South Korea is in a dire situation! In the first 20 days of February, South Korea's chip exports fell by 43.9% year-on-year, amounting to $3.8 billion. This has led to a 2.3% year-on-year decline in South Korea's exports for the first 20 days of February. In January of this year, South Korea's exports decreased by 16.6% year-on-year, with chip exports plummeting by 44.5%, marking a decline for five consecutive months. Concurrently, the plummeting chip prices are eroding Samsung's profits in South Korea. The financial report released last month showed that Samsung's chip business profits plummeted by 97% in the fourth quarter of last year, to 27 billion won (approximately $220 million).

I checked the situation with TSMC. In the performance guidance for the first quarter of this year, TSMC's management provided a revenue guidance of $16.7 billion to $17.5 billion, a sequential decline of 12.2% to 16.2% compared to the fourth quarter. Additionally, the guidance for the gross margin also further declined to 53.5% to 55.5%.

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Analyzing the market changes, the primary reason is that the global smartphone market is at a turning point from strength to weakness. Smartphones are already in a state of saturation, and due to the impact of the three-year pandemic on consumer income or uncertain future income, the pace of updating smartphones has significantly slowed down. From the perspective of manufacturers, including Apple, there is a lack of innovation, with smartphone upgrades focusing more on hype and flashy features rather than practicality, which does not attract customers significantly.

Statistical data from the third-party research institution Omdia shows that in the fourth quarter of 2022, the global smartphone shipment volume totaled 301.5 million units, a decrease of 15.4% compared to the same period last year. Moreover, the global PC market plummeted by 28.5% in the fourth quarter, setting the record for the largest quarterly decline since many institutions began tracking PC market shipments. This directly brings very obvious constraints on the demand for chips, which are at the core of the industry chain.

Another important factor is that the United States, leveraging its position as a technological hegemon, arbitrarily sanctions countries such as China, especially limiting chip demand. This has led to the obstruction of demand from Chinese manufacturers, and since China's smartphone scale accounts for a high proportion globally, it inevitably has a significant impact on chip sales and exports for Samsung, TSMC, and others. I have always maintained that the essence of this round of high inflation in the United States is a great disaster brought upon itself by wielding the big stick of trade, financial, and technological sanctions. The temporary disruption of the international oil and gas supply chain is a contributing factor, and trade sanctions against China leading to a shortage of consumer goods supply in the United States, resulting in higher prices, is an undeniable reason.

From a fundamental logical relationship and essentially speaking, the root cause of inflation is the imbalance between total demand and total supply. To combat inflation, one can start from the demand side to suppress total demand, with monetary tightening as the means, and direct measures such as interest rate hikes. However, addressing the issue from the supply side is the fundamental solution, increasing the production and market supply of consumer goods, stabilizing prices, and also stimulating economic growth!

It can be seen from this that the world cannot do without Chinese products, and the global market cannot do without Chinese demand. It is hoped that the hegemonic United States can come to its senses and recognize this point. Chinese products and demand can be said, without any exaggeration, to have an impact on all areas of the world economy, people's livelihoods, industry, and technology that no other country can match!

I have noticed that the Bank of Korea will hold a meeting on Thursday (February 23rd). Currently, most economists expect that after 18 consecutive months of interest rate hikes, the Bank of Korea will pause the rate hikes and maintain the interest rate at 3.5%. This will be beneficial for promoting South Korean exports, including adjusting chip exports from a monetary policy perspective.

Samsung still bets on the long-term prospects of memory chips, with the increasing popularity of cloud services, connected cars, and artificial intelligence systems, all of which have a strong demand for storage. Samsung previously stated that it expects the smartphone market to shrink again this year, but artificial intelligence products such as ChatGPT will promote demand growth.