Shifting supply chains: Redefining strategies for success in Korea

Against the backdrop of the covid-19 pandemic geopolitical events, such as the war in Ukraine and US-China tensions, have created uncertainty for businesses. In response to the resulting supply disruptions, and in anticipation of a slowdown in trading activity in 2023, businesses are focused on enhancing their resilience for the longer term with the aim of insulating themselves from future shocks.

As China takes a stricter approach to corporate concerns, such as data privacy and financial dividends, executives say that the mood is tenser than ever. Since the spring, Chinese officials have searched the offices of consultancies Capvision and Bain and they have detained employees from Mintz, an American due-diligence firm, and Astellas, a Japanese pharmaceutical company. This has prompted an unprecedented capital outflow from China, estimated at $755 billion in 2023 by EIU. Meanwhile, some Korean companies, shaken by Lotte’s treatment over the THAAD deployment in 2017 have long been looking for ways to reshore or diversify their supply chains. As just one example, Samsung Electronics’ workforce in China has shrunk 49 percent from 2017 to the end of 2022.

How are businesses in Korea responding? Are they reshoring, near-shoring, or friend-shoring? Is investment returning inward to Korea or to emerging economies such as Vietnam or India? Korea still offers important economic and political advantages that may entice some companies, especially Western firms, to move here.