"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, "Our 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. As a result, our sales have dropped by 20 to 30 percent compared to last year."
Manufacturing small and medium-sized enterprises (SMEs), which heavily depend on imported raw materials and components, are facing a dual crisis of rising costs and frozen delivery prices due to high exchange rates. The soaring won-dollar exchange rate directly translates into increased costs for raw material purchases, leading to declining profitability.
According to the small business sector on June 17, the exchange rate has stabilized in the 1500 won range, severely impacting industries like petrochemicals, metal processing, machinery, and food, which have a high proportion of imported raw materials. These sectors are particularly vulnerable as the prices of basic raw materials are closely tied to exchange rates, meaning they bear the cost burden as rates rise.
The pressure from negotiations over delivery prices with large companies also weighs heavily on SMEs. Due to the entrenched structure of primary and secondary contracts, SMEs are absorbing the impacts of high exchange rates without timely adjustments to delivery prices.
As of this day, the exchange rate in the Seoul foreign exchange market was 1514 won, an 11.8 percent increase from 1354 won a year earlier in June 2025.
For export-oriented SMEs, which lack sufficient hedging tools against exchange rate fluctuations, the high exchange rate crisis is a significant setback. The costs of imported components needed to produce export products have surged, and the steep rise in maritime logistics costs due to global supply chain instability is also overwhelming for these businesses.
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, these companies, lacking infrastructure for managing exchange rate risks, are unable to gauge their raw material order quantities for the upcoming month, let alone their business plans for next 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 risk accounts for up to 25 percent of operating profit for manufacturing SMEs. It was confirmed that a 1 percent increase in the won-dollar exchange rate results in approximately a 0.36 percent 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 at Sejong University’s Business Administration Department, stated, "The dual cost crisis faced by SMEs is not just an individual company issue but a structural disaster stemming from macroeconomic shocks. It is essential for the government to adopt a proactive stance on exchange rate stability, enforce the linkage of delivery prices, and support bold regulatory reforms and digital transitions to enable SMEs to create high value-added structures independently."
* This article has been translated by AI.
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