Korea's producer prices rise nearly 2% on year amid weak won, surging memory chip costs

SEOUL, January 20 (AJP) -South Korea’s producer prices rose for a fourth consecutive month in December, as a weak won lifted prices across a broad range of goods and services, while sharply higher memory chip costs added further upward pressure. 

According to data released Tuesday by the Bank of Korea, the producer price index for December stood at 121.76 (2020 = 100), up 0.4 percent from the previous month and 1.9 percent from a year earlier. For the full year of 2025, producer prices rose a relatively modest 1.2 percent. 

Fresh food prices jumped 7.5 percent on month, reflecting cold-weather conditions, while energy prices fell 0.9 percent on softer international prices despite unfavorable exchange-rate conditions. 

Raw material prices increased 1.8 percent on month, reversing a 0.5 percent decline recorded in November. 

Manufactured goods rose 0.4 percent. Gains in computer, electronic and optical equipment, which climbed 2.3 percent, and primary metal products, up 1.1 percent, were partly offset by a 3.7-percent drop in coal and petroleum products. 

Prices for electricity, gas, water and waste services rose 0.2 percent, led by increases in industrial city gas, up 1.6 percent, and sewage treatment services, up 2.3 percent. Service prices also rose 0.2 percent, driven by restaurants and lodging, which increased 0.4 percent, and financial and insurance services, up 0.7 percent.  

Among key cost drivers, production costs for DRAM surged 15.1 percent from the previous month and 91.2 percent from a year earlier. Costs for assembling flash memory rose 6 percent on month and 72.4 percent on year. 

By contrast, naphtha cracking costs fell 3.8 percent on month and 17.4 percent on year, reflecting a prolonged downturn in the petrochemical sector and ongoing capacity reductions under industrial restructuring. 

Lee Moon-hee, head of the Bank of Korea’s price statistics team, said farm product prices were influenced by seasonal supply-and-demand factors and temporary supply disruptions caused by harvest delays for certain fruit items. 

“Farm product prices typically tend to rise from the previous month in summer and winter, so this is not unusual,” Lee said. 

On the potential impact on consumer inflation, Lee said the recent rise in producer prices has been driven largely by higher prices for intermediate goods such as semiconductors and primary metals, suggesting the pass-through to consumer prices may take time. 

He added that international oil prices remain lower than the previous month’s average and could exert downward pressure on consumer prices through petroleum products.

The won weakened overnight, with the dollar briefly rising above 1,480 won—widely viewed as a government defense line—before retreating to around 1,474.5 won.