"High Exchange Rates Harm Most Domestic Industries… Measures Like Currency Swaps Needed"

As the high exchange rate trend continues, industry analysis suggests that the burden on our economy from increased raw material import costs and overseas investment expenses will outweigh the benefits of export effects. There are calls for the government to prepare proactive measures against exchange rate risks.

On the 20th, the Korean Chamber of Commerce and Industry, along with 12 major industry associations, analyzed the impact of the high exchange rate trend on major industries. It was found that industries such as bio, semiconductors, batteries, steel, petrochemicals, refining, displays, textile fashion, and food are significantly negatively affected. In contrast, the shipbuilding, automotive, and machinery industries are expected to see more positive effects.

The semiconductor industry is analyzed to experience significant increases in manufacturing costs and overseas investment expenses due to high exchange rates. Ko Jong-wan, head of strategic planning at the Korea Semiconductor Industry Association, stated, "Semiconductors are a representative export item with a high proportion of dollar settlements, so there is a clear short-term sales increase effect due to exchange rate rises," but also noted, "The localization rate of materials, parts, and equipment in the semiconductor field is only about 30%, leading to increased production costs, and major domestic companies are investing in establishing semiconductor manufacturing plants overseas, such as in the U.S., which offsets these effects."

The battery industry also expresses concerns about foreign currency debt due to large-scale overseas investments and high dependence on imported key raw materials. Kim Seung-tae, head of policy support at the Korea Battery Industry Association, said, "With high exchange rates, the burden of facility investment costs and imported raw material costs is increasing," and added, "Battery companies are pursuing contracts to link battery sales prices to mineral prices to offset the rise in mineral import prices."

Industries experiencing sluggish conditions, such as steel and petrochemicals, are found to feel a significant burden from raw material price increases due to high exchange rates. The Korea Iron and Steel Association diagnosed, "The burden of raw material prices, such as iron ore and fuel coal, which are almost entirely imported, is increasing." The Korea Chemical Industry Association also noted, "There is an increase in raw material prices such as naphtha." The pharmaceutical, bio, food, and textile fashion industries are also concerned about rising raw material prices.

Lee Jong-myung, head of the Industrial Innovation Division at the Korean Chamber of Commerce and Industry, said, "If tariff increases and interest rate adjustment speeds are implemented in the newly launched Trump second term, high exchange rates will persist for the time being," and emphasized, "The government needs to play a role in expanding currency swap lines with major countries like the U.S. and providing emergency operating funds and financial support to industries affected by exchange rates to prevent the domestic economy from being swept away by high exchange rates."

Sung Sang-hoon, reporter uphoon@hankyung.com