After Trump (Donald Trump) won the election in November 2024, South Korean companies have successively announced investment plans in the United States, establishing new production bases or expanding existing production scales. In stark contrast, due to rising costs and a deteriorating business environment, South Korean companies in China are withdrawing one after another.
According to a report from the South Korean media “Chosun Ilbo” on January 14, South Korea’s largest bread production and sales company, SPC Group, announced on January 2 a plan to invest $160 million to build its first bread factory in Texas, United States. The goal is to increase the number of operating stores in North America from over 200 to 1000 by 2030.
On November 13, 2024, just one week after Trump’s victory, South Korea’s CJ Group held a groundbreaking ceremony for the largest Asian food factory in North America with an investment of approximately 700 billion Korean won (about $477 million) in South Dakota.
Beyond the food industry, South Korean manufacturing companies are also increasing investments in the United States. Hyundai Steel has decided to invest tens of trillions of Korean won to build the first steel mill in the U.S., which will have synergistic effects with Hyundai Motor’s plan to increase its production of automobiles in America. Hyundai Motor plans to expand the production of hybrid cars at its “Metaplant America” (HMGMA) electric vehicle factory in Georgia from the current 300,000 vehicles per year to 500,000.
LS Cable also plans to invest around 1 trillion Korean won (about $676 million) to start construction on the largest undersea cable factory in the United States in Virginia in April this year.
Meanwhile, South Korean companies already operating in the U.S. are considering expanding their production capacities. LG Electronics is currently considering expanding the product range at its washing machine factory in Tennessee to include refrigerators, televisions, and more. The battery sector of Samsung, facing difficulties due to a temporary stagnation in demand for electric vehicles, is now exploring various directions such as establishing local joint ventures and sole proprietorship factories.
The reasons why South Korean companies are rushing to invest in the U.S. are attributed to factors such as low birth rates in South Korea, long-term stagnant domestic demand, unfriendly investment environments for businesses, and the return of Trump to the White House, forcing companies to consider investing in the U.S.
In sharp contrast, South Korean companies in China are making plans to withdraw, relocate, or downsize their businesses.
A report released at the end of December 2024 by the Korea Industrial Research Institute, the Korea Chamber of Commerce in Beijing, and the Korea Chamber of Commerce in China revealed that out of every 10 South Korean companies entering the Chinese market, 4 are considering withdrawing, relocating, or downsizing their operations in China over the next 5 years.
The survey indicates that 37% of the surveyed companies are contemplating withdrawing (8.8%), relocating (3.6%), or downsizing (24.6%) their operations in China within the next 5 years, while 31% are considering such actions within the next 2 to 3 years. 67% of the surveyed companies reported that the business environment in China is deteriorating.
According to a report by Yonhap News Agency in December 2024, LG Electronics Group of South Korea sold its large liquid crystal display (LCD) factory in Guangzhou for about 20 trillion Korean won in September 2024, marking the complete withdrawal of South Korean companies from the large-size LCD business.
Samsung Electronics closed its last smartphone factory in Huizhou, Guangdong in 2019, and transferred its smartphone production lines to Vietnam and India.
South Korean automotive companies are not exempt from this trend. Hyundai Motor has reduced its five production bases in China to two, while Kia Motors now operates only two out of their original three factories.
Even the cosmetics sector has not been immune, with brands like Etude House and Hera, owned by Amorepacific Pacific, withdrawing one after another. Lotte Mart fully withdrew from the Chinese market in 2018, and its department store business ceased operations in 2022.
The Korea Institute for International Economic Policy analysis points out that rising labor costs in China, reduced preferential policies for foreign investment, and the improvement in local companies’ competitiveness are forcing South Korean companies to redirect investments towards emerging markets like Vietnam.