kbr-research-notes

Korean Factories Are Now Heading to the U.S.: Direct Investment Hits $10.1 Billion, Highest in 4 Years

According to the Ministry of Economy and Finance, South Korea's overseas direct investment in the first quarter of 2026 rose by 36.2% to $21.74 billion, with U.S.-bound investment surging 107.6% to $10.15 billion—a four-year high confirming the United States as the top destination for Korean factories. Country-specific statistics for the second quarter of 2025 also showed the U.S. ($5.23 billion) overwhelmingly leading, more than seven times that of Vietnam ($700 million). The U.S. is chosen due to three main factors: a 15% tariff structure finalized through Korea-U.S. tariff negotiations, a $350 billion strategic investment package comprising $200 billion in cash investments and $150 billion in shipbuilding cooperation, and localization strategies in the world's largest market. While advanced industry investments by major conglomerates—such as $26 billion by Hyundai Motor Group, $37 billion by Samsung Electronics, and $10.8 billion by SK On—are concentrated in the U.S., a dual structure persists where Asia, including Vietnam, maintains the base for small and medium-sized enterprise production sites. However, underlying challenges such as domestic manufacturing hollowing and foreign exchange burdens make concurrent domestic investments of 800 trillion won and foreign exchange market management key variables going forward.