Lights illuminate the night sky at the construction site of Samsung Electronics' fourth semiconductor fabrication plant at its Pyeongtaek campus in Pyeongtaek, Gyeonggi, on Feb. 24.YONHAP
Cho Yoon-je
The author is a special appointment professor at the Graduate School of Economics at Yonsei University.
Unlike Korea's unchanging political disputes, the country's international standing has undergone a remarkable transformation. Traveling abroad today reveals how much has changed, not only over 20 years but even over the past five. Korea is firmly established as an advanced economy, competing with leading nations in culture, the arts and industry.
How did a country among the world's poorest 60 years ago, and still struggling for international recognition three decades ago, achieve this position?
The greatest driving force was manufacturing. Since the 1960s, Korea concentrated national resources on export-oriented industries, establishing institutions, policies and incentives that remained consistent over decades. Its success was not the achievement of any single administration or business leader. It reflected national leadership, education, capable workers, effective economic policies and the collective efforts of businesses and employees.
Manufacturing will remain central to Korea's future. But Germany's recent difficulties offer a warning. Having relied on established industrial strengths while delaying innovation, the manufacturing powerhouse has increasingly faced competition from Chinese products.
Manufacturing competitiveness depends on far more than industrial policy. Economic institutions, labor markets, business conditions, geopolitics, diplomacy, trade, security and national governance all matter. Despite Korea's achievements, these interconnected challenges raise concerns about its manufacturing future.
According to recent United Nations Industrial Development Organization (Unido) statistics, Korea ranked fifth globally in manufacturing value added in 2024, accounting for 3.3 percent, and fourth in manufacturing competitiveness.
Yet China's advance is formidable. Through its manufacturing development strategy, China increased its share of global manufacturing value added from 6 percent in 2000 to 30 percent in 2020. Unido projects its share could exceed 40 percent in the 2030s.
China already produces 75 percent of the world's electric vehicles and 86 percent of solar products. Its expansion extends across batteries, steel, petrochemicals, shipbuilding, machinery and conventional semiconductors. Although it trails Korea in advanced chips, China expects to narrow the gap within several years.
Last week, the International Monetary Fund projected Korean economic growth of 3.3 percent this year, unusually strong by recent standards. But this does not reflect structural improvement. Without the semiconductor boom, growth would likely remain at around 1 to 2 percent. By comparison, Taiwan, another semiconductor beneficiary, is projected to grow 10.7 percent.
Strong chip demand and U.S. technology restrictions on China have given Korea breathing room. Their staying power of both, however, remain uncertain, while longstanding domestic structural problems persist.
A weakening manufacturing sector would undermine Korea's international standing, income levels and national security. Governments worldwide are rediscovering manufacturing's strategic importance. Washington seeks to revive domestic production, Europe worries about industrial erosion and China is pursuing technological leadership.
Semiconductors, AI, electricity, batteries, shipbuilding, defense, biotechnology and robotics increasingly straddle the boundary between economic competitiveness and national security.
The coming decade will test Korean manufacturing. Changes in global supply chains, domestic industrial hollowing and China's technological advances could erode its competitive foundations.
Preserving manufacturing strength therefore requires comprehensive structural reform rather than industrial subsidies alone.
Korea must overhaul education and incentives to cultivate talented scientists and engineers. It should introduce greater flexibility in applying the 52-hour workweek and streamline environmental assessments, electricity infrastructure, water supplies, land use and local government approvals to shorten investment timelines.
A more productive financial system is also essential. Diplomatic and trade strategies must respond to geopolitical changes while expanding export markets.
The emerging industrial revolution combines AI, robotics, software and manufacturing. Korea must strengthen the ability of government, society and business to embrace these changes. That requires greater flexibility, efficiency and corresponding reforms in national governance.
The Lee Jae Myung administration should consider whether enthusiasm over the semiconductor boom early in its term has distracted it from making essential structural changes.
The semiconductor boom is a valuable opportunity. Its benefits should provide the time and resources needed to transform Korea's economy and society.
Maintaining manufacturing competitiveness requires the nation's collective capabilities, not merely a collection of industrial policies.
This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
