"While it is fortunate that the war in the Middle East has ended, it is difficult to predict how long the challenges posed by high exchange rates will continue," said A, the head of a small steel company focused on exports to the Americas. He added, "The high reliance on imported raw materials has increased our burden, and the prolonged high exchange rates have made it difficult to secure orders. Major companies in the automotive and electronics sectors have also moved many of their production bases overseas, making it hard to find work domestically, leading to a 20-30% drop in sales compared to last year."
Manufacturing SMEs, which heavily depend on imported raw materials and components, are caught in a double bind of rising costs and frozen delivery prices due to the soaring won-dollar exchange rate. The ongoing increase in the exchange rate directly translates to higher raw material purchasing costs, diminishing profitability.
According to the small business sector on June 17, the fixed exchange rate in the 1500 won range has severely impacted industries such as petrochemicals, metal processing, machinery, and food, which have a high proportion of raw material imports. These sectors are particularly vulnerable as the prices of basic raw materials are synchronized with the exchange rate, meaning they must shoulder the cost burden as the rate rises.
The pressure from negotiations over delivery prices with large corporations also weighs heavily on SMEs. Due to a deeply entrenched subcontracting structure, SMEs are unable to timely reflect the rising costs in their delivery prices, forcing them to absorb the impacts of high exchange rates.
As of this day, the exchange rate in the Seoul foreign exchange market stood at 1514 won, an 11.8% increase from 1354 won a year ago in June 2025.
For export-oriented SMEs, which lack sufficient currency hedging tools compared to larger firms, the high exchange rate crisis is a significant setback. The prices of overseas components needed to manufacture export products have surged, and the steep rise in maritime logistics costs due to global supply chain instability is overwhelming for SMEs.
Above all, it is the 'exchange rate volatility' that instills fear in SMEs. With exchange rates fluctuating by dozens of won in a single day, SMEs, lacking any infrastructure for managing exchange rate risks, are unable to gauge their raw material order quantities for next month, let alone their business plans for the coming year.
According to a study on exchange rate risk analysis for SMEs published by the Small and Medium Business Administration in September of last year, exchange rate risks account for up to 25% of the operating profit for manufacturing SMEs. It was confirmed that a 1% increase in the won-dollar exchange rate results in approximately a 0.36% increase in exchange losses.
Consequently, there are calls to ensure that SMEs do not bear the current high exchange rate crisis alone. Kim Dae-jong, a professor of business administration at Sejong University, stated, "The dual cost crisis facing SMEs is not just an issue for individual companies but a structural disaster resulting from macroeconomic shocks. The government must adopt a proactive approach to stabilize exchange rates, enforce the linkage of delivery prices, and support bold regulatory reforms and digital transitions to enable SMEs to create high value on their own."
* This article has been translated by AI.
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