The Korean government has decided to lower Korea’s import dependence on 185 key items for semiconductors, secondary batteries, automobiles and shipbuilding to 50% by 2030. As of last year, Korea’s import dependence averaged 70%, with some items exceeding 90%.
The Ministry of Trade, Industry and Energy (MOTIE) announced the Industrial Supply Chain 3050 Strategy in an industrial supply chain strategy meeting chaired by Minister Bang Moon-kyu on Dec. 13 at POSCO Future M’s Sejong 2 plant.
The 185 supply chain stabilization items selected by the ministry were categorized into three main areas: high-tech strategic industries (semiconductors, secondary batteries, displays, biotechnology, and electrical and electronic products), major and new industries (automobiles, shipbuilding, machinery, robots, and aviation), and basic material industries (metals, fibers, ceramics, and chemicals).
In particular, the government will focus on supply chains of rare gases, silicon wafers, and hydrogen fluoride for semiconductors, and lithium hydroxide, artificial graphite, and separators for secondary batteries. In addition, it designated eight items that are essential to core industries and have strong supply uncertainties as supply chain leading items and will manage them separately. The eight are cathode materials, anode materials, semiconductor materials, rare gases, rare earth permanent magnets, urea, magnesium, and molybdenum.
The MOTIE has taken this step because some items are absolutely imported to Korea only from specific countries. During the January-October period of this year, Korea’s dependence on Chinese precursors for ternary battery cathode materials stood at 97%. Among semiconductor materials, 96.1% of hydrofluoric acid anhydride and 86.4% of rare earth permanent magnets were imported from China. Urea for cars was 90.3% imported from China and a whopping 99.4% of magnesium ingots were as well. Magnesium ingots are a key metal utilized across industries.
The MOTIE surveyed 4,458 imported materials, parts, and equipment items with an import value of more than US$1 million and a 50% or higher dependence on imports from one specific country. The survey found 1,719 items in 2022. Of these, Korea depended on China for 930 items, or 54.1%, Japan for 270 items, or 15.7%, and the United States for 146 items or 8.5%.
To prune Korea’s import dependence on such specific countries for these items to less than 50%, the MOTIE has decided to pursue three goals: self-reliance, import diversification and securing resources.
First, the MOTIE will support the Korean industry’s self-reliance on items that have been difficult to produce in Korea for various reasons such as economic efficiency and a lack of technology. The plan is to give administrative and financial support and even direct support such as subsidies if necessary. In the case of rare earth permanent magnets, electrolyte additives for secondary batteries, and nickel sulfate, investments are currently being made to expand the domestic production base. Rare earth permanent magnets for which Korea is 86.4% dependent on China are currently produced at a Korean company’s domestic plant at a rate of only 300 tons per year but in 2027 when the investment is finished, production will ascend to 1,000 tons.
Diversification of import lines will be actively promoted. To this end, the Korean government will support overseas mergers and acquisitions (M&As) and P-turns (the relocation of a production base to a third country). In the case of M&As to stabilize supply chains, 5 to 10% of the acquisition amount will be deducted from corporate tax. The government is also considering various incentives such as paying transportation costs for imports from third countries, such as industrial urea. In addition, supply chain stabilization items will be newly added to those eligible for import insurance and their insurance limits will be preferentially increased by 1.5 times.
To support the private sector’s overseas core mineral procurement projects, the percentage of special loans for overseas resources development will be increased from 30% to 50% of project costs. There will also be a 3% tax credit for investment in overseas mining rights.
The MOTIE will also expand the stockpile of core minerals of growing strategic importance. The plan is to double the stockpile of core minerals of 20 types and 35 varieties from 50 days to 100 days by gradually expanding their stockpiles. This aims to minimize the impacts of core mineral supply issues on high-tech industries such as secondary batteries.