USD/KRW Hits 13-Month Low: Concerns Over Exporters and Semiconductor Resilience

Background of the Exchange Rate Drop and Current Foreign Exchange Market Situation

In late August 2026, the USD/KRW exchange rate plummeted to a 13-month low, significantly increasing volatility across the domestic foreign exchange and stock markets. Typically, concerns over inflation and further monetary tightening by the US Federal Reserve following the Jackson Hole symposium would strengthen the dollar. However, in the current market, the Korean won is maintaining an unusually strong trend in tandem with global dollar weakness. This steep decline in the exchange rate has emerged as a key variable forcing a reevaluation of the second-half, particularly third-quarter, earnings outlooks for major domestic conglomerates heavily reliant on exports. Market participants are keenly focused on how long this won strength will persist and its ripple effects on the real economy.

Impact on Exporter Earnings: Decreased Won-Converted Revenue and Margin Pressure

Structural Mechanics of Foreign Exchange Translation Losses

In South Korea, an export-driven economy, a falling exchange rate (appreciation of the won) immediately impacts the financial statements of large enterprises. Due to the structure of selling products in the global market and receiving payments in US dollars, foreign exchange translation losses are inevitable when converting these revenues into won, leading to smaller recorded revenues even with identical sales volumes. Industries with an overwhelming proportion of exports in their total sales, such as IT components, displays, and automobiles, exhibit extreme sensitivity to exchange rate fluctuations. According to financial industry analysis, for every 10-won drop in the USD/KRW exchange rate, the quarterly operating profit of these major export companies is estimated to evaporate by tens of billions of won.

Concerns Over Global Price Competitiveness Decline

Beyond financial losses, there are concerns regarding mid-to-long-term market share. If the strong won is prolonged, companies will face pressure to raise the dollar-denominated prices of their export products to defend profitability. This directly leads to weakened price competitiveness against global rivals, and in highly price-sensitive consumer goods and general component markets, it can result in a real decline in export volumes. The recent correction of traditional export stocks in the equity market, coupled with the downward trend in the exchange rate, is a pre-reflection of these concerns over fundamental impairment.

Semiconductor Industry: Robust Demand Overcoming FX Risks

AI Momentum Offsetting the Impact of a Weaker Dollar

Conversely, the situation for large semiconductor companies leading the KOSPI market, such as Samsung Electronics and SK Hynix, differs fundamentally. They too have very high export ratios and face superficial downward pressure on won-converted revenue and operating profit due to the sharp drop in the exchange rate. However, in the current memory semiconductor market, the industry-specific supply and demand cycle acts as the primary driver determining corporate earnings, rather than macroeconomic variables like the exchange rate. With global Big Tech companies continuously expanding their investments in artificial intelligence (AI) data center server infrastructure, demand for high-value-added products like High Bandwidth Memory (HBM) and high-capacity enterprise SSDs (eSSD) remains in a state that far outstrips supply.

Average Selling Price (ASP) Increases Driven by Strong Demand

This robust structural demand is steadily driving up the Average Selling Price (ASP) of memory semiconductors. As the rate of unit price increases for high-margin product lines exceeds the ratio of foreign exchange losses caused by the falling exchange rate, major semiconductor companies are firmly defending their actual profit-generating capacity. In essence, the prevailing analysis is that while exchange rate fluctuations may generate noise in short-term financial indicators, the momentum of the current AI semiconductor cycle is far too powerful for it to damage the fundamental growth trajectory and earnings power of these companies.

Supply-Demand Dynamics, Policy Variables, and Future Market Outlook

The Ripple Effect of Shareholder Return Policies on the Exchange Rate

The recent steep decline in the exchange rate reflects not only macroeconomic indicators but also significant internal supply and demand factors driven by corporate financial decisions. In the process of implementing large-scale shareholder return policies (such as share buybacks and increased dividends) announced consecutively by major conglomerates to enhance corporate value, there is a substantial demand to convert dollar assets held by overseas subsidiaries into won. The proactive release of dollar-selling volume by these corporations increases the supply of dollars in the foreign exchange market, acting as a factor that further fuels the strength of the won.

Establishing a Rational Investment Strategy

From an investor's perspective, there is a need to move away from the simplistic formula that 'an exchange rate drop unconditionally equals bad news for exporters' and adopt a differentiated strategy that integrates corporate fundamentals with industry cycles. For general manufacturing sectors with high exchange rate sensitivity, conservative earnings estimate adjustments and risk management factoring in FX losses are required. However, for core companies like semiconductors that lead global mega-trends and possess monopolistic technological prowess and negotiating power, it is advisable to focus on intrinsic value—such as geopolitical risks like US semiconductor import tariff policies and capital expenditure (CAPEX) trends in downstream industries—rather than short-term exchange rate volatility.