“Safe in Singapore, Production in Malaysia”… Overseas Maps of Korean Firms Are Changing

Leveraging Local Corporate Tax Benefits to Manage Surplus Funds

Expanding Production Bases in Southeast Asia Driven by Half-Price Electricity and Lower Labor Costs

A midsize company, Company A, has established its Southeast Asia and Oceania regional headquarters in Singapore. The company transfers a portion of the profits generated from its operations in neighboring countries such as Vietnam, Thailand, and Indonesia to its Singapore headquarters. This is done to take advantage of local tax benefits and robust financial infrastructure, with assets managed in this way amounting to several trillion won. To reduce the risk of principal loss, most of these assets are invested in short-term safe assets.

The financial and production bases of major domestic companies are rapidly shifting overseas. In Singapore, companies manage funds by leveraging tax breaks and financial infrastructure, while in Malaysia, they are expanding production bases, utilizing lower electricity costs and a stable labor environment. With the U.S. ramping up pressure for domestic production, semiconductor companies are also working to secure local production networks in both the U.S. and Japan. Although these are strategic choices to cope with growing global market uncertainty, there are concerns that the foundation for domestic investment and employment could be weakened.

'Financial Control Tower' Singapore

According to an investigation by The Asia Business Daily on September 18, Company A operates a regional headquarters in Singapore overseeing its subsidiaries in Southeast Asia and Oceania, managing it as a 'financial control tower.' Part of the operating profit generated in more than ten major Southeast Asian countries is remitted to the Singapore headquarters in the form of dividends or as fees for management and technical support.

The accumulated funds at the Singapore hub amount to several trillion won. Company A deposits these funds with local financial institutions to manage liquidity. To minimize the risk of principal loss and ensure asset liquidity, most are invested in ultra-short-term financial products such as short-term bonds with maturities of 30–60 days or money market funds (MMFs). Effectively, the center of financial management is being dispersed from the domestic headquarters to overseas regional bases.

Singapore offers a lower corporate tax rate of 17%, compared to Korea (up to 25%) or the United States (21%), and has fewer foreign exchange regulations along with superior financial infrastructure. This more favorable tax and regulatory environment abroad is driving the outflow of corporate funds.

According to an industry official, “The regional headquarters serves as a central financial gateway, efficiently managing surplus funds from subsidiaries in the region and handling risks such as fluctuations in exchange rates.” The official added, “It is common among multinational corporations to pool surplus funds in Singapore as a base for reinvestment or transfer to headquarters.”

Half-price Electricity and Stable Labor Relations... SKC, OCI, Lotte Gather in Malaysia

While the Singapore base serves primarily as a financial hub focusing on liquidity management, Malaysia is emerging as a key manufacturing location for major Korean companies. Within the SK Group, SKC’s copper foil manufacturing subsidiary, SK Nexilis, uses its Kota Kinabalu plant in Malaysia as a production hub.

SK Nexilis has been raising the operation rate of its Kota Kinabalu copper foil plant, strengthening its production and sales system. Recently, an increase in orders for non-Chinese battery copper foil has reportedly led to the Malaysian plant operating at full capacity in the second half of the year. The domestic Jeongeup plant serves as the group’s research and development (R&D)-focused ‘mother factory.’

A view of OCI Holdings' Malaysian subsidiary, OCI Terasus. OCI Holdings

Manufacturing in Malaysia is attractive because it lowers production costs, including electricity and labor, while also enabling stable power supply and responsiveness to global supply chain demands. Since electricity costs account for a significant share in copper foil production, savings on energy translate directly into enhanced competitiveness. In fact, the local plant’s electricity unit price is said to be less than half that of existing plants.

Stable labor relations in the area are also a positive factor. The Kota Kinabalu plant is known for maintaining a smooth production system by building strong employer–employee relations with local staff, thereby reducing management uncertainties.

OCI Holdings is also leveraging Malaysia as a major production base to build cost competitiveness. The Malaysian manufacturing subsidiary of OCI Holdings, OCI Terasus, produces 35,000 tons of non-PFE (non-foreign institution) solar-grade polysilicon annually. The Malaysian plant, in particular, has secured cost competitiveness by relying on hydroelectric power. Not only does this reduce electricity costs, but it also minimizes carbon emissions, making it advantageous for meeting international Environment, Social, and Governance (ESG) standards.

Lotte Energy Materials is also increasing utilization at its Malaysian production base. The company announced during its Q2 earnings conference call that the operation rate of its Malaysian plant, which specializes in battery foil, had reached 76%. To meet rising demand for battery foil, it is expanding capacity. Since July, the company has fully launched its fifth Malaysian plant and plans to bring forward the operation of the sixth plant—initially scheduled for next year—to begin within the fourth quarter of this year.

Lotte Energy Materials Malaysia Plant. Lotte Energy Materials

Beyond Southeast Asia to the U.S. and Japan

Efforts to expand overseas manufacturing bases from Southeast Asia to advanced economies are accelerating. Notably, SK hynix is actively pursuing diversification of its memory semiconductor manufacturing operations in countries such as the United States and Japan.

SK hynix has begun construction of a high-bandwidth memory (HBM) advanced packaging plant worth USD 4 billion in West Lafayette, Indiana. Recently, the company has reportedly been exploring options to secure a local frontend (fab) production base as well. These options include leasing part of Intel’s semiconductor facility in Ohio or forming joint ventures with major cloud companies to establish memory production lines in the United States. In Japan, SK hynix is also refining its localization strategy by exploring ways to diversify its production bases.

Experts analyze that the diversification of overseas bases by Korean companies is a long-term, structural shift to respond to changes in the global labor environment and the U.S.–China conflict.

Kim Tae-hwang, professor of international trade at Myongji University, explained, “There has been a greater burden from labor regulations and labor costs domestically, and even in China—which was once a low-wage market—wages have risen significantly since the 2000s.” He continued, “Korean companies are diversifying production bases to Southeast Asia, which is geographically favorable to China, comparatively low in labor costs, and presents less trade risk stemming from U.S.–China tensions.”

Professor Kim added, “The shift away from China and into alternative markets such as Southeast Asia has been a gradual, long-term process. The more recent, sophisticated expansion of production and financial hubs into Singapore, Malaysia, and Indonesia is expected to continue going forward.”

This content was produced with the assistance of AI translation services.