As the dependency of the semiconductor industry, which plays a major role in the economic growth of the Republic of Korea, is increasing, there is a growing concern about the negative factors that will affect the economy if the volatility of the related markets grows.

The semiconductor boom continues this year. However, the global protectionism is further reinforced by the European Union (EU) placing countervailing duties on the Trump Administration`s steel and aluminum tariff bomb policy. The uncertainty of major external factors is also evident in the decline in exports to the United States.

According to a report by the Korea Development Bank (KDB) on the "Domestic Economic Impact of Semiconductor Exports" report, the global semiconductor market is highly volatile and it is expected that Korea`s exports will be hit hard by the recession.

The biggest factor is that the share of semiconductors in total exports expanded from 9.0% in 2013 to 16.1% in 2017. The report estimates that every time global semiconductor trade fluctuates by 1 percent, it will affect Korea`s gross domestic product (GDP) by 0.09 % point.

Samsung Electronics and SK Hynix are focusing only on the back of the boom in the semiconductor market. IBK Economic Research Institute said that Samsung Electronics and SK Hynix had an OP margin of 43%, but only 3 ~ 4% of small- and medium-sized enterprises. If the structural problems of small and medium-sized semiconductor companies cannot be solved, the institute expects to face a tremendous crisis within two to three years.

There are also concerns that the export structure of Korea, which is excessively focused on semiconductors, will be vulnerable to the strengthening of protectionism. Especially, the international trade trend is not so recent. President Trump has signed an executive order imposing tariffs of 25% and 10% on imported steel and aluminum products, respectively, and the trade war that has been triggered is increasingly widening the front lines. Here, Korea is also renegotiating the Korea-US Free Trade Agreement (FTA). Experts believe that the dumping of tariff bombs, which started with steel and aluminum, will eventually reach Korea`s main export items, automobiles and semiconductors. In fact, Kim Dong-yeon, economic minister and Kim Hyun-chong, trade negotiator, are struggling at the G20 finance ministers meeting in the US and Argentina.

The governor of the Bank of Korea, Lee Ju-yeol, was also worried about the reality. The governor said in a hearing report from the National Assembly that "The US export trade deficit is estimated to be about 0.3% of total customs exports this year due to US protection trade measures." In the past, It is analyzed that it affects exports for three years. "Besides, the governor warned that "if the US government imposes restrictions on steel imports and the US trade pressure further strengthens, the level of damage to our exports will increase."

Exports to the United States dropped sharply last year. According to the Ministry of Industry and Trade, global exports grew by 15.8% last year, while exports to the US grew by 3.2% to USD 68.6 billion. After the FTA came into effect, the rate of change in the US trade surpassed that of world trade every year, but the situation reversed last year. Especially, it is a common view among research institutes and experts that the top three export items to the US are automobile (-6.4%), wireless communication equipment (-17,4%) and auto parts (-16.1%).

By Lee Mi Jong lmj0919@


[ copyright ⓒ The Digitaltimes ]