Tumbling Law
The U.S. International Trade Commission (ITC) has conceded a defeat in the five-year-long washing machine war between the United States and Korea, but Korean companies are complaining that a more complicated situation is facing them. Samsung Electronics and LG Electronics have been able to increase their market shares in the U.S. washer market despite the ITC’s tariffs because of their rapid localization strategy of relocating factories to the United States.
“On the surface, it looks like Samsung and LG won the battle by increasing their market shares, but if you look closer, the U.S. government won the war by increasing investment and employment in the United States,” a senior business official said on Aug. 16, explaining that the intensity of the circumventive pressure on Korean companies to ramp up investments in the United States is only getting stronger as the Joe Biden administration wields the CHIPS and Science Act and the Inflation Reduction Act (IRA).
“We understand that subsidies from the United States are a poisoned apple but we also realize that we can’t get out of order reshaped by the United States by not getting subsidies,” said a semiconductor industry insider.
In fact, Korean companies have been rushing to invest in the United States recently. Samsung Electronics is investing US$17 billion (about 23 trillion won) to build a foundry in Taylor, Texas. Hyundai Motor Group is building its first electric vehicle (EV) factory in Georgia, with plans to start mass production in the second half of next year.
LG Energy Solution and SK energy have also decided to build their own battery joint venture plants near EV factories to supply batteries. Hyundai Motor Group, which ranked second in the U.S. EV market in the first half of this year, aims to catch up with No. 1 Tesla through localization in the United States.
Moreover, General Motors (GM) is already building a third joint venture plant with LG Energy Solution and has decided on a new joint venture with Samsung SDI this year. Ford is partnering with SK energy to build a battery plant in Tennessee and Kentucky. Stellantis is establishing production bases in Canada with LG Energy Solution and in the United States with Samsung SDI. In line with Korean battery makers’ successive investments in the United States, Korean battery material companies such as LG Chem, POSCO Future M, and EcoPro BM are also promoting localization projects in North America.
The Japanese automaker industry is also trying to get attention from Korea in order to enter the North American electric vehicle market. Honda and LG Energy Solution plan to start running a joint battery plant in Ohio in 2025.
As Korean companies have rushed into the U.S. market, the Korean government is on the hot seat. While the number of cases of reshoring by Korean companies dropped to 22 in 2022, overseas investments by large Korean companies that create decent jobs are on the rise, leading to the phenomenon of a manufacturing industry vacuum. The Korean government’s concern is that if Korean companies try to maintain global competitiveness with “Made in America” products instead of “Made in Korea” products, it will not help create good domestic jobs or drive Korea’s economic growth.