According to a report from Business Korea, South Korea’s semiconductor industry is under growing pressure from the intense R&D efforts of Taiwan, Japan, and the U.S., as South Korean engineers work fewer hours compared to their global counterparts, due to current labor regulations.

The report pointed out that in order to keep the competiveness of companies like Samsung Electronics and SK Hynix, reforms in labor market flexibility are necessary.

The report, citing data from the semiconductor industry and the Ministry of Employment and Labor in South Korea, noted that the average monthly working hours for employees in South Korean businesses with one or more full-time workers is 156.2 hours. This is fewer than the 180.3 hours worked by Taiwanese employees as of August 2024.

According to the data, the report emphasized that compared to Taiwanese workers, South Korean workers work three days less per month. The report highlighted that the shorter working hours of South Korean employees could weaken the country’s R&D competitiveness, as companies like Taiwan’s TSMC or the U.S.’s NVIDIA expect employees to work around the clock when necessary.

The report noted that engineers in South Korea face legal restrictions preventing them from working beyond a set time. These reduced working hours, imposed by labor regulations, could threaten the competitiveness of South Korean tech companies. The report also highlighted that, although South Korea currently holds a fragile lead in the memory semiconductor sector, this position is at risk of being overtaken.

According to the report, South Korea’s strict labor regulations, including a 52-hour workweek limit introduced in 2018, were intended to promote work-life balance. However, there is increasing concern that these regulations may impede economic growth and innovation, particularly in high-tech sectors such as semiconductors.

(Photo credit: Samsung)

As the unwinding of yen carry trades came to an end, the market returned to a more stable state, though it remains highly sensitive to economic data. The S&P 500’s gains narrowed due to underperformance in some tech stocks, while it also faced the challenge of reaching new highs. Meanwhile, U.S. 2-year and 10-year Treasury yields edged higher due to shifting expectations around rate cuts, though the overall yield spread narrowed to a range of -10 to 0 basis points. The U.S. Dollar Index also saw a slight increase, driven by reduced expectations of rate cuts from the Federal Reserve.

Economic Data Review for Last Week:

• U.S. PCE (July): The July Personal Consumption Expenditures (PCE) price index rose by 2.5% year-on-year (same as the previous month) and 0.2% month-on-month (up from 0.1%). Within the details, goods inflation was flat at 0% year-on-year (up from -0.2%), while services inflation increased 3.7% year-on-year (down from 3.8%), as both factors have a limited impact on overall inflation decline. Core PCE, which excludes food and energy, increased by 2.6% year-on-year (unchanged from the previous month) and 0.2% month-on-month (also unchanged), both in line with market expectations.

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• China CPI (July): The July Consumer Price Index (CPI) rose by 0.5% year-on-year (up from 0.2%), marking the sixth consecutive month of positive growth and exceeding market expectations. The increase was mainly driven by food prices, which were affected by extreme weather conditions. Excluding volatile food and energy prices, core CPI rose by only 0.4% year-on-year, down from 0.6% in the previous period.

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Key Data to Watch This Week:

• U.S. ISM Manufacturing PMI (9/3): The U.S. ISM Manufacturing PMI for July came in at 46.8 (down from 48.5). The decline in July mainly reflects reduced investment in manufacturing due to high interest rates, along with continued weakness in goods demand, leading companies’ production and revenue to contract prompting them to implement cost-saving measures such as layoffs and hiring freezes. The market expects the Manufacturing PMI to recover slightly to 47.5, but it is still expected to remain in contraction territory.

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• Bank of Canada Monetary Policy Meeting (9/4): The Bank of Canada (BOC) has cut rates by 50 basis points since June. As inflation continues to decline, the BOC has increasingly shifted its focus to cope with economic weakness. The market expects the BOC to announce another 25 basis point rate cut at its September meeting, with two more cuts likely by the end of the year.

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• U.S. ISM Non-Manufacturing PMI (9/5): The U.S. ISM Non-Manufacturing PMI (NMI) for July was 51.4 (up from 48.8). The rebound in July mainly reflects strong business activity, although respondents indicated potential challenges ahead, and they remain cautious due to the upcoming U.S. presidential election. The market expects the NMI to decline slightly to 50.9, but it is still anticipated to remain in expansion territory.

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• U.S. Employment Situation Report (9/6): In the household survey, the unemployment rate rose to 4.3% in July (up from 4.1%), mainly reflecting an increase in labor supply and reduced hiring by companies. In the establishment survey, nonfarm payrolls increased by 114,000 in July (down from 206,000), significantly below the 12-month average of 215,000. Overall, the labor market appears to have returned to a balanced state, with no signs of widespread layoffs, though ongoing developments should be closely monitored. The market expects the unemployment rate to fall back to 4.2%, with nonfarm payrolls expected to rise by 164,000 in August.

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