New Administration Faces Daunting Economic Challenges

      April 27, 2022 13:11

      The incoming Yoon Suk-yeol administration will focus on nurturing 6G telecommunication technology, rechargeable batteries, next-generation nuclear reactors, artificial intelligence and cultural content as future growth engines, according to Ahn Cheol-soo, the head of the presidential transition team. "We intend to focus on newly growing sectors," Ahn said, adding that Korea needs to find more growth engines other than the key industries of system semiconductors, future vehicles and biotechnology. Nobody would disagree.

      But Korea has a tough road ahead as other countries, especially China, are catching up fast. The semiconductor and rechargeable battery industries are either facing tremendous pressure from Chinese rivals who are catching up quickly or are about to be beaten by them. Taiwan and Japan have managed to lift their shares of China’s semiconductor market by 4.4 percentage points and 1.8 percentage points, but Korea's share declined 5.5 percentage points. Taiwan's TSMC saw its share increase further as Samsung delayed its decision to invest further in China.

      Korean electric car battery makers have already been overtaken by their Chinese rivals. CATL, China's top EV battery maker, saw its global market share rise to 32.6 percent last year, surpassing the combined 30.4 percent share of Korea's three major players. China's share of the global EV battery market surpasses 55 percent if the shares of other companies are included. Meanwhile Korea was already overtaken in the world's smartphone market by China four years ago, and it now ranks second in the display market after being overtaken by Chinese firms last year.

      Lack of innovation is mainly being blamed for the weakening competitiveness of Korean industries, but excessive regulations and the anti-business policies of the Moon Jae-in administration also played a part. Instead of pursuing innovation, businesses had to deal with the growing might of labor unions. The new government must get to work improving the business climate, which has been sapping corporate vitality.

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