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South Korean firms are investing document 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 challenge commitments from Seoul.
US challenge commitments from South Korean firms totalled $21.5bn final yr, greater than another nation and surpassing Taiwan, which was the biggest investor in 2022, based on information from the UN Convention on Commerce and Improvement analysed by the Monetary Occasions.
Final yr marked the primary time for a minimum of a decade that South Korea has secured the highest spot for challenge 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 yr after investments had fallen by a 3rd, based on the UN information, which tracks greenfield tasks — commitments to construct amenities and jobs — and doesn’t embrace acquisitions.
Whereas final yr’s commitments from South Korea have been 11 per cent decrease than the earlier yr, the info totalled 90 tasks from South Korean firms in 2023, the best on document and up 50 per cent yr over yr.
“The US doesn’t want to be sourced from China any more. This is giving Korean companies an opportunity to become US suppliers,” Chihwan Kim, chief government of Samkee, a Korean auto provider, advised the FT. Final yr, 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 tons of 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 challenge bulletins within the US tracked by fDi Markets final yr have been within the automotive or electronics sectors. The IRA presents 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 “national security guardrails” for its funding, stopping recipients from increasing manufacturing capability and proscribing know-how licensing efforts in China and different “foreign entities of concern”.
Greater than half of South Korean outbound funding flowed to the US final yr, up from 18 per cent in 2019. China, in the meantime, obtained lower than 1 per cent of South Korean funding final yr, down from 11 per cent in 2019, based on Unctad.
Among the many largest bulletins final yr embrace a $4.3bn funding from Hyundai to fabricate battery cells with LG Vitality Resolution to provide its electrical car manufacturing unit in Georgia, the biggest challenge within the state’s historical past, and the same $3.5bn funding from Samsung SDI with GM in St Joseph County, Indiana, based on fDi Markets, a subsidiary of the Monetary Occasions.
“It’s been an intentional opportunity,” mentioned Invoice Schalliol, director of financial improvement 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 tasks. Ninety minutes away from St Joseph County is one other Samsung SDI manufacturing unit in Kokomo, the place town is anticipating greater than a thousand Korean expats and 6 new Korean eating places.
Powerful macroeconomic circumstances, falling import costs and slowing demand for electrical automobiles have additionally delayed some investments from Korean producers and sparked requires better US commerce protections. In July, LG Vitality Resolution paused its $2.3bn battery storage manufacturing unit in Arizona, citing “market conditions”. Samkee is delaying including its electrical car traces by one to 2 years because of slower than anticipated adoption.
“Manufacturers like Qcells are losing billions of dollars a month. Investments across the sector are at critical risk 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 Might.
“Without trade relief, the situation will only worsen,” Connolly mentioned. The corporate has filed a petition with a number of different US photo voltaic producers for added tariffs on Chinese language photo voltaic firms for alleged dumping in south-east Asia.
