Supply Chain Vulnerability
The Korea Institute for Industrial Economics and Trade announced on July 5 that South Korea is showing a trade deficit with the world and dependent on China by at least 50 percent when it comes to 1,088 import items and the items include lithium, magnesium, urea and manganese.
Earlier, the Federation of Korean Industries also pointed out that South Korea is highly dependent on the United States, China and Japan in 228 key import items and the items include 172 imported from China. “The 228 items include 133 in which South Korea is vulnerable in terms of supply chain stability and those imported from China account for no less than 95.4 percent of the 133 items,” it said.
The Hyundai Research Institute recently said that South Korea’s annual semiconductor equipment imports more than doubled from US$11.39 billion to US$26.59 billion from 2019 to 2021, its annual semiconductor material imports have been approximately US$8 billion since 2010, and its annual semiconductor material exports increased from US$4.1 billion to US$6.4 billion from 2019 to 2021.
“It should be noted that China is currently the second-largest exporter to South Korea as for 18 semiconductor materials,” it said, adding, “The ratio of semiconductor materials imported from China rose from 12.7 percent to 24.2 percent from 2010 to 2021, which means U.S.-China trade disputes and global supply chain failures that may cause a limited trade in the industry may lead to serious production setbacks on the part of South Korean semiconductor suppliers.”
Experts point out that South Korean enterprises need to make more effort for supply chain diversification. “Dependence on China is too high in too many items and more cooperation is needed with the United States and IPEF states,” one of them said, continuing, “At the same time, semiconductor can be used as a leverage in that South Korean memory chips account for half of China’s memory chip imports with semiconductor shortages ongoing worldwide.”