Business Circles Hold Emergency Meetings Daily... What Will Happen to Facilities Left in Ukraine?

Companies communicate with government agencies, KOTRA, etc., operating a 24-hour emergency response system
Investment in Ukraine over the past 10 years totals 60 million dollars

[Asia Economy Reporters Sunmi Park and Hyeyoung Lee] South Korean companies, hit hard by supply chain disruptions and soaring raw material prices amid the escalating tensions between Russia and Ukraine, are holding emergency meetings daily across their operational departments to devise countermeasures. Over the past decade, South Korean direct investment in Ukraine has reached $60 million, raising concerns that if Russia launches a full-scale invasion of Ukraine, the damage to domestic companies could be greater than expected.

According to the business community on the 23rd, South Korean companies operating in Ukraine are communicating with government agencies including the Ministry of Trade, Industry and Energy and KOTRA, and are responding around the clock in an emergency mode. Currently, about 10 companies operate corporations or branches locally in Ukraine. These include Samsung Electronics, LG Electronics, Hyundai Corporation, POSCO International, Hankook Tire, Ecovis, and Osstem Implant. All expatriate employees have been withdrawn from the local sites.

Samsung Electronics and LG Electronics, which have home appliance sales subsidiaries in Ukraine, are holding consecutive emergency meetings and closely monitoring the rapidly evolving situation. Considering the possibility of supply chain disruptions, they have strengthened monitoring of local conditions and trends through dedicated supply chain teams. A company official stated, "We are reviewing the scope of U.S. sanctions and the secondary and tertiary ripple effects such as transaction and payment suspensions."

The semiconductor industry is closely monitoring the procurement status of specialty gases and is focused on finding alternatives in case the situation prolongs. This is because the import dependency on Russia and Ukraine for specialty gases such as neon, argon, and xenon?essential for semiconductor production?reaches about 50%. Samsung Electronics and SK Hynix have already strengthened their supply chain organizations through early response meetings and secured ample supplies of specialty gases with high dependency on Russia and Ukraine.

However, given the possibility of a prolonged tense situation and the precedent of neon prices soaring more than tenfold during the 2015 Ukraine conflict, the industry remains cautious. An industry insider said, "We are carefully checking raw material procurement, production, and resulting price volatility as various variables may emerge."

If the situation worsens, damage to facilities invested in by South Korean companies in Ukraine will be inevitable. As South Korean businesspeople stationed in Ukraine withdraw, managing the facilities left behind has become more difficult than before.

According to the Export-Import Bank of Korea, South Korea's investment in Ukraine over the past decade amounts to $60 million. Notably, investments have become more aggressive recently. Considering that the total investment from 2011 to 2015 was less than $1 million, most of the $60 million investment has been concentrated in the last five years. Over the past decade, 20 new corporations with Korean capital have been established in Ukraine, 11 of which were set up in the last three years.

The scope of South Korean investment in Ukraine has expanded from simple wholesale and retail businesses to manufacturing involving facility investments, scientific and technical services, and facility management and leasing, which increases potential damage to Korean companies. In fact, investments in wholesale and retail accounted for only 15% of total investment in 2020-2021.

The remainder was concentrated in manufacturing, business facility management and leasing services, and scientific and technical services, all involving facility investments. An industry official expressed concern, saying, "Although the scale of our companies' investments is not large, given the concentration of investments in recent years, if Russia expands its invasion or the chaotic situation in Ukraine prolongs, damage to facility management will be inevitable."

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