US-China row pressing Korean firms on investment

SK Group Chairman Chey Tae-won, right, also chairman of the Korea Chamber of Commerce and Industry (KCCI), speaks with Minister of Trade, Industry and Energy Moon Sung-wook, during Moon's visit to the KCCI in Seoul, May 12. Yonhap

By Yi Whan-woo

The Biden America is committed to forming distinctively anti-China supply chains jointly with allies to protect key industries that it sees as critical for national security.

This means Samsung, Hyundai, LG and SK have to be diplomatically sensitive to prevent China from assuming they are a part of the anti-China alliance, according to analysts, Monday.

The four will send their respective business executives to the U.S. with President Moon Jae-in this week as part of the “unofficial economic delegation.” They accordingly plan to announce large-scale investment plans at the time of the first Korea-U.S. summit on May 21, the total amount of which would reach some 40 trillion won ($35.2 billion).

Unlike previous presidential visits, this one will not include a large-scale business delegation due to safety concerns amid the COVID-19 pandemic.

The “big four” companies plan to invest in pharmaceuticals, large-capacity batteries for electric vehicles, bioscience and semiconductor chips, which the Biden administration addresses to “outcompete” China.

“The executives will certainly will be required to develop a diplomatic sense of awareness this time as the Washington-China row is escalating to an unprecedented level,” said Park Won-gon, an international relations professor at Ewha Womans University.

He noted the Biden administration has begun to flesh out an overarching strategy to bolster domestic investments and also to compete with China by enhancing its alliance with Korea, Japan, Australia and India, among others.

The allied countries are defined as those who share values of democracy and freedom against China's autocracy, in the U.S. vision to control the global economy.

An economist, who spoke on condition of anonymity, voiced a similar view with Park.

“The entrepreneurs, unfortunately, may need to take U.S.-China relations into account in making business decisions for a while,” he said.

Of the four conglomerates, SK has several affiliates with a keen interest in estimated outstanding issues to be discussed and touched upon during the summit, such as semiconductor producer SK hynix, battery maker SK Innovation and SK Bioscience.

For instance, SK Innovation is currently building two battery manufacturing plants in Georgia and has plans to build two more. Accordingly, Group Chairman Chey Tae-won, who is also chairman of the Korea Chamber of Commerce and Industry (KCCI), will be a part of the economic delegation.

Regarding Samsung Electronics, it was the only Korean company invited to a special White House meeting in April on the global semiconductor shortage. It was also invited to a conference held by the U.S. Department of Commerce this month to further discuss the chip shortage issue.

Samsung is set to announce the specifics of its massive semiconductor investment plan just before the start of the summit. The investment plan would be Samsung's best bet to expand its foundry chip-making line already in operation in the U.S. state of Texas. The amount of the investment would be around 20 trillion won, according to reports.

“It is doubtless the firms came up with investment plans in accordance with business strategy, but China may pick on them if the investments work against it,” Park said. The professor noted the Korean companies in the 6G technology sector especially should actively join the U.S.-led global supply chain so that they will not be left out if the U.S. seizes the initiative in the wireless technology race.

“Compared to other sectors, wireless and other digital technologies undergo faster changes as well as related standard. Firms will not benefit much if they maintain ambiguous stances and remain passive in spending money for the U.S.-led digital connectivity partnership,” Park explained.

Meanwhile, an economist at Hyundai Research Institute viewed China may not go for economic retaliation against individual companies that it sees as “actively” joining U.S. efforts to form a global supply chain.