South Korea’s major industries are facing production cuts and shutdowns in China’s blockade


China’s supply chain turmoil poses a devastating threat to South Korea’s economy

With the pandemic blockade in China not ending, South Korea’s major industries are experiencing a disruption in the supply of core components. According to a recent survey, supply chain disruptions will threaten the South Korean economy due to its high reliance on China’s imports.

Under the severe turmoil in China’s supply chain, many South Korean industries are experiencing partial production cuts and shutdowns, and are concerned that continued blockades in China could lead to an economic crisis.

According to the Federation of Korean Industries, which represents South Korea’s major conglomerates and related members, about 29.3% of South Korea’s material parts imports were imported from China in 2020 and 27.3% in 2019.

South Korea’s dependence on imports is the most pressing in four industries: semiconductors, high-capacity batteries, rare earth metals, and medical supplies. Dependence on China is the highest in these four industries, outpacing dependence on the United States and Japan.

In 2020, we imported 93.3 percent of high-capacity batteries, 52.7 percent of pharmaceuticals, 52.4 percent of rare earth metals, and 39.5 percent of semiconductors from China.

A 2021 survey by the Korea International Trade Association found that South Korea relies on China for more than 80% of its 1,850 imports. Among them, 100% of South Korea’s magnesium was imported from China, 94.7% of tungsten oxide, 86.2% of neoprene adhesive, and 83.5% of lithium hydroxide.

The study emphasizes that resource-poor countries rely heavily on China’s imports for the essential items needed to maintain daily economic production. A single supply disruption due to one of the key materials can disrupt South Korea’s major sectors, including the automotive, semiconductor, electrical and cosmetics industries.

Automotive industry

In addition to the global chip shortage, South Korean automakers have announced that airbag control units, which are devices that detect accidents and trigger airbags, because Chinese parts are delayed due to severe domestic lockdowns. We are facing a shortage of ACU).

Hyundai Motor said, “Since April 18, we have not been able to procure sufficient ACU, and we had to partially idle the Genesis GV60, 70, 80 assembly lines at the Ulsan plant.” Korea Jun Andy Daily Reported on April 25, citing sources from automakers.

According to media reports, Gwangju Global Motors, which manufactures Hyundai Motor, stopped production from April 18 to 21 due to a shortage of ACU. GM Korea, a South Korean unit of General Motors, adjusted production at one of its Bupyeong plants because a Chinese supplier missed an order for brake system parts.

In March, Shandong Province was closed before the blockade of Shanghai, so Hyundai and Kia could not procure wiring harnesses. Companies reportedly had to cut production for two to four weeks.

According to a report by JoongAng Daily, GM Korea is “missing other parts of China” in addition to the shortage of car chips. The company produced 60,408 vehicles in the first quarter, down 30% from the same period last year.

Electronics industry

According to a report from South Korea’s Business Post released on April 29, Samsung is having a hard time procuring smartphone parts from China.

The supply of integrated circuit chips for the LCD panels of Samsung’s Galaxy A23 and Galaxy A13 smartphones has been reported to have been suspended due to the blockade in China.

To ensure the competitive price of major entry-level smartphones such as the Galaxy A series, Samsung uses a large number of Chinese-made parts. According to the report, a disruption in the supply of A-series smartphones could have a negative impact on Samsung’s second-quarter earnings.

Meanwhile, LG Display’s OLED panel manufacturing plant in Guangzhou faces production difficulties due to logistics and component supply issues. The company’s first-quarter sales were down 26.51% from the previous quarter.

In the looming supply chain turmoil, South Korean business circles have called on the government to help find alternative supply chains to support domestic businesses, 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 mineral and resource-owning countries through bilateral and multilateral trade agreements. A move to ensure a stable supply of important raw materials.

He added that economic cooperation and trade agreements such as the Indo-Pacific Economic Framework and Free Trade Agreements will be promoted to strengthen supply network partnerships.

Lisabian

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Lisabian is a Korean-based writer of The Epoch Times, focusing on Korean society, its culture and international affairs.

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