth in premium memory products, which are commonly used in AI chips, with such products expected to make up more than half its memory chip sales within the first half of the year, expanding to 90 percent in the second half.