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How Not to Lose Korea’s Advanced Industries

Korea is in a war with China for leadership in numerous key advanced industries, including shipbuilding, consumer electronics, semiconductors, automobiles, chemicals, steel, and batteries. Yet, as Rob Atkinson explains in The Korea Herald (print version or HeralDeep subscriber edition), it is losing ground as Chinese firms continue to gain global market share while Korean firms cede it. Korea needs stronger domestic policies to shore up its advanced industries, such as restoring a robust investment tax credit and expanding its weak R&D tax credit. But without working with allies, Korea will not win this war. The United States, in particular, can play a pivotal role by limiting imports of Chinese advanced-technology products made through unfair and mercantilist practices.

Advanced industries operate differently than most sectors. Scale matters: The larger a producer’s global market share, the lower its cost structure and the more capital it can reinvest in the future. But it works both ways. Once leading firms lose global market share, their marginal costs rise as they continue to carry the burden of high fixed costs like factories and R&D. The result is that future investment declines, competitiveness erodes, and without some remedy, such as a breakthrough innovation, firms risk deep contraction or even collapse.

Korea’s display industry offers a cautionary example...

Ultimately, lasting impact will require a coordinated front. Exclusion orders will only work if the United States, Korea, the European Union, Japan, and all other advanced, democratic allies participate and adopt parallel measures. Only a coalition representing a large enough share of global market demand can ensure that firms obeying the rules survive. Building this cooperative effort should be a top priority for the 2026 G7 summit in France.

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