South Korea’s major industries are experiencing supply disruptions in core components as the pandemic lockdowns in China show no end in sight. With the country’s high dependence on Chinese imports, any disruption in the supply chain would threaten the South Korean economy, according to a recent study.
Under the severe disruptions to the Chinese supply chain, many South Korean industries have experienced partial production cuts and shutdowns, fearing it may lead to an economic crisis if the Chinese lockdowns persist.
Some 29.3 percent of South Korea’s material parts imports came from China in 2020 and 27.3 percent in 2019, according to the Federation of Korean Industries, which represents South Korea’s major conglomerates and associated members.
South Korea’s import reliance is most pressing in the following four industries: the production of semiconductors, large-capacity batteries, rare earth metals, and medical supplies. Its dependence on China was highest in these four industries, exceeding its reliance on the United States and Japan.
In 2020, the country imported 93.3 percent of its large-capacity batteries, 52.7 percent of its medical supplies, 52.4 percent of its rare earth metals, and 39.5 percent of its semiconductors from China.
A 2021 study by the Korea International Trade Association found that South Korea is more than 80 percent dependent on China for 1,850 import items. Among them, 100 percent of South Korea’s magnesium was imported from China, as well as 94.7 percent of its tungsten oxide, 86.2 percent of its neoprene adhesive, and 83.5 percent of its lithium hydroxide.
Auto Industry
On top of the global chip shortage, South Korean automakers have faced a shortage of airbag control units (ACUs)—a device that detects accidents and triggers the airbag—as parts from China are delayed due to stringent lockdowns in the country.According to the report, Gwangju Global Motors, which makes the Hyundai Casper, halted production from April 18 to 21 due to the ACU shortage. GM Korea, the Korean unit of General Motors, adjusted production output at one of its Bupyeong plants as its Chinese suppliers failed to meet orders for the brake system parts in time.
In March, Hyundai and Kia were unable to source wiring harnesses due to the lockdown in Shandong, which occurred before the Shanghai lockdown. The companies reportedly had to cut production for two to four weeks.
Electronics Industry
According to a report by South Korea’s Business Post published on April 29, Samsung has been experiencing difficulties procuring its smartphone parts from China.The integrated circuit chip supply for LCD panels in Samsung’s Galaxy A23 and Galaxy A13 smartphones has reportedly been disrupted due to the lockdowns in China.
To ensure competitive pricing for its flagship entry-level smartphones, such as the Galaxy A series, Samsung uses a large number of Chinese-made parts. A supply disruption to its A-series smartphones may negatively impact Samsung’s second-quarter earnings, the report said.
Meanwhile, LG Display’s organic light-emitting diode panel manufacturing plant in Guangzhou faces production difficulties due to logistics and parts supply issues. The company’s first-quarter sales saw a 26.51 percent decline from the previous quarter.
Amid the looming supply chain disruptions, the Korean business community has called on its government to assist with finding alternative supply chains to support domestic companies, Yonhap News reported on April 29.
South Korea’s Ministry of Trade, Industry, and Energy said on April 29 that it plans to build a supply and cooperation network with core minerals and resource-owning countries through bilateral and multilateral trade agreements. A move to ensure the country’s stable supply of critical raw materials.
It added that economic cooperation and trade agreements, such as the Indo-Pacific Economic Framework and Free Trade Agreement, would be promoted in order to strengthen its supply network partnerships.
