As the US Trump administration began to put omnidirectional trade pressure on Korea such as prompting a safeguard on Korean-made washing machines along with negotiations over an amendment to the Korea-US FTA, there is growing concern that Korean companies will be hit hard by such actions.

Analysis says that the Trump administration's actions are based on its view that Korea is gaining more than the United States. However, some experts point out the US’s claim lacks persuasiveness. For example, they say that in the case of semiconductors which have been virtually taking the lead in Korea’s export with the arrival of a memory “super cycle” this year, the US is benefiting more from trade between Korea and the US than Korea.

According to the Korea International Trade Association (KITA), exports to the US added up to US$45.592 billion and imports amounted to US$34.647 billion in the first eight months of this year. The import growth rate is nine times more than the export growth rate. The cause is paradoxically found in booming semiconductors.

Exports of passenger cars (worth US$ 1.000 billion), automobile parts (US$ 4.031 billion) and wireless handsets (US$3.168 billion) to the US were down 3.2% and 13.0% % and 33.3%, respectively from a year earlier. They are Korea's top three export items in trade with the US. On the other hand, integrated circuit semiconductors (US$ 1.994 billion) and auxiliary storage devices (US$1.032 billion) inflated 67.8% and 90.8%, respectively, thanks to a memory semiconductor boom. These facts may show that Korea enjoyed great growth in its semiconductor exports to the US.

But things become different when checking items that Korea imported from the United States. Korea’s imports of US semiconductor manufacturing equipment, the largest one among import items from the US, ballooned a whopping 199.0% to US$ 3.558 billion from the previous year. Korea’s semiconductor-related imports, including integrated circuit semiconductors (US$2.457 billion) from the United States were more than double Korea’s semiconductor exports to the US. Shipments of equipment for semiconductor manufacture in North America also rose by more than 50% year on year to US$12.68 billion in the first half of the year, bringing a huge boom to US semiconductor equipment manufacturers.

Experts stressed that the United States cannot suffer unilateral loss in electronics and IT trade with Korea. Rather, on the US’s part, the US and Korea are close to win-win partners due to Korea's industrial structure.

In fact, although Korea is exporting smartphones and household appliances armed with innovative functions to the United States, Korea imports application processors (APs) or lithographic systems that draw circuits on semiconductor wafers by beaming light on them) chemical vapor deposition (CVD) machines that evenly apply necessary materials to semiconductor wafer substrates.

Samsung Electronics and SK Hynix are expected to earn around 60 trillion won (US$54 billion), setting new operating profit records every quarter by the end of this year. However, they are also planning to invest about 50 trillion won (US$45 billion) in facility investment this year. Much of these facility investments are expected to be used to purchase equipment for semiconductor manufacturing. US-based Applied Materials, one of the world's leading companies in semiconductor manufacturing equipment and supplies related equipment to Korean companies, showed a US$925 million net profit in the third quarter of this year, up 83.2% from the same period of last year. In addition, Qualcomm virtually enjoys a monopoly on APs, which are the brains of flagship smartphones such as the Samsung Galaxy Note 8 and the LG V30.

"As the more Korea exports finished electronic products and memory semiconductors to the United States, the more Korea imports machinery and equipment for manufacturing them from the US," said an official from the Korean electronics industry. "It is not quite right for the US to say that the US is suffering loss in trade with Korea based on a few items including washing machines."

By: DocMemory
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