[Editorial] U.S.-Bound Investments Set to Accelerate, Urgent Need to Prevent Manufacturing Hollowing-Out

This year, domestic facility investment in the top 10 manufacturing sectors has reached KRW 122 trillion, an increase of KRW 3 trillion compared to initial forecasts. We commend companies that have actively increased domestic investment while overcoming global supply chain restructuring and tariff burdens. The scale of the increase is significant. Facility investment in the top 10 manufacturing sectors has shown steady growth: KRW 100 trillion in 2023, KRW 110 trillion in 2024, and KRW 122 trillion this year. Notably, semiconductors and automobiles account for about 80% of total investment, driving the trend. The investment execution rate through the third and fourth quarters stands at a healthy 68%.
However, concerns arise for next year. This is due to the full-scale implementation of follow-up measures from the U.S.-Korea summit's Joint Fact Sheet. In line with the investment agreements between the two leaders, domestic companies are expected to sharply increase investments in the United States. Since corporate assets are limited and the scale of required U.S. investment is so large, investment within Korea is likely to decline. Even with companies' best efforts, the impact is unavoidable. This will inevitably lead to a contraction of the domestic industrial ecosystem. The hollowing out of manufacturing may accelerate. Measures are needed to encourage the return of overseas companies and attract foreign investment.
This trend is also reflected in a recent survey by the Korea Enterprises Federation (KEF) on business outlook for 2026. According to the survey, among companies with more than 300 employees, 40.0% responded that they plan to reduce domestic investment next year, while 45.7% indicated plans to increase overseas investment.
The U.S.-Korea investment agreement between the two leaders is already finalized. Demanding that domestic companies blindly increase direct investment at home is nothing more than populism, forcing the impossible. The government and industry must devise effective countermeasures.
First, efforts to improve the domestic investment environment must be accelerated. It is essential to review tax and subsidy support for companies’ facility and R&D investments. In addition, regulations related to the expansion and construction of facilities should be addressed from a pro-business perspective. Excessive regulations must be boldly relaxed in this process.
Practical support measures requested by companies, such as the introduction of a direct refund system for investment tax credits, expansion of policy finance, and reduction of electricity rates, should also be swiftly considered.
Creating a business-friendly environment is essential to ensure that domestic companies retain the capacity to invest. Such an environment is also effective in attracting Foreign Direct Investment (FDI) from abroad. If domestic corporate investment remains weak, foreign capital should be encouraged to establish production facilities in Korea. This is vital for tax revenue and job creation.
Second, overcoming the hollowing out of domestic manufacturing requires a shift in mindset. We must move beyond a defensive strategy of simply trying to prevent domestic factories from relocating overseas. Instead, it is time to adopt an aggressive and integrated supply chain strategy aimed at maximizing the total value added by Korean companies in the global market. The goal is not to keep company headquarters in Korea, but to foster high value-added production activities within the country.
Following the conclusion of the U.S.-Korea tariff negotiation, expanding overseas investment may present opportunities for companies. However, concrete efforts are also needed to prevent the hollowing out of the domestic manufacturing base due to capital outflows. This could become a pressing issue as early as next year. Action, not just words, is now required.