South Korea in a Dilemma

U.S. President Joe Biden during his Feb. 24 address on the importance of the semiconductor industry

The Federation of Korean Industries held a forum on April 29 and predicted that China and South Korea would be most affected as the Joe Biden administration is increasingly protecting the U.S. semiconductor industry.

“The president’s executive orders in the four sectors including semiconductor and EV battery are for the United States to keep its lead in the high-tech industries and keep China at bay by reshaping the global supply chains,” said Korea Economic Research Institute analyst Jo Gyeong-yeop, adding, “In the mid to long term, the Joe Bide administration will urge the allies including South Korea, Taiwan and Japan to invest and participate in the supply chain reorganization.”

“The U.S. semiconductor industry protection is forecast to lead to a 0.35 percent decrease in China’s GDP and a 0.07 percent decrease in South Korea’s GDP,” the analyst explained, continuing, “In the electrical and electronics industry, the outputs of China and South Korea are estimated to fall by 0.32 percent and 0.18 percent, respectively.”

“Market-centered production and the transfer of raw materials and resources rather than commodities will accelerate with the development of digital technologies,” Sogang University professor Kim Yong-jin pointed out, advising, “States that have markets may force choices on the intermediate goods producers including South Korea and South Korea would be well advised to consider its own value chain establishment and industrial reorganization.”

“At present, the world’s largest chip market is China and the world’s largest EV battery market is Europe, which means demand confirmation needs to precede any investment in these industries of the United States instead of China and Europe,” POSCO Research Institute analyst Lee Ju-wan remarked, adding, “This also means that the scale of the investment, the local demand, local market conditions and so on need to be thoroughly analyzed so that continuous business operations are possible based on the U.S. demand.”

“South Korea is in a dilemma with the two superpowers in pursuit of supply chain domination at the same time,” said Kim Bong-man, head of the International Affairs Department of the federation, adding, “With a U.S.-South Korea summit scheduled for next month, the South Korean government needs to formulate better bilateral trade strategies to minimize damage to South Korea.”

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