Bu·U·Gyeong Manufacturing Industry Reluctant to Bring Production Facilities Domestically

Busan Chamber of Commerce Survey: Majority of Manufacturing Firms Negative on Reshoring
82.5% of Surveyed Companies Dissatisfied with Reshoring Policy
Highest Obstacles Are High Wages and Deteriorating Employment Conditions

Current Status of Overseas Production Bases Expansion by Manufacturers in the Southeast Region.

[Asia Economy Yeongnam Reporting Headquarters Reporter Kim Yong-woo] What are the views of manufacturing companies in Busan, Ulsan, and Gyeongnam regarding 'reshoring,' the relocation of production bases back to Korea?

At manufacturing sites in Busan, Ulsan, and Gyeongnam, negative opinions overwhelmingly dominated regarding reshoring as a solution to the supply chain crisis caused by COVID-19, and only a very small number of companies are currently considering reshoring.

On the 16th, the Busan Chamber of Commerce and Industry revealed these findings through the "Busan, Ulsan, Gyeongnam Manufacturing Reshoring Demand and Opinion Survey." The survey targeted 120 manufacturing companies in Busan, Ulsan, and Gyeongnam that have overseas production subsidiaries.

According to the survey, the majority of manufacturing companies in Busan, Ulsan, and Gyeongnam with overseas production bases cited low labor costs and local market penetration as the main reasons for overseas expansion. Among all respondents, 44.2% cited utilization of low wages, and 39.2% cited local market penetration as reasons for expansion. Other reasons included "joint expansion with the primary contractor" at 5.8% and "raw material procurement" at 4.2%.

The countries of expansion were led by China and Vietnam at 33.9% and 30.6%, respectively, followed by the United States at 5.9%, Indonesia at 4.8%, and India at 3.8%. The total overseas local employment scale of the surveyed companies was about 100,000 people, with their wage levels averaging 45.3% of domestic labor costs.

Policies Needed for Reshoring.

Regarding reshoring policies, negative opinions were overwhelming. 82.5% of surveyed companies responded that they do not see reshoring as an alternative to overcoming supply chain crises. Only 17.5% gave a positive evaluation. In fact, only 4.2% of companies said they are currently considering reshoring, while 76.7% said they would maintain the current situation, the largest share.

Rather, 7.5% of respondents said they would expand local investment, and 11.7% said they are considering new investments in third countries, indicating that concerns should focus more on the expansion of overseas production by manufacturing companies rather than expectations for reshoring.

When asked about preferred regions for reshoring, 70% of respondents chose the location of their headquarters, but 30% chose locations other than their headquarters. Among these, 6.7% considered the Seoul metropolitan area, suggesting that reshoring might not necessarily benefit the regional economy.

In particular, Busan's competitiveness as a target region for U-turn (returning production) was found to be lower than that of Gyeongnam. Among companies located in Gyeongnam, 75% responded that they would return to Gyeongnam, while only 66.7% of companies in Busan said they would return to Busan, lower than Gyeongnam. Among companies in Busan, 16.7% said they would consider a U-turn to Gyeongnam, whereas only 9.6% of companies in Gyeongnam considered a U-turn to Busan. Additionally, when considering a U-turn, 10% of companies in Busan had the Seoul metropolitan area in mind, compared to a much lower 3.8% of companies in Gyeongnam.

This reveals that Busan is relatively a more difficult city for companies to operate in.

The top priority for companies when considering a U-turn was industrial infrastructure such as industrial complexes. 38.3% of all respondents pointed this out, making it the most significant factor. Other considerations included "logistics infrastructure such as ports and airports" at 19.2%, "securing excellent production and technical personnel" at 17.5%, "headquarters location" at 10.8%, "various policy supports" at 10.0%, and "development of related industries" at 4.2%.

The biggest obstacle to reshoring for regional manufacturing companies was the burden of high domestic wages and deteriorating employment conditions. 34.2% of surveyed companies cited this as the greatest difficulty. This reflects the reality of the domestic business environment, where most regional manufacturing companies have overseas expansion goals focused on utilizing low wages and local market penetration, and where burdens such as minimum wage increases and the 52-hour workweek system are increasing.

A representative from the Busan Chamber of Commerce and Industry said, "Considering the reality of our economy's high dependence on overseas and the overseas expansion purposes of regional manufacturing companies, it is currently difficult to expect voluntary reshoring by regional companies."

However, they added, "If various employment system improvements and policy support benefits are increased, it may be possible to explore new forms of win-win job creation that consider regional and industrial characteristics through reshoring."

This content was produced with the assistance of AI translation services.