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South Korean firms are investing file quantities of capital in to the US economic system, because the Biden administration’s efforts to carve out China from its provide chain and profitable subsidies for superior know-how producers spark a surge in mission commitments from Seoul.
US mission commitments from South Korean firms totalled $21.5bn final 12 months, greater than some other nation and surpassing Taiwan, which was the biggest investor in 2022, in response to information from the UN Convention on Commerce and Growth analysed by the Monetary Instances.
Final 12 months marked the primary time for at the least a decade that South Korea has secured the highest spot for mission commitments within the US, a milestone that arrived as China’s place has fallen. Beijing was the highest investor within the US in 2014 however ranked eighth final 12 months after investments had fallen by a 3rd, in response to the UN information, which tracks greenfield initiatives — commitments to construct amenities and jobs — and doesn’t embrace acquisitions.
Whereas final 12 months’s commitments from South Korea had been 11 per cent decrease than the earlier 12 months, the info totalled 90 initiatives from South Korean firms in 2023, the best on file and up 50 per cent 12 months over 12 months.
“The US doesn’t wish to be sourced from China any extra. That is giving Korean firms a chance to turn out to be US suppliers,” Chihwan Kim, chief govt of Samkee, a Korean auto provider, informed the FT. Final 12 months, Samkee invested $128mn to open its first US manufacturing unit in Tuskegee, Alabama, to construct car components.
The surge in South Korean funding follows the Biden administration’s passage of the Chips and Science Act and the Inflation Discount Act in 2022, providing a whole bunch of billions in tax credit, loans and subsidies to jump-start US manufacturing of semiconductors and clear applied sciences, together with photo voltaic panels and electrical automobiles, and cut back reliance on China, the dominant producer.
Greater than a 3rd of Korean mission bulletins within the US tracked by fDi Markets final 12 months had been within the automotive or electronics sectors. The IRA affords a $7,500 shopper tax credit score for electrical automobiles that requires meeting in North America.
Tensions between Washington and Beijing have additionally put strain on South Korean firms to restrict their operations in China to pursue US expansions. The Chips Act, for instance, outlines “nationwide safety guardrails” for its funding, stopping recipients from increasing manufacturing capability and proscribing know-how licensing efforts in China and different “overseas entities of concern”.
Greater than half of South Korean outbound funding flowed to the US final 12 months, up from 18 per cent in 2019. China, in the meantime, obtained lower than 1 per cent of South Korean funding final 12 months, down from 11 per cent in 2019, in response to Unctad.
Among the many largest bulletins final 12 months embrace a $4.3bn funding from Hyundai to fabricate battery cells with LG Power Resolution to provide its electrical car manufacturing unit in Georgia, the biggest mission within the state’s historical past, and an identical $3.5bn funding from Samsung SDI with GM in St Joseph County, Indiana, in response to fDi Markets, a subsidiary of the Monetary Instances.
“It’s been an intentional alternative,” mentioned Invoice Schalliol, director of financial growth in St Joseph County. Indiana officers have made 4 journeys to South Korea previously 5 years to recruit traders and the state ranks second for funding from Seoul.
The state is even poised for a demographic shift from its South Korean initiatives. Ninety minutes away from St Joseph County is one other Samsung SDI manufacturing unit in Kokomo, the place the town is anticipating greater than a thousand Korean expats and 6 new Korean eating places.
Powerful macroeconomic situations, falling import costs and slowing demand for electrical automobiles have additionally delayed some investments from Korean producers and sparked requires higher US commerce protections. In July, LG Power Resolution paused its $2.3bn battery storage manufacturing unit in Arizona, citing “market situations”. Samkee is delaying including its electrical car traces by one to 2 years on account of slower than anticipated adoption.
“Producers like Qcells are shedding billions of {dollars} a month. Investments throughout the sector are at essential threat of failure,” mentioned Hal Connolly, head of public coverage and authorities relations at Qcells, a Korean photo voltaic components producer in Georgia, at a Division of Commerce and US Worldwide Commerce Fee listening to in Could.
“With out commerce reduction, the state of affairs will solely worsen,” Connolly mentioned. The corporate has filed a petition with a number of different US photo voltaic producers for extra tariffs on Chinese language photo voltaic firms for alleged dumping in south-east Asia.
