Industrial Research Institute: "US Supply Chain Restructuring Negatively Impacts Korea in the Long Term"

[Sejong=Asia Economy Reporter Kwon Haeyoung] While the United States' supply chain restructuring policy is expected to have a positive impact on Korean companies in the short term, it may have negative effects in the long term. It is advised to move away from the current structure where economic and security agendas are discussed separately and to address the supply chain agenda of advanced industries from an integrated perspective, as seen in major countries including the United States.

On the 4th, the Korea Institute for Industrial Economics & Trade (KIET) released a report titled 'Key Contents and Implications of the U.S. Semiconductor and Battery Supply Chain Investigation Report' containing these insights. Earlier, on the 4th of last month, the U.S. White House issued a report proposing policies to secure supply chain competitiveness for four major items: semiconductors, batteries, pharmaceuticals, and rare earths.

The institute forecasted that U.S. semiconductor and battery policies would have a positive short-term impact on Korean industries. Strengthened federal and state government incentives for investment companies in the U.S. will contribute to improving business conditions for Korean investment companies, and the U.S.'s enhanced technology protection measures for advanced semiconductors are also expected to help widen the technological gap with China.

Regarding batteries, a significant portion of the rapidly growing demand expected in the U.S. market is likely to be secured by Korean companies. The expansion of investment and exports by domestic battery materials, parts, and equipment (SoBuJang) companies to the U.S. will provide a valuable opportunity to accumulate globalization experience. Additionally, U.S. market entry restrictions on Chinese battery companies are expected to bring a positive spillover effect to Korea's battery industry.

The report expressed concerns about negative impacts in the long term. If the U.S. secures semiconductor manufacturing capabilities, it will inevitably weaken Korea's position in the global market over time. Should the U.S.'s aggressive recruitment of outstanding overseas talent prove effective, Korea's semiconductor industry ecosystem could also suffer significant damage. Furthermore, if the U.S. focuses on supporting domestic companies while securing its battery industry in the mid to long term, the standing of Korean companies in the U.S. market is expected to decline.

Lee Jun, head of the Materials Industry Division at KIET, suggested, "Considering the stance of major countries like the U.S. that address advanced industry supply chain issues from a national security perspective, we need to review our current structure where technology, industry, and security are discussed at separate tables, and establish a response system that can handle the supply chain agenda of advanced industries from an integrated economic and security viewpoint."