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Senior Korean officers are historically reluctant to say something that could possibly be construed in Beijing as antagonistic or confrontational. So it got here as a shock to some when South Korean finance minister Choi San-mok instructed the Financial Times this yr that his nation’s financial relationship with China had reworked over the previous decade from certainly one of mutual profit right into a “rivalry”.
Choi’s bluntness displays a rising sense of alarm in Seoul that South Korea’s main industrial teams are dropping or have already misplaced their technological edge over rising Chinese rivals, and that the general public stays complacent concerning the scale of the problem and its penalties.
For about twenty years after South Korea and China first established diplomatic relations in 1992, Korean corporations had been in a position to journey China’s know-how growth by providing Chinese tech corporations extra refined elements and merchandise than they had been in a position to produce themselves.
But in virtually each sector bar probably the most superior semiconductors, that’s now not the case. Chinese corporations have both surpassed, matched or are quickly closing the know-how hole with South Korea in sectors ranging from electrical automobiles to smartphones. Despite this, many Koreans proceed to consolation themselves with the concept Chinese rivals stay unable to compete in the case of high quality.
Korean media retailers report enthusiastically on scandals at Chinese factories. The manner these tales are shared and offered by them and on social media have fed a notion that Chinese merchandise are by definition unreliable and unsafe, and Korean merchandise inherently superior.
This was illustrated by the response in South Korea to a luxurious Mercedes EV that caught fire final month in an underground storage within the western Korean metropolis of Incheon, hospitalising 23 folks and damaging 40 different automobiles. The incident sparked a public backlash in opposition to electrical automobiles, with residential and workplace buildings banning them from their automobile parks, EV homeowners panic promoting their automobiles and several other EV producers giving in to stress to reveal their battery suppliers for the primary time.
It quickly emerged that the Mercedes had contained nickel-manganese-cobalt (NMC) batteries manufactured by Farasis Energy, a lesser identified Chinese battery producer. According to Korean media experiences, native EV drivers responded by demanding to know if their automobiles contained Chinese or Korean batteries. Some potential consumers of EVs instructed sellers they had been unwilling to purchase automobiles with Chinese batteries.
This is even if the precise reason behind the Mercedes fire in Incheon has but to be established. As some observers had been fast to level out, main Korean battery makers have their very own file in the case of EV fires — in 2021, LG Energy Solution paid General Motors as much as $1.9bn following a sequence of fires ensuing from defective batteries equipped for GM’s mass market Chevrolet Bolt. Bernstein analyst Neil Beveridge notes that there’s “no evidence to suggest that Korean batteries have better safety performance than Chinese batteries.”
The actuality, from a Korean perspective, is extra worrying. South Korean battery makers have historically specialised within the manufacturing of NMC batteries, that are costlier however have the next density and due to this fact higher efficiency than the lithium iron phosphate (LFP) batteries that main Chinese battery makers specialize in.
But as automobile producers come below intensifying stress to scale back the worth of electrical fashions in response to sluggish shopper demand, and as Chinese corporations enhance the efficiency of their LFP batteries, the rationale for choosing a Korean battery is rising weaker and weaker.
With automobile corporations more and more turning to Chinese LFP batteries as a way to deliver down costs, Korean battery makers are being compelled to begin providing LFP batteries themselves. This means trying to undertake an unfamiliar know-how and transfer on to China’s house turf simply when the steadiness sheets of the producers are below stress from disappointing international EV gross sales.
It is that this, not the security file of Chinese batteries, that should be protecting Korean policymakers up at night time. If Korean producers are now not in a position to compete not simply on value but additionally on high quality and efficiency, they’ll have little to supply past the label “Not Made In China”.