The Evolving Structure of Korea-China Supply Chains in High-Tech Industries and Korea's Response

As trade tensions between the US and China ratchet up and spur a wholesale transformation of global supply chains, structural changes to the trade relationship between South Korea and China have become inevitable. This is likely to be most pronounced in high-tech industries, such as semiconductors, batteries, and pharmaceuticals, where there is already a well-established cross-border division of labor. In this paper, we analyze the structure of Korea-China supply chains with respect to the three high-tech in­dustries listed above. We find that Korean semiconductor, battery, and pharmaceutical companies all rely heavily on China for materials. Korean firms source key intermediates and parts and use China as a base for entering other countries, and together these factors constitute the primary driving force underpinning Korea’s high dependency on Chinese suppliers. In this paper, we argue that Korean industries need to internalize and diversify their supply chains to reduce their de­pendency on Chinese materials while also seeking out new models of cooperation to capitalize on Chinese infrastructure, technology, and markets as well as Chinese companies’ growing interest in using Korea as a production base.