FKI surveys BSI among top 600 firms by sales

November outlook at 98.6, below 100 for second straight month

AI investment concerns chill electronics sector sentiment

Non-manufacturing hits 26-month high

Improved consumer sentiment, winter heating demand lift services outlook

Export and import cargo stacked at Sinseondae Pier in Busan Port. [Yonhap]
Export and import cargo stacked at Sinseondae Pier in Busan Port. [Yonhap]

Business sentiment among domestic manufacturers in the semiconductor sector has turned negative for the first time in nine months, as growing uncertainty over the sustainability of AI investment weighs on corporate confidence.

The Federation of Korean Industries surveyed its Business Survey Index among the top 600 companies by sales, finding that the November BSI outlook came in at 98.6 — matching October's reading of 98.6 and marking two consecutive months of negative sentiment.

A BSI reading above 100 indicates a more positive business outlook compared with the previous month, while a reading below 100 signals a negative one.

The manufacturing BSI outlook stood at 92.1, down 3.5 points from last month's 95.6.

Among individual manufacturing subsectors, only textiles, apparel, leather and footwear (107.7) posted a reading above 100. Wood, furniture and paper; pharmaceuticals; general and precision machinery and equipment; and automobiles and other transport equipment all came in at the 100 baseline, while the remaining five subsectors recorded negative outlooks.

Particularly notable was the electronics and telecommunications equipment subsector — which includes semiconductors — falling 16.7 points from the previous month to 83.3, turning negative for the first time since February, nine months ago.

The FKI said that despite strong recent semiconductor earnings, uncertainty over returns on AI investment and caution over the durability of the current business cycle are constraining corporate sentiment. It added that the petroleum refining and chemicals subsector (80.0), whose profitability has recently deteriorated due to high raw material prices and global oversupply, is another factor dragging on manufacturing sentiment.

Non-manufacturing, by contrast, posted a BSI outlook of 105.2, up 3.4 points from last month's 101.8 — the highest reading since July 2024 (105.5), a span of two years and four months. The non-manufacturing BSI has now remained in positive territory for three consecutive months since September (102.4).

Among non-manufacturing subsectors, wholesale and retail (121.7), electricity, gas and water (121.1), and information and communications (114.3) all showed strong readings. Three subsectors recorded negative outlooks, with professional, scientific, technology and business support services sitting at the 100 baseline.

The FKI attributed the positive non-manufacturing sentiment to a gradual improvement in consumer confidence and expectations for higher winter heating demand.

Breaking down results by category, domestic demand (102.3) was the only component to post a positive outlook. Financial conditions (94.3), exports (95.1), employment (97.1), profitability (97.4), investment (98.9) and inventory (102.6) all came in below 100, indicating negative sentiment.

Domestic demand has now held in positive territory for three consecutive months, reaching its highest level since May 2022 (104.3), a gap of four and a half years. Exports, meanwhile, have failed to escape negative territory for two straight months since the September outlook (100.9).

"Despite expectations for improvement in domestic demand and the services sector, the outlook for key manufacturing industries remains weak, dampening overall corporate sentiment," said Lee Sang-ho, head of the FKI's economic affairs division. He called for the ongoing discussions around the so-called mega special zone legislation to include expanded tax support and labor deregulation so that corporate investment and job creation can be meaningfully supported.


joze@heraldcorp.com