Korean Companies Caught in the Thucydides Trap

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[Asia Economy Reporters Kim Heung-soon and Jung Hyun-jin] As major powers such as the United States and China compete for dominance in global trade hegemony, red lights have turned on Korea's key industries leading the world market. The production and merger and acquisition (M&A) plans of domestic companies with global competitiveness in semiconductors, shipbuilding, and aviation are being disrupted due to the power struggle among these major powers. The protectionism triggered by COVID-19 has escalated into a hegemony competition between the emerging power China and the United States, which feels threatened by it, leading to an assessment that Korea’s leading companies have fallen into the "Thucydides Trap."

According to the industry on the 27th, the U.S. Department of Commerce’s Bureau of Industry and Security recently announced in the Federal Register that it will conduct a survey of companies across the semiconductor supply chain, including manufacturers and intermediate and end users. The survey for semiconductor manufacturers included sensitive information such as monthly sales volume of the top-selling products from 2019 to 2021, the top three customers per product and their expected sales proportions, and inventory status of finished products.

Information in the semiconductor industry not only affects pricing but is also closely linked to confidentiality agreements with customers, so most of it is kept secret. However, the U.S. government is pressuring companies to disclose this information. The biggest concern is that the U.S. might use this information to benefit the growth of its own semiconductor companies.

In large-scale M&As, delays in review schedules by competition authorities in various countries are also hampering Korean companies. SK Hynix’s ongoing acquisition of Intel’s NAND business is being delayed by Chinese competition authorities, and the integration of Korean Air and Asiana Airlines, promoted as part of the aviation industry restructuring, has been stalled for nearly a year due to reviews by the U.S., China, and Japan. Korea Shipbuilding & Offshore Engineering (formerly Hyundai Heavy Industries) completed preparations such as converting to a holding company to acquire Daewoo Shipbuilding & Marine Engineering shares held by KDB Industrial Bank in 2019, but has been unable to finalize the acquisition contract for over two years due to the European Union’s failure to approve the merger.

Experts advise that although the government hastily decided to establish the 'Foreign Economic Security Strategy Meeting,' a body integrating foreign economic and security issues, bold institutional reforms, infrastructure expansion, and active tax support are necessary.

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