TMTPOST -- South Korea, a leading economic and trade partner close to China, is becoming an important node in the globalization process of Chinese enterprises.

As the world's fourth-largest e-commerce market, South Korea is attracting increased investment from Chinese cross-border platforms. In July 2023, TEMU entered the South Korean market and topped the local app market for the first time in September of the same year. In March 2024, Alibaba announced plans to invest $1.1 billion in building a logistics center in South Korea over the next three years, increasing its stake in the South Korean market. In August of the same year, Alibaba's B2B platform in South Korea went online. In June of this year, Shein declared its official entry into the South Korean market. Currently, the scale of South Korea's e-commerce has reached $170 billion and continues to maintain a compound growth rate of 8.7%.

In March of this year, Pony.ai and South Korean tech company GemVaxLink announced the establishment of a joint venture. BYD and Zeekr also successively released their timelines and product plans for entering the South Korean market.

According to the latest data released by the Ministry of Trade, Industry and Energy of South Korea, in the first seven months of this year, the total value of Chinese electric vehicles exported to South Korea reached $848 million, an increase of 848% compared to the same period last year. This has made China the source of electric vehicle imports for South Korea, a major global automotive brand hub, for the first time.

Why has this country, with a population of less than 60 million, become one of the most successful in globalization? And why can it become an important channel for Chinese enterprises going abroad? What can Chinese brands learn from South Korea? The AsianFin Global Business Leaders Club, jointly initiated by TMTPost and the American AsianFin, will organize a 4-day, 3-night South Korean future industry inspection tour. This will include face-to-face exchanges with dozens of South Korean policymakers and representatives of leading local industries, as well as in-depth visits to leading South Korean enterprises such as Samsung Biologics, CJ Logistics, and Hyundai, to explore opportunities for Sino-Korean industrial cooperation under the new economic and trade structure. (Direct registration link at the end of the article)

South Korea, a Pioneer in Creating Global Brands

South Korea is a pioneer worth learning from in creating global brands.

South Korea's globalization process began with post-World War II industrialization. By implementing an export-oriented strategy and supporting technological innovation industries, it joined the international community and was dubbed the "Miracle on the Han River." It not only produced world-class high-end home appliance brands like Samsung and LG but also created the global phenomenon of "Hallyu" with its variety shows and Korean dramas.

In 2024, Samsung Electronics was ranked in the TOP 5 of the "Best Global Brands" list by the global brand consulting company Interbrand for the fifth consecutive year, with a brand value of $100.8 billion, surpassing Japan's Sony and Panasonic, and being the only Asian company in the TOP 5.‌

The global high-end brand Samsung was once synonymous with cheap goods, pursuing large-scale production to compete in the international market through pricing. This is very similar to the current situation of most Chinese companies going global.

The neighboring countries of China and South Korea share similar cultural histories and economic foundations. The experiences of South Korean companies in the globalization process offer valuable lessons for Chinese enterprises.

In a previous article by TMTPost titled "The Korean Car Overseas Expansion Revelation," it was noted that Hyundai Motor Group (mainly comprising Hyundai Motor and Kia Motors) achieved global sales of 7.3 million units in 2023, once again ranking third globally, just behind Toyota and Volkswagen. In terms of financial performance, Hyundai and Kia's combined total revenue in 2023 was close to 1.4 trillion RMB, with a net profit of 110 billion. In contrast, the best-performing Chinese car company, BYD, had global sales of 3.02 million units and a net profit of only 30 billion RMB for the year.

(Image generated by AI)

Compared to Korean cars, Chinese overseas brands, represented by new energy vehicles, are still in the early stages of globalization. Besides Korean cars, some international car companies operating in Korea have earlier provided experience in global operations.

South Korea holds great appeal for other countries' global brands. Global automotive giants Daimler and BMW have both established innovation and research centers in Korea. BMW, for instance, invested in establishing a driving experience center in Incheon in 2014, and in April this year, BMW invested another 12 billion KRW to set up a research center in Korea, making it BMW Group's fifth global research base.

This move partly reflects BMW's strategic layout and considerations for the overall Asian market, including China, Korea, and Japan. It also embodies BMW's desire to maintain closer links with ecosystem companies like Samsung during its globalization process.

In addition to South Korea's automotive, shipbuilding, and consumer electronics products, the country is increasingly investing in future high-end manufacturing industries such as bio-health, new energy, smart vehicles, and semiconductors through high-end manufacturing, aiming to create more future global brands and construct a more comprehensive global strategic layout.

Take new energy as an example, South Korea's photovoltaic and hydrogen industries are developing rapidly. In 2022, South Korea's photovoltaic industry exports reached 16.4%, an increase of 38% year-on-year. In 2023, after South Korea introduced policies and bidding to promote energy storage, the newly added energy storage capacity reached its highest level since 2020.

The layout of hydrogen energy is also advancing swiftly. In 2019, the South Korean government was the first in the world to propose the concept of a "hydrogen society," developing green hydrogen production technology and promoting the construction of hydrogen refueling stations. Companies like Hyundai, Kia, and LG have also launched hydrogen-powered cars/trucks/buses and hydrogen fuel cells. However, the hydrogen energy industry in South Korea and globally still faces challenges such as technology maturity, storage and transportation, and related infrastructure.

In the DRAM chip sector, South Korea holds a dominant position in the global market. Samsung Electronics is the second-largest semiconductor manufacturer in the world, with about an 11% share of the global foundry market in the first half of 2024, second only to TSMC. To strengthen the competitive advantage of the semiconductor industry, the South Korean government plans to provide low-interest loans and support worth 8.8 trillion won (approximately 6.45 billion USD) next year.

South Korean companies' globalization involves industrial layout, technological innovation, brand building, marketing, and even policy support and industry orientation, all of which are worth careful study by Chinese companies.

Chinese Companies Going Global: South Korea's First-Stop Advantage

South Korea's significance to Chinese companies lies not only in the referential value of South Korean companies' earlier globalization process but also in the potential of the regional market and the preferential and convenient connectivity of South Korea to global trade.

Although South Korea has a population of less than 60 million, it generated a GDP of 1.7 trillion USD in 2023. This is a market with huge potential.

At the same time, with the reversal of China-South Korea trade relations and the transformation of South Korea's high-end manufacturing industry, more opportunities are emerging.

According to China's customs statistics in 2023, the main goods imported from South Korea were mechanical and electronic/audio-visual/optical medical products, primarily integrated circuits, accounting for 66.55%, followed by chemical and plastic rubber products (20.05%), metals (5.25%), and petroleum, natural gas, and other mineral products (3.16%).

During the same period, China's main exports to South Korea were mechanical and electronic products, including integrated circuits (42.98%), chemical and plastic rubber products, mainly lithium batteries (18.60%), metal-related products (10.19%), textiles, clothing, shoes, and hats (7.8%), and furniture, lamps, and toys (4.79%).

From the comparison of China-South Korea trade, China's demand for Korean products is relatively concentrated, while South Korea's demand for Chinese products is more diverse. From the perspective of trade category structure, the trade focus is gradually shifting towards high value-added intermediate materials, mainly semiconductors and lithium batteries, moving away from a trade structure dominated by raw materials.

China is gradually transitioning from the downstream end of South Korea's manufacturing industry to the mid-to-upstream, driving the China-South Korea industry towards multidimensional competition and cooperation. This competitive and cooperative relationship is particularly evident in the field of power batteries.

On one hand, there is fierce market competition at the industry terminal between the two countries. According to data from South Korea's SNE Research, among the top ten global power battery installations in the first half of 2024, Chinese companies hold 6 positions, Korean companies 3, and Japanese companies 1, with market shares of 64.9%, 22.2%, and 4.4% respectively. According to statistics from the Korea Trade Association, in the first half of 2023, South Korea's dependence on China for key raw materials for power batteries such as lithium hydroxide, nickel sulfate, and cobalt sulfate reached 82.3%, 72.1%, and 100% respectively.

On the other hand, both countries are also cooperating to build an industrial ecosystem upstream. In the past two years, Chinese companies such as Huayou Cobalt, GEM, and CNNC have signed investment cooperation agreements worth hundreds of millions of dollars with Korean companies to produce and process upstream products needed for power batteries, such as cathode materials, precursors, and nickel refining.

Additionally, in the post-pandemic era, the cross-integration of new-generation information technology with advanced manufacturing, new materials, and new energy has triggered disruptive industrial technological changes. South Korea, experiencing a slow economic recovery, regards the digital economy as an important strategic lever for economic growth and is vigorously promoting the digital transformation of industries, developing mobile digital, biopharmaceutical, and artificial intelligence industries. South Korea is witnessing a digitalization boom across various industries, including smart work, home office, and online education.

To encourage the development of digital information technology, the South Korean government offers preferential loan interest rates and divides the information and communication industry into three major sectors: information communication, electrical electronics, and sensor measurement. The scale of policy financing for these sectors is increasing annually, reaching 85.4 trillion Korean won in 2021, with an average annual growth rate of 37.2%.

Many Chinese companies have sensed cooperation opportunities and have become active in investing in Korea.

Public data shows that since 2017, Chinese investment in Korea's electrical and electronic, machinery and equipment, precision instruments, medical devices, metals, and metal processing industries has increased. Especially in February 2022, after the Regional Comprehensive Economic Partnership (RCEP) came into effect for Korea, China and Korea have increasingly collaborated in technology-intensive fields such as automobiles, electromechanical products, and chemicals.

Recent data from Korea's Ministry of Trade, Industry and Energy shows that in the first three quarters of 2024, foreign direct investment in Korea totaled $25.18 billion, a year-on-year increase of 5.2%, setting a historical record. Among this, investment from China was $4.57 billion, a significant increase of 316.3%.

At the same time, with the intensification of Sino-US trade frictions, Korea has become an important global trade and economic transit hub.

Located at the center of Northeast Asia, connecting important hubs between China, Japan, Southeast Asia, and North America, Korea has signed super FTAs (Free Trade Agreements) with 59 countries globally and has the third-largest tariff preferential cost advantage in the world, making it one of the important transshipment trade locations for Chinese companies to access the North American market.

Incheon, the "Golden Bridge" for the integration of the four future industries between China and South Korea

As one of the Korean cities closest to China, Incheon has become the "Golden Bridge" for China-Korea economic and trade exchanges.

Located at the central position of Northeast Asia, Incheon is Korea's third-largest city and the center of Korea's import and export trade, accounting for nearly 70% of Korea's total imported goods. This area is the center of Korea's key manufacturing industries such as automobiles, shipbuilding, steel, metals, ports, and construction.

Incheon hosts two of the world's major transportation hubs, namely Korea's second-largest trade port, Incheon Port, and Korea's largest airport, Incheon International Airport.

Incheon Port is less than 200 kilometers away from Weihai, Shandong, China. In 1990, the first maritime route between Incheon Port and Weihai was established, and later the maritime routes between Qingdao, China, and Incheon developed to as many as six, making Incheon Port a veritable maritime logistics channel for China-South Korea trade.

Incheon Port has established connections with 18 ports in 9 countries worldwide. It is not only an important loading and unloading port for timber and grain but also the Northeast Asia regional center for the London Metal Exchange, trading millions of tons of products such as copper, aluminum, nickel, and steel annually.

According to data released by the Incheon Port Authority (IPA), the container throughput of Incheon Port reached a new historical high in 2023, totaling 3.461 million TEU for the year, 3.2 percentage points higher than the previous historical high of 3.355 million TEU in 2021. South Korean imports and exports increased by 9% and 9.9% respectively compared to the previous year.

Incheon International Airport is another "golden bridge" for China-South Korea trade

As the third-largest cargo airport in Asia, following Hong Kong International Airport and Tokyo Narita International Airport, it is a crucial aviation hub connecting Seoul with other cities in Korea and other countries. It hosts nearly a hundred airlines, including Israel Aerospace Industries, Atlas Air from the USA, and Korean Air, promoting the formation of the Incheon aviation industry cluster.

It is also a major "base" for China's cross-border e-commerce logistics.

According to South Korea's Chosun Ilbo, a large number of Chinese e-commerce products are gathered at the logistics center in Weihai, Shandong, and then enter South Korea through west coast ports such as Incheon, Pyeongtaek, and Gunsan, before being airlifted to North America and Europe via Incheon Airport. The sales volume of Chinese e-commerce companies influences South Korea's overseas air cargo volume.

Data from Incheon International Airport Corporation shows that in 2023, the total weight of "sea-air intermodal cargo" arriving at Incheon Airport by sea and then airlifted to third countries reached 98,560 tons, an increase of 43.1% compared to the previous year. Of these shipments, 99.6% originated from China.

In addition to logistics, Incheon has established industries in the three high-end manufacturing sectors that the South Korean government is continuously investing in: bio-health, new energy future vehicles, and semiconductors.

Incheon is the center of South Korea's biopharmaceutical industry, leading the country's life health industry to become a new growth point. Statistics show that in 2023, the market value of South Korea's biopharmaceutical market reached 25 billion USD, making it an indispensable biomanufacturing center in the global supply chain.

Data indicates that Incheon's biopharmaceutical production capacity reaches 1.16 million liters, the largest scale for a single city globally. Incheon's bio-industry cluster is concentrated in Songdo, which currently has 11 industrial parks, gathering leading local bio companies such as Samsung Biologics, Lotte Biologics, Celltrion, and SK Biopharmaceuticals, as well as global raw material companies like Merck, Sartorius, Cytiva, and Thermo Fisher Scientific.

Incheon's photovoltaic energy storage battery industry chain is also quite complete, covering the development of energy storage technologies, including lithium-ion batteries, vanadium redox flow batteries, and sodium-sulfur batteries, as well as the production and services of supporting equipment such as photovoltaic modules, inverters, and mounting systems.

Recently, the Incheon City Government released the "Incheon Future Industry Map," stating that in the future, four major advanced industrial belts will be constructed: a "Bio-Semiconductor-Materials, Parts, Equipment Belt" in Songdo, Namdong, and Yeongjong; a "Robotics-Mobility-Advanced Medical Belt" in Cheongna; an "Eco-Friendly-Future Energy Belt" in Geomdan and Yonghyeong; and an "ICT Convergence Belt" in Juan, Bupyeong, and Gyeyang. By 2050, the four economic belts are expected to create a market value of 73 trillion KRW (approximately 381.8 billion RMB).

Against the backdrop of adjustments in the China-South Korea trade structure, Incheon will take on more responsibilities for industrial exchange, and more Chinese companies are beginning to establish a presence in Incheon, involving sectors such as logistics, new energy, real estate, e-commerce, and retail.

For example, Hong Kong's Chow Tai Fook Group submitted a letter of intent to the South Korean government to establish a presence on Yeongjong Island, Incheon; Alibaba is also negotiating with the Incheon city government to invest in building a large shopping center, hotel, logistics center, etc., in the Incheon Yeongjong Island Free Economic Zone; China Travel Service Hong Kong Holdings and Weihai Baima Yun Warehouse Supply Chain Management Co., Ltd. plan to establish overseas warehouse projects in Incheon; Ganzhou Cycle Power Technology Co., Ltd. invested $87,400 (approximately 600,000 RMB) to set up a new subsidiary in Incheon to engage in lithium battery recycling technology services, trade, and other businesses; the Mexican Chinese enterprise Qilin Group once co-invested with Incheon City, South Korea, to build the first Chinese commercial city in South Korea—"Incheon Chinatown"…

This time, the AsianFin Global Business Leaders Club, jointly initiated by TMTPost and the American AsianFin, will be led by representatives of star companies in four major fields: biotechnology, automotive and autonomous driving, clean energy, and smart logistics from China, to engage in two-way deep exchanges with representative companies in South Korea's four major fields.

Additionally, participants can fully engage in key activities of Incheon Tech Week, exchanging with dozens of South Korean policymakers and leaders of key industries; conduct in-depth visits to the Incheon Yeongjong Logistics Industrial Park, Songdo Bio Industrial Park, and Seoul Pharmaceutical Base, and engage in deep exchanges and learning with South Korean giants such as Samsung Biologics, CJ Logistics (under CJ Group, South Korea's largest logistics company), Hyundai Group, as well as global companies established in South Korea, to explore globalization experiences and uncover cooperation opportunities.

There are limited seats available for this delegation. Interested company executives are welcome to scan the code to register. (Author｜Yang Xiujuan, Editor｜Wang Lu)