The United States Was a Leader of Globalization; Now, It Is Shaking up Free Trade

Hyundai Motor Company and Kia Motors Corporation showed surprising growth this year with exceptional mobility and perseverance, despite concerns that hydrogen vehicles have delayed the launch of their electric vehicles. During the first half of the year, electric vehicle sales in the U.S. rose by 317% compared to last year, ranking them second in market share after Tesla, Inc. Local media and market evaluation agencies published favorable reviews for each new model released, including the Hyundai Ioniq 5 and the Kia EV6. In a June article titled “Hyundai Quietly Climbs the EV Sales Charts and Elon Musk Notices,” Bloomberg affirmed that “the hottest things in the auto industry — the most electric electrics — now come from Hyundai Motor Co. and Kia Corp. … Tesla still sells far more cars, but it took the company a decade to deliver as many electric vehicles as Hyundai and Kia have managed in a few short months.” Even Musk himself stated that “Hyundai is doing pretty well” on his Twitter account.

However, Hyundai Motor’s growth spurt is in danger of being put on hold due to the U.S. Inflation Reduction Act. This law ends subsidies of up to $7,600 for electric vehicles not made in North America. Other automakers such as Volkswagen, Volvo and Nissan still have models that are produced in North America and can receive subsidies. But Hyundai Motor, which produces and exports electric vehicles in Korea, does not have any models that can be subsidized. Some say that the American implementation of the bill without prior notice is a “stab in the back” to Hyundai Motor Group's announcement to invest more than $10 billion in the U.S.

The semiconductor industry is also troubled by the U.S. CHIPS and Science Act’s restrictions on investment in China. Under the bill, companies that accept incentives from the U.S. government are prohibited from building advanced factories in China. If companies expand their existing low-cost semiconductor factories, the output must be sold in the Chinese market only. In short, the bill bars companies from making additional semiconductor-related investments in China. This is bound to create complications for Samsung, which owns a NAND flash plant in Xi'an, the hometown of Chinese President Xi Jinping, and SK Hynix, which has a major DRAM plant in Wuxi, China. Officials from SK Hynix, which acquired Intel's Chinese NAND plant for $9 billion at the end of last year, even suspect that Intel may have sold its Chinese plant with advance knowledge of the U.S. authorities' regulatory moves.

In the 1990s, the United States became the world’s only superpower by beating the manufacturing power of Japan and Germany with digital transformation and globalization. Today, the U.S. is shaking up the globalization and free trade that it has built into global standards with its own hands. The decision-making standard of "how to produce the cheapest product" has now changed to "how to produce a product in a place that promotes national security and interests.” A decade ago, “protectionism” was synonymous with "foul play" in Congress. We now live in an age where the secretary of commerce openly announces that "this is about protecting our national security" while briefing the CHIPS Act.

With Korea, China, and Taiwan producing 90% of the high-tech semiconductors needed in the U.S., it has become difficult for anyone to object to concerns that China's invasion or blockade of Taiwan could lead to a "semiconductor nuclear winter" that could paralyze the entire U.S. high-tech industry. The U.S. right wing is denouncing globalization as the cause of the growth of hostile countries such as China and Russia. The left wing is also sympathetic to de-globalization, believing that neoliberalism has accelerated income polarization and climate change.
De-globalization and supply chain reorganization, which overturns the global economic system of the past three decades, are bound to entail great trouble. High prices could become commonplace, as Nobel laureate Michael Spence warned, "There isn’t an infinite supply of low-cost labor anymore." Prices of new iPhones, a symbol of globalization, are expected to rise by 15-20% from last year in most countries except the U.S. and Canada amid supply chain turmoil. This is because the “recipe for successful globalization” of combining U.S. software, Korean parts, and Chinese manufacturing is no longer working.

Just as the manufacturing industries of Germany and Japan hesitated to convert to digital and fell out of IT competition, new winners and losers will be decided in the process of de-globalization. At times like these, we should quickly jump on the wave of change, no matter what kind of backstabbing or sunk cost we may suffer in the process of reorganizing the supply chain. We must awaken our own “fast follower” DNA.