The Statistics Korea announced on November 18 that the in-stock ratio of the manufacturing sector reached an 80-month high of 129.5 percent in August this year before falling slightly to 128.1 percent in the following month. The ratio had remained at around 105 percent between 2000 and 2008 but began to increase in the second half of 2009.
In the meantime, the average rate of operation of the sector declined from 80.5 percent to 74.6 percent between 2011 and the third quarter of this year. Under the circumstances, experts point out the possibility of a vicious cycle of massive inventory disposal, rapid decline in production, less employment, decrease in consumption and drop in growth rate. This could result in an increasing deflationary pressure.
Each of Samsung Electronics and SK Hynix recorded the highest inventory stock on record in the third quarter of this year. The amount was worth 22.841 trillion won for Samsung Electronics, more than 50 percent of it belonging to the IT & Mobile (IM) and Consumer Electronics (CE) Divisions. This situation led to a significant contraction in its investment. Samsung Electronics’ cash flow from investing activities dropped more than 40 percent from over 30 trillion won to 18 trillion won or so between the third quarters of 2014 and 2015. Its R&D investment declined by more than 300 billion won during the period, too. In the case of SK Hynix, the inventory stock amounted to 1.8265 trillion won, increasing by approximately 320 billion won from a year ago.
LG Electronics’ inventory stock decreased from more than six trillion won to about five trillion won but its operating profit ratio dropped at the same time. In the third quarter, LG Electronics posted sales of 14.0288 trillion while recording only 294 billion won in operating profits.