Key Developments in South Korea: A Weekly Recap
South Korea experienced a series of significant events over the past week, from trade agreements to diplomatic shifts and corporate moves. Here’s a detailed look at what transpired.
Trade Deal with the United States
A major development came in the form of a revised tariff agreement between South Korea and the United States. U.S. President Donald Trump announced on July 30 that the two nations had finalized a new trade deal, reducing planned tariffs from 25% to 15%. This decision followed discussions with key South Korean officials, including Deputy Prime Minister and Finance Minister Koo Yun-cheol and Industry Minister Kim Jung-kwan. The agreement is expected to see South Korea invest $350 billion in the U.S., including $100 billion in natural gas and other energy products. Trump also mentioned an upcoming meeting with South Korean President Lee Jae-myung to discuss further details. This deal mirrors a similar agreement with Japan, which involved $550 billion in investments.
Samsung’s Semiconductor Division Struggles
Samsung Electronics reported a sharp decline in profits for its semiconductor division, with operating profit dropping by 94% in the second quarter. This was attributed to inventory write-downs despite steady server memory sales. The company’s overall operating profit fell by 55.23%, reaching 4.67 trillion won ($3.4 billion), while net profit decreased by 48.01% to 5.11 trillion won. Revenue increased slightly by 0.67% to 74.56 trillion won ($53 billion). Chip sales dipped by 2%, and foundry earnings remained weak due to low utilization. However, the smartphone and network unit saw a 40.9% increase in operating profit, driven by strong Galaxy S25 and A-series sales and overseas demand.
Prosecution Raid Raises Concerns
A controversial raid by South Korean prosecutors on a joint U.S.-South Korea base has sparked concerns about the alliance. The search targeted the Air Force’s Master Control and Reporting Center (MCRC) at Osan Air Base on July 21, investigating a suspected 2024 unmanned infiltration. No prior notification documents were found, and U.S. personnel were not informed. This move has raised questions about potential breaches of the Status of Forces Agreement (SOFA) and could impact ongoing trade and defense discussions between the two countries.
SK Innovation Merges EV Units
SK Innovation announced the merger of its two core EV-related subsidiaries—SK On, its battery unit, and SK Enmove, a maker of EV lubricants and thermal solutions. The merger aims to improve efficiency and strengthen financial position amid slowing global EV demand. SK On will absorb SK Enmove at a fixed ratio of 1 to 1.6616742, effective November 1. The deal had been delayed due to investor opposition but proceeded after SK Innovation repurchased the remaining 30% stake in SK Enmove. Post-merger, SK On expects capital to rise to 1.7 trillion won ($1.2 billion) and EBITDA to reach 800 billion won ($578 million) in 2025.
Diplomatic Vacuum in Seoul
South Korea is facing a diplomatic vacuum as over 30 special envoys were recalled under the new administration. Ambassadorial posts to the U.S., Japan, Russia, and China are currently vacant, along with positions at the UN, UK, France, Israel, UAE, and Hungary. This absence of top diplomats could persist for weeks or months, potentially undermining Seoul’s access to intelligence and weakening its global standing.
Tesla and Samsung Partnership
Tesla CEO Elon Musk confirmed a partnership with Samsung Electronics following a $16.5 billion chip deal. Musk highlighted the potential for a “real partnership” during a recent call with Samsung leadership. The eight-year chip foundry deal is seen as a breakthrough for Samsung’s struggling foundry business, with experts suggesting broader collaboration akin to Nvidia and TSMC.
North Korea’s Stance
North Korea dismissed Seoul and signaled a preference for direct talks with the U.S. Kim Yo-jong, sister of North Korean leader Kim Jong-un, acknowledged a positive relationship between Kim Jong-un and the U.S. president. Experts interpret these statements as a strategy to extract more concessions from both South Korea and the U.S.
