South Korea suffered a record-high trade deficit in January, hammered by the sluggish demand for semiconductors, a major export item, amid worries about a global economic slowdown that could further depress the country’s exports in the coming months.

According to the Ministry of Trade, Industry and Energy on Wednesday, the country's outbound shipments dropped 16.6 percent on-year to $46.27 billion in January. Imports shrank by 2.6 percent on-year to $58.96 billion, a relatively small decrease compared with the change in exports, reflecting high energy prices.

The trade deficit widened to $12.69 billion in January, an all-time monthly high. Marking the longest streak since 1997, the country recorded a trade deficit for 11 straight months. And the decline in exports extended for four months in a row, undercutting the heavily export-dependent Korean economy.

The deepening woes on the trade front were largely the result of the sharp decrease of chip exports and a slide in shipments to China, among other factors. Due to the fall in both prices and demand for memory chips on the global market, exports of semiconductors plunged by 44.5 percent on-year to $6 billion.

A slower demand for chips from China in connection with the COVID-19 pandemic also played a role in dragging down trade figures. As around 40 percent of Korea’s semiconductors are exported to China, exports point out the so-called “China risk” over chips is now on the rise.

Korea’s chipmakers suffered damage from shrinking demand for semiconductors linked to the economic downturn around the world. Samsung Electronics, the world’s biggest chipmaker, reported Tuesday its operating profit plunged 68.95 percent to 4.3 trillion won ($3.5 billion) in the October-December period, reflecting the weak demand for memory chips.

It is the first time that Samsung posted a quarterly operating profit of less than 5 trillion won since the third quarter of 2014. The tech giant’s sales dropped 8 percent on-year to 70.46 trillion won in the fourth quarter, while the net profit was 23.84 trillion won.

Even for the entire year of 2022, Samsung’s earnings record was far from optimistic. It reported 43.38 trillion won in operating profit, down 15.99 percent from a year earlier.

SK hynix did not fare well, either. The world’s second-largest memory chip producer posted an operating loss of 1.7 trillion won during the fourth quarter of last year, compared to a profit of 4. 21 trillion won a year earlier. It was the first operating loss in a decade, illustrating the depth of a slowdown in the global chip market. For 2022 as a whole, SK hynix saw its operating profit drop 43.5 percent on-year to just over 7 trillion won.

While Samsung said it would scale back its output and spending this year despite a drop in chip profits, SK hynix said it plans to reduce investments and costs facing uncertainties in the market.

Given that the chip market undergoes ups and downs in a cyclical pattern, both Samsung and SK hynix might be able to see a recovery in sales and profits when global demand for chips goes up. The problem is that it is now anybody’s guess as to when such a recovery may arrive.

On Wednesday, the US Federal Reserve lifted interest rates by 25 basis points, softening rate increases in a move dubbed “a baby step.” Market watchers take the Fed’s move as a sign that it is slowing the pace of its fight against inflation while attempting to avert a tough recession. This represents a hopeful sign from the US market, one of the key export destinations for Korea.

Finance Minister Choo Kyung-ho said Wednesday that Korea’s trade performance is expected to gradually improve in the coming months in step with China’s reopening.

But it is too early to say that the country’s trade will improve going forward. For instance, the International Monetary Fund on Tuesday slashed its growth outlook for Korea this year to 1.7 percent, down 0.3 percentage point from its last estimate in October, while it raised the global growth outlook to 2.9 percent from the previous 2.7 percent. Policymakers should devise more contingency plans against stronger headwinds in the country’s efforts to shore up its exports.