The Korean manufacturing industry's dependence on Japan has fallen sharply over the past nine years. As the Korean government plans to support Korean companies developing semiconductor materials, parts and equipment, its dependence on Japan is expected to decline further.
The proportion of Japanese products in all intermediate goods imported to Korea in the first quarter of this year was 15.9 percent, according to the Manufacturing Domestic Supply Index released by Statistics Korea on July 7. Compared to 25.5 percent in the first quarter of 2010 when Statistics Korea started compiling statistics, it dropped by 9.6 percentage points.
The proportion of Japanese intermediate goods has been on a steady decline. In the first quarter of 2014, it went below 20 percent for the first time to 18.1 percent. Since then, it had hovered on the 17 percent and 18 percent levels and hit 15.7 percent in the third quarter of last year and stood at 15 percent level again in the first quarter of this year.
Japan had been the largest supplier of intermediate goods to Korea until it lost the first spot to China in the first quarter of 2014 and since then, has never surpassed China.
The percentage of Japanese goods in Korea’s overall imports of manufactured goods, including intermediate goods, has decreased significantly. It dropped 10.2 percentage points from 23.9 percent in the first quarter of 2010 to 13.7 percent in the first quarter of this year. Representative items are cigarette (-75.8 percentage points), non-metallic minerals (-41.4 percentage points), rubber and plastic products (-30.4 percentage points), medical, precision and optical instruments and watches (-22.2 percentage points), automobiles and trailers (-21.2 percentage points), and chemical materials and chemical products (-15.3 percentage points).
Although the percentage of overall Japanese imports to Korea has continued to fall, that of products that require high technology is still high. However, as the Korean government is employing a strategy to strengthen self-sufficiency against the Japanese government’s regulation on the export of some items to Korea, the proportion of Japanese imports is likely to continue to slide.
Actually, the Korean government has decided to invest more than one trillion won every year in the development of material parts and equipment for semiconductor for 10 years from next year. For general materials, parts and equipment, it will invest 5 trillion won for six years from 2021.