Korea IP and activity: Looking beyond May’s weakness

Research evidence excerpt

Korea IP and activity: Looking beyond May’s weakness

Economics - Data Reactions ● Korea

30 June 2026

Please see Table at the back for key details of the monthly IP & activity data.

Implications

Semiconductor weakness pulled IP lower... Recall Korea’s GDP had surprised strongly to the upside in 1Q26, helped by strong

semiconductor production (13.9% q-o-q sa). As Chart 2 shows, much of May’s IP weakness came from a sharp fall in semiconductor

production (-10% m-o-m sa), likely due to the very high base from 1Q26 – as we are also seeing similar trends in exports data as well

(Chart 3). Meanwhile, the monthly contraction excluding semiconductors was milder at -1.1% (vs. -1.9% in April).

Chart 2: Manufacturing production by Chart 3: Sequential momentum in

sector semiconductor exports are moderating

from strong levels

Source: CEIC, HSBC Source: Bloomberg, CEIC, HSBC; Note: seasonal adjustment by HSBC

…but we are constructive of Korea’s growth recovery. Combined with April, IP has weakened q-t-d (down 0.1% vs. +2.7% q-o-q

sa in 1Q26). Continued rises in memory prices over June also mean that semiconductor shipments may have slowed further in

volume terms towards the quarter-end as well, pointing to a likely moderation in the quarterly GDP.

That said, we are constructive of Korea’s AI-led growth recovery. Looking through monthly volatility, continued rises in memory prices

reflect strong expectations of AI capex demand from global tech companies, which remain resilient despite the recent corrections in

global tech equities. With the ongoing de-escalation in the Middle East conflict, the Bank of Korea (BoK)’s manufacturing business

sentiment index remained healthy in June, with June first 20 days’ exports data showing signs of a broad recovery including for non-