Korea to invest $9.3 bil. for components, materials

Shipping containers are seen at a port in Tokyo, Japan, in this file photo, Monday. Reuters-Yonhap

By Kim Yoo-chul

Following Japan unexpectedly and unilaterally tightened controls on high-technology exports to Korea last year, the government has decided to invest up to 11.2 trillion won ($9.3 billion) this year alone to help South Korean companies gain the upper hand against their Japanese counterparts in the industrial materials and components sector.

“South Korea will invest up to 11.2 trillion won to keep core industries ― automotive, shipbuilding and industrial materials ― running this year. The government-wide financial support is to give assistance to these related industries,” the trade ministry said in a statement Monday.

Specifically, the plan provides up to 4.5 trillion won to help local small- and medium-sized enterprises (SMEs) invest in facilities to produce industrial materials and components crucial to manufacturing. The government agency has allocated 3 trillion won to operate programs helping SMEs develop technological advancements.

“The government aims to guarantee full security for three industrial materials crucial to maintaining the country's prowess in manufacturing and is also planning to fully localize production of nine components by the end of this year. If the supply chain doesn't work properly during the transition, then the government will have full authority to intervene in the process,” according to the statement.

The statement signed by the trade, finance and startup ministers and the head of the financial regulator was reported to President Moon Jae-in, Monday afternoon.

The government-led assistance plan comes after Foreign Minister Kang Kyung-wha “strongly asked” her Japanese counterpart Toshimitsu Motegi to get Tokyo to reverse its removal of South Korea from its preferential partner list during their Feb. 16 (KST) meeting in Munich, Germany.

While the leaders of the two countries have generally agreed to move toward a reconciliation, no substantial progress has been made because of the apparent inability of either side to stray from their entrenched positions, making reaching a “middle ground” difficult. Tokyo is still asking Seoul to “do something” over South Korea's top court rulings which ordered Japanese companies to compensate surviving South Korean victims forced to work for them before and during World War II. Seoul has refused to budge stressing the matter is more about sovereignty.

The statement also added the ministry will be teaming up with local semiconductor fabricators for speedier progress in manufacturing logic chips, which are more profitable than conventional memory chips. South Korea has a weaker presence in this area than its chief rivals including Taiwan.

“The ministry plans to allocate 1 trillion won for research and development into the manufacture of logic chips. We will soon operate business models with private companies,” it said. Additionally, the ministry identified bio, eco-friendly cars and hydrogen vehicles as the country's next growth engines that will receive government assistance.

South Korea is home to the world's top two memory chip suppliers ― Samsung Electronics and SK hynix ― that control more than 70 percent of the global market. However, their shares in the logic-chip making sector isn't as substantial as Taiwan's TSMC and Intel of the United States, limiting the Korean duo's growth in the overall semiconductor sector.

Hit by tumbling imports, South Korea's trade deficit with Japan dropped to its lowest in 16 years last year. Data from the Korea International Trade Association showed Seoul had a trade deficit of $19.16 billion with Tokyo in 2019, the lowest since the $19.03 billion reported in 2003. Japan's imposition of restrictions on exports to South Korea appears to have led to the decrease in the trade deficit.