Businesses brace for near shutdown

As South Korea’s daily coronavirus tally rose to a new record on Sunday, local businesses are bracing for a possible upgrade in the country’s social distancing rules to the toughest level yet – a partial shutdown.

While Level 3 of the government-set five-tier social distancing scheme is expected to decimate conventional retail industries, export-driven sectors such as mobile phones and semiconductor chips are less likely to be massively affected, experts and industry insiders said.

The government and health authorities are taking a cautious approach, given the weight of a decision, but when an upgrade is deemed inevitable, there will be no hesitation, said Prime Minister Chung Sye-kyun.

“When we move to Level 3, over 200 million business outlets and facilities will have to close or limit their operations,” he said Friday.

Not included in that 200 million would be factories of Samsung Electronics, Hyundai Motor and other major conglomerates that buttress the country’s economy, and biotech companies developing COVID-19 treatments, diagnostic kits or vaccines.

These companies are currently operating their production facilities as usual and are expecting no immediate impact from the country’s distancing rule changes, if any.

Company officials contacted by The Korea Herald said they were not letting their guards down by strictly limiting travel and meetings.

Samsung Electronics, the world’s largest memory chip provider and the biggest exporter shoring up the Korean economy, sees no problem in running its chip fabrication lines under its own guidelines to prevent the virus from getting into its production facilities.

“A minimal workforce is allowed to work to keep the lines operate as usual, while employees in the back office and research centers are advised to not hold any business meetings within the workplace and refrain from traveling and having personal gatherings,” a Samsung official said.

Despite the unrelenting pandemic over the past 11 months, Korea’s electronics industry saw its overseas sales steadily grow.

According to data by the Ministry of Trade, Industry and Energy, total semiconductor exports rose 3.5 percent to $89.7 billion from January to November compared to the same period last year.

Chip exports accounted for 19.4 percent of the country’s total exports. If the trend continues, chip exports are estimated to claim over 20 percent of the export-driven Korean economy by the end of the year.

When asked if Level 3 social distancing would hamper the exports, an official from a leading local diagnostics firm told The Korea Herald that, “There has been no noticeable link between social distancing and exports so far.”

“Work from home has not been required, and we have only seen an increase in manufacturing and exporting this year,” she said.

“However, should the government raise the distancing measures to Level 3, the regulations will become stricter, for which we are internally preparing guidelines to minimize disturbance in work,” added the official.

Pharmaceutical exports rose to a record high in Korea in 2020 on the back of increased global demand for Korean coronavirus prevention tools. As of October, the country marked over $10 billion in yearly exports of pharmaceuticals and medical devices, for the first time.

COVID-19 diagnostic kits towed the figure, according to Korea Customs Service.

Korea Pharmaceutical Traders Association seconded the opinion, saying that if Level 3 distancing affects pharmaceutical exports, it would apply differently per product.

However, overall, domestic distancing would not affect overseas sales of Korean drugs, he said.

The situation is starkly different for domestic market-oriented businesses.

Stores that sell daily necessities such as groceries, glasses and medicine would be exempt from Level 3 measures, but businesses considered not essential will have to close completely or partially. Department stores, electronics stores, duty-free stores and clothing and cosmetics sections inside discount chains could be those facing such limitations.

In a regular briefing Friday, the Ministry of Health and Welfare’s spokesperson Son Young-rae hinted that measures could regulate even supermarkets from being crowded.

“It is under review to allow the sale of daily necessity corners inside convenience stores and supermarkets, but the number of customers allowed inside will be limited,” said Son, adding that the same will apply to large discount store chains.

Such measures will limit the operation of 50,000 stores nationwide and 25,000 stores in the Seoul metropolitan area alone.

By Song Su-hyun, Lim Jeong-yeo & Kim Byung-wook song@heraldcorp.com">(song@heraldcorp.com) (kaylalim@heraldcorp.com) (kbw@heraldcorp.com)