The manufacturing ecosystem hidden behind the Samsung-SK hynix boom

Hyun Hea-jung

The authos is a professor of the College of International Studies at Kyung Hee University.

The Bank of Korea recently raised its forecast for Korea's economic growth this year from 2.0 percent to 2.6 percent. The revision reflects the strong recovery in semiconductor exports, captured in the popular expression "Samjeon-Nix," a combination of Samsung Electronics and SK hynix. While the improved outlook is welcome, conditions inside the broader manufacturing sector tell a different story. Non-information technology manufacturing and domestic demand remain sluggish, while warning signs are emerging across the country's industrial ecosystem.

According to Statistics Korea, the average domestic shipment index for manufacturing has remained below 100 over the past five years, indicating prolonged stagnation. Traditional industries such as textiles, metals and nonmetallic minerals have struggled in both export and domestic markets, weakening the economic foundations of many regional communities. Data from the Korea Employment Information Service also show that, since 2023, manufacturing business closures have outpaced new start-ups, while new hiring has fallen by 20 percent.

This year, non-IT manufacturing is expected to grow by only 1.4 percent, below Korea's estimated potential growth rate of 1.66 percent for 2026. The economy is becoming increasingly polarized between IT and non-IT industries, while export growth is no longer translating into corresponding increases in domestic production, investment or employment.

The problem is not merely cyclical. It is also rooted in policy.

Major economies now place manufacturing competitiveness and supply chain resilience at the center of national strategy. Through the CHIPS and Science Act, the United States has offered subsidies and tax credits for semiconductor production while also considering tariffs on imported chips under Section 232 of the Trade Expansion Act to encourage more domestic manufacturing. Large investments by companies such as TSMC and Micron reflect this policy mix.

The European Union has similarly transformed carbon neutrality into an industrial strategy. By linking the Net-Zero Industry Act, the Carbon Border Adjustment Mechanism and the Critical Raw Materials Act, it has integrated clean technology, raw materials and carbon regulations into a unified manufacturing strategy. Japan has also made semiconductor, battery and critical mineral supply chains a national priority under its Economic Security Promotion Act, while providing substantial subsidies to Rapidus to establish an advanced semiconductor industry.

These countries share one characteristic. They no longer treat trade policy simply as a matter of market access or tariff negotiations. Instead, they use it to strengthen domestic production, supply chains and technological capabilities.

Korea, by contrast, often pursues industrial, labor and climate policies that work at cross-purposes. While the government seeks to expand exports and strengthen supply chains, it is also advancing policies that manufacturers believe will increase labor costs and regulatory uncertainty. Measures such as the so-called Yellow Envelope act, broader industrywide collective bargaining and expanded presumptions of worker status are intended to strengthen labor rights. Yet manufacturers, particularly small suppliers, argue that they could increase production risks and operating costs.

Climate policy presents a similar challenge. Carbon neutrality is an unavoidable goal, but the pace of regulation has outstripped support for businesses attempting to make the energy transition. Without sufficient infrastructure and technological assistance, stricter regulations could discourage domestic investment and accelerate the relocation of production overseas.

The manufacturing challenge facing Korea is therefore about more than competition from China or exchange rate fluctuations. Policies promoting industrial transformation, stronger labor rights, carbon neutrality and fair competition are all worthwhile. Yet pursuing them simultaneously without considering their interaction risks placing excessive burdens on the manufacturing ecosystem.

Manufacturing is not simply a business issue. It underpins value creation, employment, regional economies and national competitiveness. What Korea needs is not a collection of well-intentioned policies but a coherent strategy that prioritizes industrial competitiveness while minimizing policy conflicts. Otherwise, even if exports and headline growth continue to improve, the underlying strength of the Korean economy will steadily erode.