Hankyung Research Institute: "Employment and Sales Increase in Semiconductor and Other Value Chain Advancement Industries"

Report on the Current Status of Global Value Chain Advancement in Korean Manufacturing Industry

An analysis has emerged suggesting the need to strategically expand the advancement of global value chains (GVC) since companies in eight industries related to the advancement of GVCs?such as semiconductors, automobiles, and petroleum refined products?show higher employment and sales compared to other industry groups.

On the 22nd, the Korea Economic Research Institute, through a report titled "Current Status and Characteristics of GVC Advancement in Korean Manufacturing," commissioned to Professor Choi Nam-seok of Jeonbuk National University, identified the five advanced forward GVC core industries from 2015 to 2020 as ▲Electronic components, computers, video, audio, and communication equipment ▲Medical, precision, optical instruments, and watches ▲Electrical equipment ▲Other machinery and equipment ▲Automobiles and trailers, and the three major backward GVC core industries as ▲Coke, coal, and petroleum refined products ▲Chemical substances and chemical products ▲Primary metals.

GVC refers to a global value-added trade map that links together the value added created by companies participating in the global supply chain, identified based on the countries and industries where production takes place.

In the eight major forward and backward GVC core industries, employment per company was estimated to be about 510 employees higher than the average of all companies in the industry group. In particular, in the five core forward GVC industries such as semiconductors and automobiles, employment per company was about 610 employees higher than the industry average. Regarding sales, the eight major forward and backward GVC core industries recorded annual sales approximately 514.4 billion KRW higher than the overall industry average. In the five forward GVC core industries, sales per company were about 397.7 billion KRW higher annually compared to the entire industry group.

Based on the analysis results, the report pointed out the need to strategically expand GVC advancement in the future. Professor Choi stated, “Participation in global value chains positively impacts domestic employment, sales, and corporate value creation as well as the domestic economy,” and argued, “It is necessary to expand global supply chain linkages with the United States, Japan, and Europe, focusing on the eight core GVC industries.”

He added, “Since the GVC is being newly reorganized mainly around the United States recently, it is necessary to participate in GVC advancement based on the Indo-Pacific Economic Framework (IPEF) through foreign direct investment toward the U.S.” Furthermore, he advised, “Considering that China is the top trading partner in the forward and backward GVC core industries, business cooperation with Chinese companies should also be approached strategically.”