Domestic information and communication technology (ICT) startups that depend on foreign supply chains, such as those in China and Taiwan, are facing changes in U.S. tariff policies, necessitating urgent responses such as expense reduction, supply chain diversification, and investment attraction.
According to a report released on the 2nd by the Korea National IT Industry Promotion Agency (NIPA) under KIC Silicon Valley, ICT startups exporting hardware such as electronic products and Internet of Things (IoT) devices to the U.S. are likely to bear tariffs of over 15% imposed by Korea. In particular, if these corporations use parts produced in other countries like China, they could face even higher tariffs.
The report warned that high tariffs could become significant obstacles for startups seeking to enter and expand in the U.S. market, suggesting instead to consider entering emerging markets such as Southeast Asia and India. It also emphasized the need to reduce dependence on China-centered supply chains, secure alternative suppliers, and strengthen internal production capabilities while preparing expense reduction measures.
In addition to the decrease in product competitiveness due to tariff imposition and potential increases in expenses related to supply chain restructuring, concerns about investment contraction were also noted. Due to trade uncertainty and worries over reduced revenue, it was believed that venture capitalists and investors are likely to decrease their investments in ICT startups.
Additionally, while large corporations are pursuing the expansion of manufacturing facilities in the U.S., startups that lack funding and resources find it difficult to establish localization policies, raising concerns about declines in competitiveness.
The report recommended that ICT startups secure a competitive edge in the market through technology and service differentiation while establishing flexible strategies for supply chain restructuring, market diversification, and investment attraction.