Major South Korean companies are expanding their investments in Japan, shifting from merely establishing sales offices to directly engaging in the semiconductor ecosystem and core technologies. The combination of a weak yen, Japanese government subsidies, and Korea-Japan supply chain cooperation is expected to accelerate investments aimed at building essential infrastructure and securing technological leadership.
According to statistics from the Korea Export-Import Bank, the number of new South Korean companies established in Japan rose from 318 in 2024 to 386 in 2025. In the first half of this year alone, 172 new firms opened, making Japan the fourth-largest destination for South Korean investments after China, the United States, and Vietnam.
The nature of these investments is also changing. Historically, South Korean investments in Japan primarily focused on securing sales bases. A report from the Japan External Trade Organization (JETRO) indicated that 70.6% of South Korea's cumulative investments in Japan last year were aimed at entering the local market, with only 14.7% allocated to manufacturing.
Recently, the information and communications sector has diversified, with new companies increasing from 45 in 2023 to 60 in 2024. Major corporations are now actively establishing their own research and production bases.
Samsung Electronics opened an advanced packaging research facility, the Advanced Package Lab (APL), in Yokohama last month. The company plans to invest 40 billion yen (approximately $350 million) over five years, increasing its research staff to over 100 by next year. Advanced packaging, which combines multiple chips into one, is seen as a critical battleground in the competition for AI semiconductor leadership.
SK Group Chairman Chey Tae-won announced plans in June to build a gigawatt-scale AI data center, the AI Factory, in Japan. The goal is to combine SK Hynix's high-bandwidth memory (HBM) with NVIDIA's graphics processing units (GPUs) for operation by 2028-2029. With ongoing memory supply shortages, Japan is being considered as a potential site for semiconductor production facilities. Chey described Japan as a "great candidate," citing the concentration of equipment and materials companies as a strength.
Efforts to secure core technologies through fund formation are also underway. Companies like POSCO Holdings, Doosan, and Hyundai Motor participated as strategic investors in the Korea-Japan Fusion Fund managed by IMM Investment Japan, investing in the fusion company Kyoto Fusion Engineering. This structure aligns South Korean conglomerates' manufacturing capabilities with Japanese deep-tech firms that possess advanced technologies but require manufacturing partners.
The favorable exchange rate, termed the "super yen depreciation," is further boosting investments in Japan. This month, the average exchange rate of the won to yen was 849 won per 100 yen, the lowest since December 2007 (829.2 won). Under the current exchange rate, the cost of a 40 billion yen project, which would have been 400 billion won, is now reduced to about 340 billion won, easing the investment burden by approximately 60 billion won.
Historically, a weak yen has encouraged South Korean companies to invest in Japan. In 2023, when the won to yen exchange rate fell to around 800 won, the number of new South Korean companies in Japan reached a record 269. In 2024, this number increased to 318. However, despite the rise in the number of firms, the total investment amount halved from $1.15 billion in 2022 to $640 million in 2024, as investments were primarily in small sales offices.
This year presents a different scenario. With the won's depreciation keeping the exchange rate around 900 won per 100 yen, investments surged to $26.7 billion (approximately 35.4 trillion won) in just the first half of the year. Investments began moving even before the full effects of the yen depreciation were realized.
Lee Chang-min, a professor at Hankuk University of Foreign Studies, noted, "In the past, South Korean investments in Japan were primarily small retail firms, lacking qualitative growth. Now, we are seeing a horizontal technological alliance that combines Japan's advanced materials and components technology with South Korea's superior manufacturing capabilities. The Japanese government's proactive approach to attracting advanced companies through subsidies is reshaping the quality of investments in Japan."
The strengthening economic cooperation between the two countries is also reducing investment burdens for companies. The leaders of South Korea and Japan have agreed to expand cooperation in supply chains for advanced industries, including semiconductors, during a series of meetings this year. The Korea-Japan Chamber of Commerce also adopted a joint statement in August focusing on strengthening cooperation in critical minerals and AI semiconductor collaboration.
Expectations are high in the business community. A survey by the Korea Economic Association of the top 1,000 companies found that 62.4% of respondents believe that Korea-Japan economic cooperation is necessary for South Korea's economic growth, with only 3% stating it is unnecessary.
Choi Eun-mi, a senior researcher at the Asan Institute for Policy Studies, explained, "Companies are not just looking at the Japanese market; they are also leveraging the Korea-U.S.-Japan supply chain bloc amid U.S.-China rivalry to reduce global uncertainties. This is a result of the convergence of reduced political risks between the two countries and the alleviation of financial burdens due to exchange rates."
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.