LG Energy Solution and Arizona government officials pose for a photo during the groundbreaking ceremony for LG Energy Solution's Arizona battery complex on Wednesday. Standing center left is Arizona Gov. Katie Hobbs, and on her left stands Richard Ra, president of LG Energy Solution Arizona. (LG Energy Solution)

South Korea's investment in the US creates a win-win effect for both countries as Korean companies' entry into the US contributes to the growth of Korea's exports while enhancing employment, economic growth and exports to the US, an industry report said Monday.

Pouring a growing volume of investments in the US, Korean companies entering the US are found to contribute to the US economy in terms of employment, economic growth and exports, according to the report titled "Korean Companies’ Investment in the US and their Economic Effect" released by the Korea International Trade Association.

The US accounted for 43.7 percent of Korea's overseas direct investment, or $27.7 billion in 2023, led by Korean companies in the secondary battery and chips industry proactively expanding their presence in the US.

The KITA report highlighted Korean enterprises’ growing contribution to the US economy, calling for close partnership for the growth of mutual trade and industrial competitiveness that aligns with the visions put forward by both US presidential candidates -- Joe Biden and Donald Trump.

“Korea's investment in the US can have a positive impact on both fostering high-tech industries that Biden values, responding to climate change, strengthening the US manufacturing industry and resolving trade imbalances that Trump emphasizes, so Korea should strengthen supply chain links with the US in high-tech industries and work together to create synergy between the two countries,” a KITA researcher Do Won-bin said in the report.

The ratio of Korean companies' contribution to US economic growth to the size of assets in the US was $10.1 per $100 as of 2021, significantly exceeding the average of all foreign companies of $6.8 per $100 and ranking 10th out of those from 27 major economies, according to data from the Bureau of Economic Analysis of the US Department of Commerce.

The rise in Korean businesses’ overseas direct investment into the US soil largely stemmed from the US administration actively attracting high-tech production sites through subsidies and tax breaks by implementing the Inflation Reduction Act and the Chips Act.

Such examples include Samsung Electronics making large-scale investments to build a semiconductor production plant in Texas, and LG Energy Solution injecting investments to build a battery production plant in Arizona.

In terms of employment size, the number of employees at Korean companies was relatively small compared to other foreign companies, but it was analyzed that they were contributing to job creation in the US, focusing on high-value-added industries.

In 2021, the average annual salary per worker at Korean companies in the US was $104,000, exceeding the overall average of $87,000, and the contribution to US economic growth ranked eighth out of 27 countries, showing its contribution to the creation of US jobs in high value-added industries.

“As the US promotes 'America First' such as employment, growth and manufacturing competitiveness, it is necessary to make efforts to create synergy between the two countries by further elaborating investment in the US in the future,” Do said.

The report found that the expansion of Korean companies into the US market was found to be positive for Korea. As a result of the empirical analysis, it was analyzed that if Korea's overseas direct investment to the US increases by 10 percent, Korea’s exports to the US increase by 0.202 percent.

This is believed to be because Korean companies in the US procure raw materials and intermediate goods from Korea.

“Korea needs to strengthen cooperation between businesses and the supply chain with the US in high-tech industries so that investments between the two countries can contribute to the promotion of mutual trade and enhancement of industrial competitiveness,” the report said.