South Korea has become the largest investor in the United States for the first time, with companies committing $21.5 billion (around 28.63 trillion won) to U.S. projects last year. As the U.S. sought to exclude China from its supply chains amid escalating tensions, South Korean companies boosted their investments in the U.S., fearing that investing in China could jeopardize their export opportunities. Analysts suggest that the U.S. recognizes the necessity of active collaboration with South Korean firms, which excel in key industries such as semiconductors and electric vehicles, essential for future industrial growth.
The Financial Times (FT) reported on Sept. 18 that South Korea became the top investor in the U.S. last year, committing $21.5 billion, according to data from the United Nations Conference on Trade and Development (UNCTAD). This placed South Korea in the top spot as Taiwan’s investments fell sharply in 2022 due to Taiwanese semiconductor companies, such as TSMC, diversifying their investments into Japan and Southeast Asia.
While South Korea’s U.S. investments have steadily risen, they remained within the top 10 during the 2010s. However, the Biden administration’s CHIPS Act and Inflation Reduction Act (IRA) in 2022, which offer subsidies and tax incentives for electric vehicles and semiconductors, have prompted South Korean companies to expand their U.S. investments aggressively.
Hyundai announced a joint investment of 5.7 trillion won with LG Energy Solution in May last year to build an EV battery plant in Georgia, while Samsung SDI committed to a 5 trillion won battery plant with GM in March. The combined investments of South Korea’s three major battery companies in the U.S. now total tens of trillions of won. In 2019, only 18% of South Korea’s foreign investments were directed to the U.S., but this surged to over 50% last year, while investments in China dropped significantly from 11% to less than 1%.
Concerns are rising that subsidies and tax benefits may be reduced depending on the outcome of the U.S. presidential election in November. Last month, former U.S. President Donald Trump announced that he would eliminate the EV subsidy of up to $7,500 if re-elected. Kim Soo-dong, a research fellow at the Korea Institute for Industrial Economics and Trade, cautioned that if Trump wins, the Biden administration’s subsidy policies could be rolled back, potentially disadvantaging South Korean companies.
