Semiconductors, batteries, and beauty: Korea-China industrial structures are now in direct collision. Korea's semiconductor exports surged 139% year-on-year in Q1 2025, reaching a record total export value of approximately USD 172 billion. The country that was once Korea's largest customer and factory has become its fiercest competitor. According to a Chinese industry report released in May 2025, China has accelerated its strategy to achieve 70% localization of silicon wafers, a core semiconductor material, despite U.S. sanctions. Chinese companies, backed by government support, are rapidly expanding 12-inch wafer production lines, directly entering a market long dominated by Korea and Japan. Korea is fighting back. Samsung Electronics and SK Hynix are seeing renewed performance expectations driven by surging demand for AI-related HBM (High Bandwidth Memory). However, the competitive landscape has shifted. Previously, Korea developed technology while China manufactured. Now, Chinese companies threaten both the technological edge and price competitiveness of Korean firms. At a recent Shanghai semiconductor exhibition, booths of Chinese equipment makers were crowded with state-owned enterprise officials and investors, underscoring the push for semiconductor self-sufficiency.
China's advance is most evident in the battery market. According to SNE Research, CATL holds a 37% global market share in EV batteries, ranking first worldwide. BYD has surpassed Tesla in EV sales volume. In Guangzhou, BYD, XPeng, and Li Auto vehicles are reportedly more common than Teslas. In displays, BOE is rapidly catching up to Korean companies; having effectively dominated the LCD market, China is now pressuring Korean firms in OLED. The beauty industry is no exception. The K-beauty market, once buoyed by the Korean Wave, is changing. Chinese local brands such as Perfect Diary, Huaxizi, and Proya are aggressively expanding market share through online distribution and patriotic consumption trends. China, once a sales market for Korean products, is transforming into a global beauty brand production base. Korean companies face a dilemma. The U.S. is tightening semiconductor restrictions on China. As of 2025, China accounts for about 19% of Korea's total exports, making it Korea's largest trading partner. Following the U.S. risks the Chinese market, while maintaining ties with China invites U.S. regulatory pressure. An industry insider commented: "Korean companies are now at a point where they need to completely rethink their survival strategies, not just walk a tightrope between the U.S. and China." In response, the Korean government has expanded its export strategy from a semiconductor focus to include cosmetics, food, content, and bio sectors, reflecting concerns that the era of relying solely on semiconductors is ending.
Experts view 2026 as a decisive inflection point in Korea-China economic relations. If China succeeds in technological self-sufficiency, Korea's greatest strength—its intermediate goods export structure—could be undermined. China is no longer a low-cost producer. Korea can no longer rest on its technological advantages. The two countries, once partners in growth, are now clashing over the same markets, industries, and customers. This competition is expected to intensify. In the past, Korean companies rose to global prominence thanks to China's growth. Now, China has become not Korea's largest customer but its most threatening competitor. In 2026, Korea-China relations are moving from an era of cooperation to an era of survival competition. Supply chains and technological hegemony now drive diplomacy and security. Korea-China economic relations stand at the center of a new order restructuring.
Source: Read the original report | Published: May 07, 2026