Korea Institute for Industrial Economics and Trade researcher Kim Ba-woo speaks during an industry forum on the global supply chain in Seoul this week. Photo courtesy of KOTRA

Semiconductor, battery businesses under threat of supply bottleneck

South Korea depends too much on China in its two main businesses of semiconductors and rechargeable batteries, according to the Korea Institute for Industrial Economics and Trade (KIET).

KIET researcher Kim Ba-woo made the point in a forum held by Korea Trade-Investment Promotion Agency (KOTRA) this week.

In a phone interview with Korea News Plus, Kim said that South Korean semiconductor and battery makers’ dependence on Chinese intermediaries tops 50 percent in many of the components.

For example, the country’s battery producers’ reliance on Chinese parts amounted to 85.3 percent for anode materials and 72.5 percent for cathode materials last year. They are two major components of lithium-ion batteries.

The proportion stood at 77.6 percent for memory chips and 59.6 percent for diodes.

Kim noted that South Korea was required to collaborate with its allied countries in nurturing supply chain resilience.

“It is not desirable to rely too much on a single country in producing our mainstream products like semiconductors. In particular, our firms should not wholly count on China’s state-owned enterprises. They need to diversify their import partners,” he said.

“In addition, things may be dangerous to our main customers like the U.S., Europe, and Japan because any trouble in the supply chain is feared to cause a chain reaction.”

South Korea is home to the world’s largest memory chip maker Samsung Electronics and the No. 2 player, SK hynix.

The country also accommodates three major rechargeable battery makers of LG Energy Solution, SK Innovation, and Samsung SDI. All of Them are included in the global top 10 list.

“If our manufacturers of memory chips or batteries fail to produce sufficient products due to the supply bottleneck, their customers would also suffer,” Kim said.

“Electric vehicle producers, computer makers, and data center operators would suffer, to name but a few. Accordingly, we need to collaborate with them to reduce the overly high reliance.”