U.S. tariffs are posing significant challenges for South Korean companies with production bases in Vietnam, China, and India. The U.S. has imposed tariffs of 46% on Vietnam, 34% on China, and 26% on India, with China’s effective rate reaching 54% due to previous tariffs. These measures are impacting major players like Samsung Electronics, which produces a substantial portion of its smartphones, TVs, and automotive components in these countries.
The imposition of high tariffs is particularly concerning for smartphone manufacturers.
Smartphone, electronics, and apparel companies that have relocated their production bases to Southeast Asia to cut labor costs are facing a crisis as the U.S. imposes high tariffs of up to 46% on countries like Vietnam and India, which serve as supply chain detours. While some companies are increasing production within the U.S. or adjusting quantities by country, most have already invested significantly in local facilities, leaving them with limited alternatives.
Samsung Electronics produces a significant portion of its major products, such as smartphones, TVs, and automotive components, in countries like Vietnam, China, and India. The U.S. has imposed tariffs of 46%, 34%, and 27% on Vietnam, China, and India, respectively, which are higher than those on other countries. China’s actual tariff rate reaches 54% when including the previously imposed 20%.
The most concerning issue is smartphones. Samsung Electronics produces half of its Galaxy smartphones in Vietnam and about one-third in India. Over 10% of the smartphones manufactured in Vietnam’s Bac Ninh and Thai Nguyen are exported to the U.S. While Samsung produces mid-to-low-end lines in India for the local market, the proportion of premium lines has increased with the initial production of Galaxy S23 starting in 2023, potentially utilizing them for future exports. The key factor is competition with Apple, which has most of its iPhone supply chain in China. As Galaxy and iPhone compete in the global flagship smartphone market, the response to tariffs by country could lead to differing fortunes.
The apparel industry is also in turmoil. Many domestic OEM and ODM apparel companies primarily export to the U.S., with a significant number having production bases in Vietnam. The Vietnam production ratios for Hansae, Hwaseung Enterprise, and Youngone Corp. are 50%, 60%, and 20%, respectively. The Korea Federation of Textile Industries held an emergency meeting on tariffs to discuss response strategies.
Cable and power device companies riding the power supercycle also have significant production in Vietnam. LS Cable & System and Taihan Cable & Solution export a substantial portion of the cables produced domestically and in Vietnam to the U.S. and Europe. LS Cable & System plans to increase its U.S. production ratio to circumvent tariff impacts. A company official stated, “We plan to further strengthen our localization strategy centered on U.S. production bases,” adding, “We will maintain supply stability and price competitiveness in the U.S. through the Georgia plant currently in operation and the submarine cable plant scheduled to break ground in Virginia at the end of this month.”
The electronics industry is relieved that Mexico, a key export base to the U.S., is excluded from the current reciprocal tariffs. However, the possibility of additional U.S. tariffs being imposed on Mexico in the future cannot be ruled out, so companies plan to adjust production volumes by country in line with U.S. policy. LG Electronics is considering increasing production at its Tennessee plant to avoid tariff burdens. Samsung Electronics initially planned to move some refrigerator lines from its Gwangju plant to Mexico but decided to monitor tariff trends further before making a decision.
Electronic component companies like Samsung Electro-Mechanics and LG Innotek have production bases in Vietnam, but are somewhat shielded from direct tariff impacts as they sell intermediate goods. However, they are concerned about potential ripple effects, such as pressure to lower supply prices, as the upstream industries of electronics and smartphones face direct tariff impacts. A representative from a smartphone component company with production bases in South Korea, the U.S., China, and Vietnam stated, “If the smartphone industry is significantly affected, we need to find ways to increase supply in other areas,” adding, “Maximizing domestic consumption in the production country instead of exporting is also an option.”
An industry insider commented, “If the tariff imposition is prolonged, it will ultimately lead to price increases, affecting U.S. consumers,” adding, “Since there could be changes before the final tariff imposition date on April 9, we need to keep an eye on developments.”
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