Korean companies assess risks, opportunities in Trump era

President Trump highlights inflation, calling out a candy company’s shrinkflation. (AFP/Yonhap)

South Korean companies are viewing the Trump era with both caution and optimism, assessing risks following their U.S. investments while anticipating potential benefits from tighter regulations against Chinese competitors.

The semiconductor industry, led by major players including Samsung Electronics Co. and SK hynix Inc., is carefully monitoring potential changes to the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act while developing contingency plans. Both companies have made significant U.S. investments under this act, with Samsung in Texas and SK hynix in Indiana set to receive subsidies and tax benefits worth 64 trillion won ($46.2 billion) and 620 billion won respectively. Given Trump’s skepticism toward the CHIPS Act, the companies could see the subsidies come under fire, which could in turn affect U.S. operations as raw material and labor costs continue to rise. However, some analysts suggest that Trump might opt to reduce the subsidy amounts rather than eliminating the act.

Trump’s strong protectionist trade stance could, on the other hand, benefit the semiconductor sector. In a report released Thursday, KPMG Samjong Accounting Corp. expressed optimism, noting that U.S. regulations targeting China could provide Korea’s semiconductor industry with a competitive advantage.

Song Eui-dal, a visiting professor at the University of Seoul, highlighted the importance of showcasing Korean semiconductor quality and competitiveness to the U.S. government to build bilateral trust.

Meanwhile, the automotive sector is watching closely for the possible imposition of a universal tariff. An additional 10 to 20 percent tariff on all imports would impact the price competitiveness of cars manufactured in countries including Korea and Mexico for the U.S. market. Estimates indicate that a 20 percent tariff could cost Korean automakers approximately 7.2 trillion won annually to keep vehicle prices steady.

The expected reduction in electric vehicle (EV) subsidies also presents challenges. Biden administration incentives prompted major investments by Korean automakers in U.S.-based EV and battery plants, but decreased demand could hinder these companies’ ability to recoup their costs. Hyundai Motor Group is responding by diversifying with next-generation hybrid models in the U.S. market and preparing to manufacture hybrids instead of EVs at its dedicated EV plant in Georgia.

The battery industry is also on alert, wary of potential reductions in the Advanced Manufacturing Production Credit (AMPC) under the Inflation Reduction Act (IRA). AMPC has been critical for domestic battery manufacturers struggling with industry headwinds. Excluding the AMPC, LG Energy Solution Ltd. and SK on Co. recorded losses in the third quarter of 2024. But if tariffs limit battery imports from China and U.S.-based Korean battery firms secure corporate tax cuts and reduced electricity rates, it could create a more favorable business environment.

The defense industry, by contrast, is optimistic. Hanwha Ocean Co., through its newly acquired Philly Shipyard in Philadelphia, plans to directly manufacture vessels for the U.S. Navy and enter the maintenance, repair, and overhaul (MRO) market, valued at around 20 trillion won annually. Korean shipbuilders currently focus on MRO projects for U.S. Navy vessels stationed in the Indo-Pacific under the Regional Sustainment Framework (RSF) policy. However, having access to the Philadelphia Shipyard opens doors to MRO contracts for the entire U.S. Navy fleet.