South Korean companies are injecting record funds into the U.S. economy amid the Biden administration’s efforts to remove China from its supply chain and offer generous subsidies to advanced technology manufacturers. According to data analyzed by the Financial Times and the United Nations Conference on Trade and Development, South Korean enterprises pledged a total of $21.5 billion in projects in the United States last year, surpassing any other country once again.
It was the first time in at least a decade that South Korea ranked first in project commitments in the United States. This milestone comes as Chinese investments in the U.S. continue to decline. China, which was the largest investor in the U.S. in 2014, dropped to eighth place last year with a one-third decrease in investments. These statistics track greenfield projects – commitments to building facilities and creating jobs – excluding acquisitions.
Chihwan Kim, CEO of South Korean automotive supplier Samkee, told the Financial Times, “The U.S. no longer wants to source from China, giving South Korean companies the opportunity to become suppliers to the U.S.”
Data shows that in 2023, South Korean enterprises had a total of 90 projects in the U.S., reaching a historical high and increasing by 50% compared to the previous year.
The surge in South Korean investments is a result of the Biden administration passing the Chips and Science Act and the Inflation Reduction Act in 2022. These acts provide billions of dollars in tax breaks, loans, and subsidies to kickstart semiconductor and clean technology manufacturing in the U.S., including solar panels, electric vehicles, and reduce reliance on China, a major producer.
According to fDi Markets, a data service under the Financial Times, over one-third of the projects announced by South Korea in the U.S. were within the automotive and electronics industries. This included Hyundai’s $4.3 billion investment in partnership with LG Energy Solution to produce batteries for its electric vehicle plant in Georgia. The Inflation Reduction Act offers a $7,500 consumer tax credit for electric vehicles ultimately assembled in North America.
Amidst tensions between the U.S. and China, South Korean companies are facing pressure to expand in the U.S. while dealing with restrictions on their businesses in China. For example, the Chips Act outlines a “national security fence” for funding and restricts technology licensing work in China and other “concerned foreign entities.”
Since 2021, the Biden administration has been focused on restructuring global supply chains in advanced technology areas like semiconductors, advancing the process of removing Chinese supply chains. Samsung, as a global leader in storage chips and the world’s second-largest semiconductor foundry, has become a focal point of attention in the U.S. In November 2021, Samsung Electronics invested $17 billion in building a chip plant in Texas, marking the company’s largest investment in the U.S. to date.
According to data from the United Nations Conference on Trade and Development, over half of South Korea’s foreign investments flowed into the U.S. last year, soaring from 18% in 2019. Meanwhile, China received less than 1% of South Korean investments last year, a significant decrease from 11% in 2019.