'Decision to Leave' US or China... Chey Tae-won Ponders Solutions to Supply Chain Collapse (Summary)

KCCI Year-End Press Conference

[Asia Economy Reporter Choi Seoyoon] "We must not exclude China, our number one economic partner." "The alliance with the United States is also important from a security perspective."

Choi Tae-won, Chairman of the Korea Chamber of Commerce and Industry (and Chairman of SK Group), said at a year-end press conference on the 21st that amid the rise of protectionism due to the COVID shock and the Russia-Ukraine war, countries have made a "Decision to Break Up." He likened the supply chain collapse to the title of the movie Decision to Break Up. Chairman Choi diagnosed, "All countries have already made a 'Decision to Break Up' (supply chain collapse) with someone," adding, "Unlike in the past, this is progressing in a way that fundamentally changes the 'relationship.'

He continued, "Because it is a 'Decision to Break Up,' it is not about 'never seeing each other again,' but rather 'this is this with you, and that is not done,' increasing the complexity of the global economy," adding, "(While the U.S. alliance is important) we are in a significant dilemma where we cannot afford to neglect China."

He said that amid the supply chain collapse, countries are revising laws to implement policies favorable to themselves, but Korea does not have the option to set those rules. Chairman Choi said, "The U.S. suddenly created the Inflation Reduction Act (IRA), and soon after, the European Union (EU) followed. Would Japan or China not create similar measures?" He added, "In Korea's case, the influence these countries (large markets) have on us is greater than the influence we have on them, so in certain areas, Korea has no choice."

The issue Chairman Choi mentioned?"choosing one means you cannot choose the other"?is a problem SK is facing. SK Group operates both battery (affected by the U.S. Inflation Reduction Act) and semiconductor (SK Hynix’s factories in China) businesses. Battery affiliate SK On is under the influence of the IRA, while semiconductor affiliate SK Hynix operates DRAM factories in Wuxi and NAND flash factories in Dalian, China. SK Hynix has stated that due to U.S. restrictions, its local business in China is affected and that "if operating fabs in China becomes difficult, contingency plans to relocate to Korea or elsewhere are being considered." Thirty percent of SK Hynix’s sales come from these Chinese factories. The company must carefully navigate the reality of balancing the right to freely operate in China and the security-trade cooperation led by the U.S., such as the ‘Chip4’ alliance.

He suggested that Korea needs a sophisticated strategy unique to itself amid the U.S.-China economic security tensions. Chairman Choi said, "The more intense the G2 conflict becomes, the more neighboring countries need to strengthen their own cohesion," and identified Japan as a country with which Korea should restore and build strong economic cooperation. He said, "Japan is in a similar situation to Korea and has no clear solution," adding, "Although there are historical issues, it is a good time to discuss how to overcome economic crises and maximize shared benefits to create synergy."

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