[Public Voices] Strategies for Navigating the Turbulent Era of Geopolitics, Geotechnology, and Resource Geopolitics

There is a continuous series of warning signals from domestic companies. The operating profit of the top 500 companies in the first quarter decreased by about 25 trillion won in one year, halving the profit. The operating profit of 713 listed mid-sized companies also decreased by 31% in the first quarter. This year, the trade deficit has exceeded 30 billion dollars. Since this is due to structural changes in the global economic order rather than a cyclical economic phenomenon, the outlook is even more uncertain. It is a complex triangular wave where traditional geopolitical factors overlap with geotechnology, influenced by advanced technology, and resource geopolitics, where natural resources emerge as variables. A fundamental change in perspective and response to the global market is necessary.

Geopolitics, which emerged in the 19th century, is an approach that international political status is influenced by geographical locations such as continents, oceans, straits, and peninsulas. It reflects the dynamics of competition and power expansion among Western powers. Geotechnology, raised in the late 20th century, views advanced technological capabilities as a major variable in international diplomacy. Taiwan's TSMC is called the sacred guardian mountain (Hoguk Shinsan) protecting the country as a core strategic value against China. Morris Chang, the founder and former chairman of TSMC, demonstrated his status by meeting with U.S. Vice President Kamala Harris and Chinese President Xi Jinping at the Asia-Pacific Economic Cooperation (APEC) held in Indonesia last November. Pat Gelsinger, CEO of U.S. Intel, emphasized at the Wall Street Journal (WSJ) event in October last year, "In the past 50 years, oil reserves determined the world geopolitical order, but in the next 50 years, semiconductor factories will become more important." KAIST titled its 'Future Strategy 2023' published earlier this year as "The Era of Geotechnology."

Resource geopolitics has emerged in the 21st century as the BRICS (Brazil, Russia, India, China, South Africa) bloc, opposing the U.S.-European Union (EU), is joined by other countries. After the Russia-Ukraine war, the linkage among seven of the world's top ten resource-rich countries?Russia, Saudi Arabia, Iran, China, Brazil, Iraq, and Venezuela?has tightened. They are using their own currencies in resource transactions and are making visible intentions to create a common currency to break away from the dollar-based system. In the global open economy, some natural resources are simple trade commodities, but in a bloc economy, they are expected to change in character to strategic materials from a national security perspective.

From a geopolitical perspective, South Korea's industrialization secured opportunities during the Cold War system where the U.S. and the Soviet Union confronted each other. As the frontline of the free democratic camp, it introduced capital and technology from advanced countries and opened export markets. The semiconductor industry, a current core industry, also started from a geotechnological variable. The semiconductor industry began in the U.S. in the 1950s and grew rapidly in the 1960s, but Japanese companies advanced and led the market from the 1970s. To check Japan, the U.S. government signed the first U.S.-Japan Semiconductor Agreement in 1986, creating an environment for the emergence of a third supplier country. In this flow, Samsung Electronics built a memory semiconductor factory in 1983 and reached the level of Japan's market share in 1992. The industrial structure that had been maintained since then is now caught in turmoil due to the U.S.-China semiconductor war. The geotechnological variable that gave opportunities to South Korea's semiconductor industry in the 1980s is reappearing as a crisis factor in the 2020s.

From the perspective of the business environment of our companies, we are currently in a period of upheaval where geopolitical risks are amplified globally, geotechnological variables are emerging, and resource geopolitics blocks are rising. As a strategic response direction, it is necessary to understand the direction of change in the international order combining 'geography-technology-resources' and focus on business opportunities expanding in Southeast Asia, the Middle East, and Central Asia, which are intersections of geopolitics, geotechnology, and resource geopolitics. Internally, it is necessary to enhance capabilities to increase risk sensitivity and respond quickly and flexibly (Agile·Flex·Risk).

Kim Kyung-jun, Former Vice Chairman of Deloitte Consulting