Reshaping Supply Chains Away from China... Into the Storm [Korea-China Supply Chain Diagnosis]

The Core is the Anti-China Supply Chain Front... Korea-China Decoupling is a Burden
Close US Alignment Leading Advanced Technology is a Necessity, Not a Choice
"Participation in IPEF Must Strengthen Economic Security Through Supply Chain Stabilization and Advanced Technology Development"

[Image source=Yonhap News]

[Asia Economy Sejong=Reporter Kwon Haeyoung] The government has begun to establish a response system for the Indo-Pacific Economic Framework (IPEF), a US-led 'anti-China' supply chain alliance, and is accelerating preparations for negotiations. While the government's position is to set agendas aligned with IPEF's purpose as a value alliance sharing freedom and market values and an economic security cooperation body, there is no disagreement that its essence is a 'united front' to contain China. Along with close Korea-US cooperation centered on advanced industry supply chains such as semiconductors, batteries, and bio, decoupling from China is an unavoidable path.

Having experienced retaliation over the Terminal High Altitude Area Defense (THAAD) system and the element water trauma, it is difficult for us to predict where and how much backlash will come from China's opposition to participating in IPEF. However, one thing is clear. The US's supply chain restructuring effort to exclude China from advanced industries and keep it as a mid-level industrial country is expected to be persistently carried out over a long period. And with the US holding overwhelming technological superiority in advanced industries and refusing cooperation with China, there are not many options left for us. Considering that exports to China account for 25% and the high dependence on raw materials, a complete separation of the Korea-China supply chain is impossible. ▶Related articles on pages 4 and 5

That said, there is no need to be overly fearful. Even within the tightly intertwined Korea-China industrial structure like a spider web, there are industries such as semiconductors and displays where we have technological superiority. In the case of semiconductors, the core industry targeted by IPEF's supply chain restructuring, the establishment of a cooperation system within the Indo-Pacific region is also a positive factor. The US handles most processes including manufacturing equipment, wafer production capacity, and back-end processes. Korea leads in memory semiconductor design and production, Taiwan in system semiconductor design and production, and Japan in manufacturing equipment. Through the US-led 'Chip 4 Alliance,' it could be an opportunity to solidify dominance in memory semiconductors while strengthening technological cooperation with the US in advanced system semiconductors and widening the technological gap with competing countries. It also buys time to evade the pursuit of China, which is striving for 'semiconductor rise.'

However, supply instability of raw materials due to China's backlash, especially in battery and bio industries with high dependence on Chinese materials, is expected to cause damage. Some of these risks are ones we must bear. It is urgent to reduce dependence on China through cooperation with the Indo-Pacific bloc and diversification of supply chains.

Professor Jeong Ingyo of Inha University’s Department of International Trade emphasized, "The US emphasizes building trustworthy supply chains with countries that respect peace, human rights, and democracy values, and will reflect this in IPEF cooperation going forward," adding, "We must actively utilize this to stabilize supply chains, develop advanced technologies, and strengthen economic security."