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Korean semiconductors, cars, etc. explode in the US-China battle… Focus on Squadron in October

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US passes law against China Korean companies will also suffer.
China likely to lift Conservatives out of squadron in October

US President Joe Biden (left) and Chinese President Xi Jinping.

Relations between the two countries are deteriorating as the US and China continue to take economic measures, and political and military conflicts between the US and China have recently escalated over Taiwan. There is a possibility that the confrontation between the US and China could intensify after the Chinese Communist Party’s National Convention in October, and there are fears of adverse effects on key industries such as semiconductors and automobiles.

According to the “Foreign Economic Focus” announced by the Bank of Korea on the 25th, in addition to sanctions against Chinese IT companies since 2017, the US has applied for a semiconductor support law to expand domestic semiconductor production and stop the development of China’s copper industry. August 9th. Accordingly, companies receiving support from the US government will be limited in additional investments, such as expanding state-of-the-art semiconductor manufacturing equipment at factories in China over the next 10 years.

In addition, the US is expanding its scrutiny of China by passing the Inflation Reduction Act on August 16 to limit China’s influence in the battery sector. This is a bill that excludes electric vehicle (EV) subsidies if the ratio of the use of main minerals and battery parts made in China exceeds a certain level.

China will host the 20th National Congress of the Communist Party in Beijing on October 16, which will determine key leaders and national policies to guide China over the next five years. The BOK predicted: “The conflict between the US and China is likely to escalate in a situation where the existing Chinese leadership is likely to be replaced by a hardline conservative after the national meeting in October.”

In particular, it is analyzed that US pressure measures on China will affect Korea’s main industries such as semiconductors and automobiles.

In terms of semiconductors, Korean companies such as Xi’an NAND Factory Samsung Electronics, Wuxi DRAM Factory SK Hynix, and Dalian NAND Factory operate large manufacturing plants (factories) in China. disruption of microprocess conversion and expansion of production capacity.

The cars are also expected to have a negative impact on Korean companies’ exports to the US in the short term, as domestic electric vehicles are excluded from the new car purchase tax credit under the Inflation Reduction Act (IRA). This is because Korean companies currently manufacture all electric vehicles in Korea, and most of them rely on China for battery materials and parts, so it is difficult to meet the requirements in a short period of time.

The BOK stated: “While the high tariffs imposed due to the US-China trade dispute are expected to persist for some time, if the trade dispute resumes depending on the development of factors in a future conflict between the two countries, it will act as an additional risk. decline in the Korean economy.

In addition, he stressed: “It is necessary to diversify the supply chain, improve the conditions for domestic investment and strengthen innovation capacity so that the competitiveness of our industry can be fundamentally improved.”

Reporter Dawn Kim [email protected]

Source: Economist

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