Korea Faces Intensified Competition with Taiwan in Semiconductor Exports to the U.S.

"Need to Secure Competitive Advantage Against Taiwan and Enhance Trade Cooperation with the U.S."

Source=Korea International Trade Association

[Asia Economy Reporter Kim Pyeonghwa] Competition between South Korea and Taiwan is intensifying over the expanding share of semiconductors in the U.S. import market. As the U.S. reduces imports of Chinese memory modules, Taiwan, which hosts many related companies, is increasing its market share. In the automotive sector, South Korea is narrowing the gap with competitor Japan by diversifying the models sold locally.

The Korea International Trade Association’s International Trade and Commerce Research Institute announced on the 12th that it will release a report titled "Analysis of Export Competition Among Major Countries in the U.S. Import Market" containing these findings.

South Korea and Taiwan Benefit from Decline in U.S. Semiconductor Imports from China

According to the report, over the past five years (2017?2021), the market shares of South Korea, Vietnam, and Taiwan in the U.S. import market have all risen simultaneously. Notably, the gap between South Korea and Taiwan narrowed from 1.24 percentage points to 0.63 percentage points, and the Export Similarity Index (ESI) increased from 0.351 to 0.373, indicating intensified competition. The ESI quantifies the similarity in export product structures and indexes the degree of competition between two countries in a specific market; the closer to 1, the fiercer the competition.

South Korea performed well by increasing its share in key products such as semiconductors and automobiles, and competition with Taiwan intensified in the semiconductor sector. While U.S. imports of Chinese semiconductors sharply declined over the past five years due to additional tariffs on China, South Korea and Taiwan increased their shares by 5.34 and 3.82 percentage points respectively. The ESI between South Korea and Taiwan also rose from 0.480 to 0.575.

The U.S. places 87.6% of its memory semiconductor imports on modules rather than chips, leading to competition with Taiwan’s third-party companies specialized in module production. Third-party companies refer to firms that do not manufacture semiconductor chips themselves but procure chips externally and sell them as modules. Most of these are Taiwanese companies.

Source=Korea International Trade Association

Narrowing the Gap with Japan in the Automotive Sector

In South Korea’s largest export sector to the U.S., automobiles, the gap with major competitor Japan has narrowed. Over the past five years in the U.S. automobile import market, Japan’s market share decreased by 2.23 percentage points, while South Korea’s increased by 1.47 percentage points, reducing the share gap between the two countries from 10.54 percentage points in 2017 to 6.84 percentage points in 2021. South Korea’s share in the U.S. automobile import market rose from 8.41% last year to 8.57% in the first half of this year, further narrowing the gap with Japan.

The report analyzed that this result was driven by diversification of models centered on high value-added SUVs and strong sales of premium brands. It noted that the diversification of models sold in the U.S. from mainly compact sedans to mid-to-large sedans, luxury SUVs, and hybrids had an impact.

Cho Sanghyun, head of the Korea International Trade Association’s International Trade and Commerce Research Institute, stated, “Since the U.S.-China dispute, export competition with Taiwan has intensified, making it urgent to secure advanced technological competitiveness and diversify product lines to gain a competitive edge over Taiwan.” He added, “We must establish a close trade cooperation system with the U.S. to minimize negative impacts arising from the U.S.’s China exclusion moves and our expanding market share.”

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