Korea trails China in most manufacturing, but U.S.-China tensions open new opportunity

Experts say that industries tied to security and supply chains offer an opening as the West looks to reduce reliance on the biggest Asian economy.

China’s stranglehold over Korea in manufacturing may start to loosen as rising tensions between Beijing and Washington offer a potential inroad.

Undercutting China on price in commodity products is no longer a winning strategy. Even in shipbuilding and batteries, where Korea is strong, a fight with China for first and second place is hardening into the norm.

“Given China’s production scale and technology level, it is hard to say Korea has the edge in most manufacturing,” said Kim Kyoung-you, a senior research fellow at the Korea Institute for Industrial Economics and Trade.

The Korea International Trade Association compared competitiveness in 2019 and 2024 across Korea’s five main export categories — semiconductors, automobiles, machinery, steel and chemicals — and found Korea trailing China in all but semiconductors.

Even so, the experts say with one voice that “now is the opportunity.” As the United States and Europe push China out of key industrial supply chains, Korean manufacturing has been handed a chance to recover.

Becoming the alternative supplier

The experts all point to the same thing: the time that U.S.-China tensions have bought.

“We don’t need to be ahead of China in every field,” said Jee Man-su, a research fellow at the Korea Institute of Finance. “We have to build a structure in which, in the global market, if a buyer is not using Chinese products, Korean products are the best alternative.”

This means that industries tied to security and supply chains — shipbuilding, defense, automobiles, batteries and power equipment — are where Korea could establish itself as the substitute source.

Simply pocketing the windfall is not enough, the experts also agree. The time should go toward moving products and processes out of the commodity competition China dominates and into high-value and specialty segments.

“We especially need to shore up the competitiveness and the supply chains for materials, parts and equipment, where dependence on China is rising,” Ji said.

“We need a mission-oriented industrial policy in which government and industry jointly develop AI and robotics platforms and low-carbon process technology that an entire sector can draw on.”

Manufacturing as national security

Another suggestion goes further: that manufacturing be considered a national security issue rather than a profitable sector for individual companies.

Shipbuilding, power, steel, telecommunications and defense are not simply export industries but the base that keeps the country functioning. Korea depends on imports for crude oil, iron ore and other key resources, so a break in maritime logistics hits industry and daily life directly.

“The United States, China, Japan and Europe treat shipbuilding and shipping as security and supply chain industries, and their governments have moved to rebuild them, but Korea still tends to see them in purely commercial terms,” said Yang Jong-seo, a senior researcher at the Overseas Economic Research Institute of the Export-Import Bank of Korea. “If you cut the industry and its work force in a downturn because you are looking only at profitability, you lose the ability to respond to the next upturn or to a national crisis.”

BY SUK GYEONG-MIN, NAM YOON-SEO [cho.yongjun1@joongang.co.kr]