Is it a gift or Germany? Interest is paying attention to the results of a supply chain survey of the four major items in the United States, which has entered the countdown of the announcement. In particular, expectations and concerns arise at the same time as semiconductors and batteries, which are major exports of Korea, may have a business success or failure according to this supply chain survey.
100-day supply chain investigation closes soon
On the 31st, the Ministry of Trade, Industry and Energy announced that Joe Biden would complete the 100-day supply chain survey for the four key items of the US administration on the 4th of next month. An official from the Ministry of Industry said, “There is no decision on how the results of the survey will be released or how far, so we are watching the related trends with interest.”
US President Biden signed an executive order on February 24 to investigate the supply chain of four key products for semiconductors, batteries, rare earths, and biopharmaceuticals for 100 days. This is to check supply chain weaknesses as concerns over the supply and demand of these items increase due to the novel coronavirus infection. It also aims to check China, which is emerging as a rival in the fight for supremacy in the 4th Industrial Revolution.
The’post-China’ of the United States… Opportunity in Korea?
It is not yet possible to predict what will happen. However, the general opinion of experts is that it will limit China’s influence in key items and strengthen an alliance-driven supply chain. In particular, this move away from China by the US could be a significant opportunity for Korea to compete with Chinese companies.
First of all, semiconductors can slow or frustrate the rise of China. In the past, China set a goal of achieving 40% semiconductor self-sufficiency by 2020 through’Made in China 2025′. However, due to US sanctions, Chinese semiconductor companies took only 2-18% of their market share last year. It is evaluated that technology is also 3-4 generations behind Korea and Taiwan.
Batteries have a greater de-China effect than semiconductors. Chinese battery companies have grown rapidly based on the government’s strong subsidy policy and the ability to self-procure materials. However, if the US, which does not have its own manufacturing capabilities, removes Chinese companies from the battery supply chain, it will have to open hands to Korean and Japanese companies. In fact, of the total battery production in the United States last year (48GWh), the production scale of US companies was only 1.5% (0.7GWh).
US absorption of investment and jobs is a burden
The US checks on China are good news, but the explicit demand for domestic production is burdensome. The U.S. created a law to support semiconductors last year and is promoting the attraction of foreign companies through tax credits, R&D expansion, and subsidies. There is a high possibility that foreign-invested companies will come out after the battery supply chain survey.
In this atmosphere, at the last Korea-US summit, Korean companies promised an astronomical investment amounting to 32 billion dollars (approximately 366 trillion won) in the semiconductor and battery fields alone.
However, the expansion of Korean companies’ overseas expansion could lead to domestic investment and job losses. The Korea Economic Research Institute, affiliated with the National Federation of Entrepreneurs, said that the reduction in Korea’s gross domestic product (GDP) due to the US semiconductor support was 0.07%, second only to China (0.35%). The electric and electronic industry’s own production, including semiconductors, also decreased by 0.18%, which was also the second most damaged after China.
Post-China is rather a boomerang?
Some point out that the US check on China could be rather a boomerang. It is analyzed that if the US demands the participation of allies in China’s check, it will hurt Korean companies that are highly dependent on Chinese exports.
In fact, last year, exports of semiconductors to China (including Hong Kong) amounted to 60%. Lithium hydroxide, a representative raw material for batteries, was also dependent on China at 81.1% as of last year. All manganese sulfate is imported from China.
There is also a possibility that the US checks against China will expand across East Asia. In fact, the US Semiconductor Industry Association (SIA) and Boston Consulting Group (BCG) in a report released last April emphasized that “75% of the world’s semiconductor production capacity is concentrated in China and East Asia, so it may be exposed to geopolitical risks.” did.
Reducing reliance on East Asia as well as China to stabilize supply chains will only benefit US companies. In fact, Intel recently announced the expansion of the foundry (consignment production) process, which was virtually abandoned by South Korea and Taiwan. The battery is also trying to internalize its production capacity, centered on automakers.
Sejong = Reporter Kim Namjun [email protected]