Advanced manufacturing industries targeted by the Made in China 2025 strategy, such as robots, semiconductors, electric vehicles (EVs, including autonomous driving), and batteries, have grown exponentially since 2015. With the exception of semiconductors, several categories within robots, batteries, and EVs have exceeded the localization targets outlined in the strategy. China now holds an overall value chain advantage over South Korea in these sectors. Across R&D, procurement (supply chain), production, services, and demand markets (both domestic and overseas), China maintains an edge in robots, EVs, batteries, and autonomous vehicles. Korea retains superiority in equipment procurement, sales and maintenance services, and overseas demand for the semiconductor industry, driven by its memory chip competitiveness. Korea also maintains a slight lead in robotics R&D capabilities for product development and design.

While the expanding rivalry poses threats to Korean industries, opportunities exist to differentiate in advanced and niche markets. China’s price competitiveness, its expanding dominance in new AI-based markets, and its internalizing supply chains are common threats. However, leveraging its overall technological prowess and process expertise in materials, components, and equipment, Korea maintains a qualitative advantage in certain categories. Korea must seek to enter global premium markets, such as the US and the EU, emphasizing stability and reliability.

Up to now, Korean industry has pursued an “ultra-gap” strategy, in which firms sought to maintain wide competitive moats against their Chinese competitors. This strategy is no longer viable. Korea urgently needs to shift its policy toward competitive cooperation and strategic utilization, and secure a position in the future ecosystems that China aims to dominate, actively utilizing China’s high-tech and technological ecosystems. We must discover new cooperative models that combine China’s technology, production base, and data with Korea’s innovative ideas.