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| A worker checks a copy of Apple Daily's July 1, 2020, edition with the front page reading "Draconian law is effective, one country two systems is dead" at the newspaper's printing plant in Hong Kong, Wednesday. AP-Yonhap |
By Kim Yoo-chul
Top South Korean exporters are considering their options, including possibly quitting Hong Kong, amid growing concerns about the Chinese central government's newly-instituted national security laws.
But even in a worse-case scenario, South Korean companies operating there are very unlikely to initiate their backup plans. More precisely, Hong Kong is a major site of chip warehousing for manufacturers and distributors globally.
The U.S. decision to withdraw preferential treatment is meant to curtail the risk that companies may export products that contain sensitive information, through Hong Kong, to China.
Samsung Electronics' headquarters in Seoul said there were no developments regarding Harman Holding Limited, a company registered in Hong Kong. In 2017, Samsung Electronics acquired Harman International Industries in a deal worth about $8 billion. Harman Holding Limited established Harman International (China) Holdings in mainland China.
According to the Korea CXO Research Center, 64 South Korean companies, categorized as "big companies," have established 170 affiliates in Hong Kong. SK operates 44 legal entities there, followed by Lotte, CJ and Samsung with 18, 17 and 13 in terms of regional establishments. The country's dominant Web portal Naver has seven affiliates in Hong Kong with mid-tier conglomerates Hyosung and Celltion operating six each, followed by LG and Hanwha Group running two each.
No substantial impact is expected for South Korean tech companies, according to market research firm TrendForce, but the researcher claimed that Washington's increasingly stringent export controls toward mainland China could possibly weigh on Taiwanese firms.
"Because Hong Kong had been afforded preferential treatment in the past, the region saw the emergence of a substantial semiconductor spot market and became a warehousing hotbed for many chip manufacturers," TrendForce said.
"With the cancellation of preferential treatment, changes in the geographical concentration of semiconductor products and chip manufacturing strategies are likely to take place as a result."
As the researcher said, South Korean companies' Hong Kong affiliates are used as a "supporting role" in terms of helping investors manage their portfolios and offering various finance-driven services. IMM Investment operates five affiliates in Hong Kong with Mirae Asset running four there.
But officials said the deepening U.S.-China trade war and Washington's increased efforts to prevent China from acquiring U.S. products and technologies is likely to have some negative impact on Korean financial companies in Hong Kong.
In the global financial system Hong Kong has functioned as an "electrical transformer connecting two circuits with different voltages," an industry watcher said. Unlike Hong Kong with its freewheeling capital flow, mainland China is now working to expand its influence on capital, another said.
Mirae Asset Management, 60 percent owned by Mirae Asset Group boss Park Hyun-joo, has two affiliates on Hong Kong ― Mirae Asset Global ETFs Holdings and Mirae Asset Global Investment.
