Category: Korea-Business

What the U.S. is doing is pushing industries to make a choice between the U.S. or Chinese markets. Korea is trying to find a middle ground which so far the Biden administration does not want to offer them:

Korea Inc. faces an uphill battle as a push in the United States for economic security is taking its toll on companies dependent on China for manufacturing or for the supply of materials and components.    
   
The U.S. is passing laws and enacting executive orders to bring the manufacturing of products important to national interest back to U.S. soil. Chips, batteries, electric vehicles(EV), solar cells and certain biotechnology products are on the list, and China is the main country of concern.    
   
A number of Korean companies have been affected already.  

Hyundai Motor’s EV sales in the U.S. have fallen since the passage of the Inflation Reduction Act (IRA), as its EV models won’t be qualified for the subsidies under the act.    
   
Samsung Electronics and SK hynix are having to rethink their use of China as a major manufacturing base for semiconductors as a number of U.S. rules are making it difficult to transfer key technologies to China, which is the second largest source of memory chips for these companies after Korea.      
   
Korea feels betrayed by its ally and is fighting for workarounds that would allow its companies to continue sourcing heavily from China. It is now engaged in an intense lobbying effort to get the rules watered down or waivers for its companies.  
   
This anniversary special will explore the impact of the U.S.-China tech war on Korean business and map out ways to curtail the damage. It is based on interviews with academics and researchers.    
   
Some argue that the dependence on China needs to be reexamined, while others argue that the Yoon Suk-yeol administration should come up with sizable financial incentives and tax cuts to attract manufacturing facilities for chips and high-tech products to Korea. 

Joong Ang Ilbo

You can read more at the link.

U.S. service members in South Korea continue to gain continuing buying power as the won continues depreciate against the dollar:

The Korean won has weakened severely against the U.S. dollar, sending its value to 1,362 won per dollar as of Sept. 2 ― the lowest since April 2009. Excluding global financial crisis periods, the currency value is the lowest since April 2001 when the global economy had just started recovering from the IT bubble recession.

The won-dollar rate was once below 1,300 right after the U.S. Federal Reserve’s Federal Open Market Committee (FOMC) meeting, on the hopes that the Fed might pivot to decelerating the pace of its rate hikes. The dollar index (DXY), measuring the dollar value against six major currencies, came down to 105 by the end of July from the previous peak of 108. Now the index has moved up even further beyond 109, which is the highest since 2001.

The resurgence of the dollar index has stemmed from the weakening euro ― now below parity ― as well as concerns that the Fed will keep raising rates aggressively. In addition, the weakening Chinese yuan, amid China’s sluggish recovery and the central bank’s rate cuts, has caused the Korean won to weaken further. 

Korea Times

You can read more at the link.

Economic conditions in Korea may not be good, but it good for U.S. troops stationed there that are getting a great exchange rate against the won:

Current economic conditions are “severe,” the presidential office said Tuesday, as the Finance Ministry warned speculators not to pile into the won trade, with the currency now at levels not seen in more than 13 years.  
   
“Internal and external economic conditions, like the weak won and the growing trade deficit, are severe,” presidential spokesperson Kim Eun-hye said on Tuesday.  
   
Earlier that day, President Yoon Suk-yeol said he will address the economic risks in an emergency meeting and make sure the falling won “does not impose negative impacts on our market.”

The won broke 1,340 to the dollar for the first time in 13 years and four months on Monday. It continued to fall Tuesday, hitting 1,346.60 won intraday. The currency has declined more than 10 percent this year.  
   
A declining won puts Korea in a tough situation as households are weighed down by debt and being squeezed by inflation. Raising rates would held stabilize the currency but threaten the housing market, while inflation could remain high if rates are increased too slowly.  
   
The brewing economic crisis is as much a test for the president, who is already battling a low approval rating and has few tools at his disposal, as it is for the central bank. 

Joong Ang Ilbo

You can read more at the link, but the current economic problems is probably going to only further drop President Yoon’s approval ratings.

Not only will he speak at the National Assembly, but he is expected to meet with top Korean business leaders as well:

Bill Gates, the founder of Microsoft and co-chairman of the Bill & Melinda Gates Foundation, has been invited to speak at the National Assembly during his stay in Korea on Aug. 15-17, but all eyes are on whether he will meet with key business leaders during his visit, according to industry officials, Wednesday. 

Gates will visit the Assembly at 10 a.m. on Aug. 16 and meet with Speaker Kim Jin-pyo. At 10:40 a.m., he will give a speech on the topic of “The importance of international cooperation and Korea’s leadership for coping with and preparing for COVID-19 and future infectious diseases” at the plenary session of the Special Committee on Budget and Settlement of the National Assembly.

This is Gates’s first visit to the National Assembly since 2013. Back then, he gave a lecture on the topic of “Smart Aid: Innovation for a Better World and a Stronger Korea” at the National Assembly at the invitation of then-Saenuri Party (currently known as the People Power Party) member Chung Mong-joon.

Afterward, Gates met up with key businesspeople during his past visits to Korea and all eyes are on whom he will meet this time around.

Korea Times

You can read more at the link.

It looks like Putin’s War has opened a whole new market for the ROK defense industry:

Poland’s defense minister said his country will buy a large package of Korean weapons, including K-2 tanks, K-9 self-propelled howitzers and FA-50 light fighter jets, and also manufacture some weapons in Poland under license, according to a media report released Wednesday.  
   
In an interview with Polish defense media outlet Defence24, Polish Defense Minister Mariusz Blaszczak cited the Russian invasion of Ukraine as the main driver of the purchase.  
   
“The unpredictable nature of Putin means that we need to accelerate equipment modernization even further,” Blaszczak said. “It is of key importance to increase the levels of security as fast as possible for Poland. We can do this only by creating a powerful military that is strong enough to deter any potential aggressor from deciding to attack.” 

Joong Ang Ilbo

You can read more at the link.

Anyone want to buy the McDonalds franchises in South Korea?:

McDonald’s is moving to sell its Korean branches as more companies enter the overly-crowded fast food market here, the company said Friday. The U.S. fast food giant first attempted to dispose of its Korean business back in 2016 but failed to do so as potential buyers opted out, due to high sales prices and other reasons.

Mirae Asset Securities has been selected as a sales manager to find the new owner of McDonald’s Korea, which has seen its profitability deteriorate, despite rising revenue, because of rising wages and higher raw materials costs, amid intensifying competition. 

“McDonald’s is looking for a strategic partner in Korea to improve the company’s growth. We are working with an external consulting firm to review various options. We will provide more details on the sell off at the appropriate time,” a McDonald’s Korea official said. 

McDonald’s sales in Korea have actually increased from 724.8 billion won ($570.4 million) in 2019 to 867.8 billion won in 2021. This increase is only counting the revenue created from the restaurants McDonald’s Korea directly managed, and if sales created with franchisees are included, the figure reaches over 1 trillion won. It is the largest sales achieved by the American fast food restaurant chain in Korea. Its operating losses reached 44 billion won in 2019, 48.3 billion won in 2020 and 27.7 billion won in 2021. 

Various factors are attributable to McDonald’s money-losing business in Korea. Higher delivery service fees here during COVID-19 have increased its business expenses, along with soaring costs of labor and raw materials. 

Korea Times

You can read more at the link.

This is not surprising considering how this trucker strike continues to drag out which is all linked to high fuel prices:

South Korean steelmaker POSCO said on Sunday will halt some of its plants in the country due to a lack of space to store finished products, which have not been shipped due to a strike by truckers who are demanding higher pay as fuel prices surge.

POSCO follows automaker Hyundai Motor in cutting production lines as the strike by thousands of truckers disrupted cargo transport at the country’s industrial hubs and major ports.

Reuters

You can read more at the link.

I feel bad for the investors that lost their money, but investing in bitcoin has always had a casino like atmosphere to it. You should not invest money that you cannot afford to lose:

The collapse of Luna is starting to ripple through Korea as investors in the coin and companies associated with it add up their losses and adjust their plans.  

Victims range from retail punters to some of the largest business names in the country, and the damages go from trivial to existential, though the sense is that, so far, the Luna fiasco will not be a Lehman moment and threaten crypto markets or the broader markets in a systemic way.    

“I lost my entire lifesavings in just two days,” one person wrote anonymously on Bitman, a Korean blockchain community, on May 14. “I repeatedly sold Luna at a loss, bought more to lower the average price and sold it at a loss again. After losing more than 100 million won [$78,000] that I struggled to save for years, I can neither eat nor sleep. I loathe myself.”  

Terra coins were algorithmically pegged to other currencies though arbitraged with Luna coins. When faith in the design evaporated in early May, Luna lost most of its value in a matter of days and TerraUSD, which is the Terra that tracks the dollar, dropped to about 10 cents. 

One man, who claims to have lost 2 billion won ($1.6 million) by investing in Luna, was under investigation after showing up at the house of Kwon Do-hyeong, one of the masterminds behind the Terra stablecoin scheme.    
   
“Kwon should officially apologize and announce some sort of plan using any means available, including using his own money,” the man told the local press. “There are some people around me who have actually lost their lives.” 

Joong Ang Ilbo

You can read more about the cryptocurrency losses impacting South Korea at the link.

This is probably a smart move with the amount of major car companies now offering electric vehicle options that is driving increased competition. If Samsung wanted to get into this market they should have done it at least a decade ago in order to already have captured market share like Tesla has done:

But at Samsung, still Apple’s top rival in the smartphone segment, its proven “go-to-market strategy” won’t be applied in the finished EV segment, as the Korean tech behemoth decided recently not to manufacture its own brand of EVs, as two senior executives, both of whom are directly involved in the issue, told The Korea Times. 

The core reasons behind this decision are that it doesn’t believe its entry into the finished EV segment will see sustainable profits, and it holds the intention to continue avoiding any possible conflicts with its top clients, amid the focus on its contract-based semiconductor foundry business, according to them.

“After thorough reviews, response and discussions with clients, top Samsung management reached a consensus that making a foray into the finished EV segment won’t be the right fit both in terms of a profit standpoint and from a client management perspective,” one of the sources said on condition of anonymity.

Korea Times

You can read more at the link.