Korea’s manufacturing existential crossroads

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Korea’s manufacturing existential crossroads

Published: 21 Mar. 2025, 00:01

Audio report: written by reporters, read by AI

Kim Won-bae

The author is an editorial writer at the JoongAng Ilbo.

Not long ago, a photograph was published showing the U.S. Navy’s logistics support ship, USNS Wally Schirra, setting sail from Hanwha Ocean in Geoje, South Gyeongsang, after completing maintenance work. The shortage of maintenance, repair and overhaul (MRO) shipyards within the United States led to this situation. There is even speculation that, if relevant laws are amended, the shipyard could take on new U.S. Navy shipbuilding projects. When Hanwha Group signed the acquisition deal for Daewoo Shipbuilding & Marine Engineering in 2022 — then struggling with chronic deficits — few predicted such an outcome.

Hanwha Ocean announced on March 13 that the U.S. Navy’s logistics support vessel USNS Wally Schirra had set sail after successful completion of maintenance and repairs — the first such contract awarded to a Korean company. The photo shows the Wally Schirra departing following its successful overhaul. [HANWHA OCEAN]

The Russian invasion of Ukraine has been unfortunate, yet it has served as an opportunity for Korea’s defense industry to rise. K9 self-propelled howitzers and K2 tanks have been exported to Europe, as Korea was the only free-market country capable of delivering high-performance weapons at a competitive price within a short time frame. This underscores the critical importance of maintaining a strong manufacturing base.

However, the outlook is not entirely rosy. Germany, which had scaled back its military production, has declared its intent to rearm. Rheinmetall, the defense firm behind the PzH 2000 howitzer, which outperforms the K9, is reportedly considering acquiring a struggling Volkswagen plant. Volkswagen itself is also expanding its defense sector.

Korea’s nuclear power plant exports, which seemed to be on a winning streak with the Czech Republic deal, have hit a snag. Although Korea Hydro & Nuclear Power (KHNP) settled an intellectual property dispute with Westinghouse in January, it recently withdrew from the Netherlands’ nuclear plant bidding process, with analysts suspecting a connection to the Westinghouse negotiations. Meanwhile, the Trump administration is set to announce a list of nations subject to reciprocal tariffs on April 2. Depending on the outcome, the Korean economy could face a storm.

When peace and prosperity last long enough, people take them for granted. Korea has thrived under a U.S.-led global order, but since the rise of Donald Trump, it has become increasingly clear that such an environment is no longer guaranteed.

Samsung Electronics Chairman Lee Jae-yong greets Democratic Party leader Lee Jae-myung at Samsung Software Academy Youth in southern Seoul on March 20. [KIM SUNG-RYONG]

China’s rise presents an even graver challenge. Even Volkswagen, Germany’s leading automaker, is staggering under the onslaught of Chinese electric vehicles (EVs). It was too slow in its EV transition, and with firms like BYD continuing to grow, its market share in China has dwindled. Der Spiegel published an article in March last year with the headline: “The existential crisis of Germany’s auto industry.”

Korea’s key industries face even fiercer competition with China than Germany does. The entire manufacturing sector is in an existential crisis. BYD has unveiled technology allowing a five-minute charge for a 400-kilometer drive. Outside of semiconductors, Korean products are now barely visible in the Chinese market. Despite U.S.-led containment measures, China has even developed advanced AI models like DeepSeek, proving that the competition will only intensify. The manufacturing sector is directly tied to high-quality jobs — how will Korea preserve its industrial base?

BYD Atto 3 EV during the Chinese automaker's press event held in Seoul on Jan. 16. [YONHAP]

Samsung Electronics Chairman Lee Jae-yong recently told executives, “Samsung is facing a fight for survival. The leadership must engage in deep self-reflection and act decisively with a do-or-die determination.” If Korea’s top conglomerate is in such dire straits, no other company is immune. Yet, this sense of crisis has not fully registered with many workers. Hyundai Steel, which posted a loss last year, is embroiled in a labor dispute as its union demands performance bonuses on par with Hyundai Motor. Meanwhile, the Gwangju Job Project, which initially set wage increases at the inflation rate for up to 350,000 units of production, is now teetering on the brink as strikes have begun. While management bears responsibility for handling labor disputes, excessive union demands could lead to mutual destruction.

How about the government and political circles? The Moon Jae-in administration recklessly pushed a nuclear phase-out, while the Yoon Suk Yeol administration has slashed research and development (R&D) budgets indiscriminately, causing widespread confusion. On March 20, DP chief Lee Jae-myung met with Samsung’s Lee Jae-yong and remarked, “When companies thrive, the country prospers, and when Samsung succeeds, so do its investors.” Yet, he reportedly did not mention the need to suspend the 52-hour workweek rule for the semiconductor industry. Empty pleasantries won’t solve real problems.

The DP has unilaterally passed a commercial law revision expanding fiduciary duties to shareholders. It is also pushing for the Yellow Envelope Act, which limits damage claims against illegal strikes, and even discussing a four-day workweek. It remains unclear whether these laws and policies are being pursued with a thorough understanding of their impact on Korea’s manufacturing sector. Meanwhile, preventing the leakage of core technologies is an urgent matter, but efforts to revise the Espionage Act, which currently only applies to North Korea, have stalled.

With politicians, businesses, and workers each pursuing different agendas, how can Korea maintain its competitiveness? To overcome this crisis, a shared sense of urgency must come first.

Translated using generative AI and edited by Korea JoongAng Daily staff.