Last month, South Korea witnessed a significant slump in its tech trade with China. According to the Ministry of Trade, Industry, and Energy, semiconductor shipments from South Korea to China experienced a sharp decline of 35.7 percent compared to the previous year.

Notably, the memory chip trade took the hardest hit, plunging by 53.1 percent, primarily due to sluggish demand in China. This decline comes amidst ongoing geopolitical tensions, which have had a profound impact on the chip supply chain landscape in Asia.

South Korea, a prominent player in the information and communications technology (ICT) sector, faced a considerable setback in its exports to mainland China and Hong Kong. The ICT exports, encompassing semiconductors, displays, and smartphones, witnessed a staggering drop of over 30 percent in May compared to the same period last year.

These figures underscore the challenges faced by the tech trade between South Korea and China, with ramifications for both countries. The geopolitical tensions have prompted a reassessment of supply chain dynamics in the region, leading to disruptions in the flow of crucial technology components. The decline in the tech trade, especially in semiconductors, between China and South Korea may be indicative of the impact on China’s position within the global chip supply chain.

Korean exports, encompassing items like chips, displays, and refined oil, are often regarded as key indicators of international trade trends due to their significant role within global supply chains. The latest data suggests a partial rebound in demand for Korean goods; however, overall exports continue to exhibit weakness, primarily attributed to an accumulation of chip inventories and China’s lackluster economic growth. 

China- South Korea Trade Relations:

China and South Korea’s trade relations are highly impacted by the US- China Tech War. South Korea’s semiconductor industry, led by Samsung Electronics and LG, is crucial for U.S. export control efforts against China. With China as its primary trading partner since 2003, accounting for over 60% of chip exports, and a trade-dependent economy, South Korea’s cooperation holds significant importance. The United States represents a mere 7.7% of its chip exports, amplifying the stakes for South Korea. 

In April 2023, a year-on-year analysis reveals a slight increase in China’s exports by $230 million (1.73%) from $13.3 billion to $13.6 billion between April 2022 and April 2023. However, imports from South Korea experienced a significant decline of $4.3 billion (-26%) from $16.5 billion to $12.2 billion during the same period. 

Amidst US export restrictions on advanced semiconductors and chip-making equipment, China has intensified its efforts to enhance self-sufficiency in legacy chips used in automobiles and household appliances. Consequently, the reduced information and communications technology (ICT) trade with South Korea highlights China’s focus on domestic production and self-reliance.

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