South Korea’s chip stockpile swells in warning sign for exports

South Korea’s semiconductor stockpiles expanded at the fastest pace in more than six years, adding to concern about the outlook for exports that drive the country’s economic growth.

Nationwide inventory soared 79.8% in June from a year earlier, the statistics office said Friday, up from a 53.8% jump in May. At the same time, both production and shipments decelerated, suggesting a slowdown in the nation’s most profitable industry.

The result casts a pall over the outlook for an economy where the central bank is in the midst of a yearlong tightening cycle. Memory chips are sold worldwide and underpin the strength of the won, which has been one of Asia’s worst performing currencies this year as trade deficits mount.

South Korea was in the midst of a two-year export slump when chip inventories soared by 104.1% in April 2016.

The accumulation in stockpiles comes as Samsung Electronics Co. and SK Hynix Inc., two of the world’s largest memory-chip producers, warn future sales may weaken, adding to concerns about a global slowdown as inflation spurs global central banks to tighten.

The two firms’ shares prices have still gained in recent weeks as investors bet the companies will cut capital spending, a move that would eventually tighten supply. The tiny components are used in everything from smartphones to laptops and cars.

South Korea’s overall industrial production rose 1.4% in June from a year earlier, less than the 2.1% forecast by economists.