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South Korean Consumer Electronics Makers Increasing Overseas Production
Due to Trade Protectionism and Rigid Labor Market
South Korean Consumer Electronics Makers Increasing Overseas Production
  • By Jung Min-hee
  • June 4, 2019, 08:50
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Rising trade protectionism and Korea's rigid labor market are forcing domestic consumer electronics manufacturers to relocate their production facilities overseas.

An increasing number of South Korean consumer electronics manufacturers, including Samsung Electronics and LG Electronics, are relocating their manufacturing facilities to other countries. The trend is likely to accelerate due to mounting trade protectionism and the rigidity and low productivity of the South Korean labor market represented by an exceptionally rapid increase in minimum wage.

Last year, the manufacturers produced 89.7 percent, 85.7 percent and 76.5 percent of their refrigerators, washing machines and air conditioners outside South Korea, respectively. This led to a decline in consumer electronics exports. Specifically, South Korea’s consumer electronics exports fell 17.3 percent on year to US$3.57 billion in 2018.

“With global competition heating up, declines in consumer electronics exports and domestic consumer electronics production are likely to continue,” said the Korea Electronics Association, adding, “Expansion of trade protectionism and foreign exchange risks are likely to add to market volatility and complexity, too.”

Last year, South Korean manufacturers’ overseas direct investment on a remittance basis reached an all-time high of US$49.78 billion with a year-on-year increase of 11.6 percent. This was led by the acquisition of Toshiba Memory shares by SK Hynix and overseas plant expansion by display manufacturers and automotive electronics suppliers.