As the war between Russia and Ukraine drags on and sanctions by Western countries, including the U.S. and the EU, become a reality, the parts shortage is expected to intensify further due to rising raw material prices and increased exchange rate volatility.

According to a survey commissioned by the Federation of Korean Industries to market research firm Mono Research on the "impact of the Russia-Ukraine crisis on businesses" targeting the top 1,000 manufacturing companies by sales revenue (153 companies responded), 60.8% of the responding companies—six out of ten—stated that the Russia-Ukraine crisis had a negative impact on their business operations. In particular, nine out of ten companies (89.8%) with investment and trade relations with Russia and Ukraine responded that they were being adversely affected by the crisis, indicating that the damage to Korean companies is severe.

Companies that responded that the situation in Russia and Ukraine had a negative impact on business operations cited the following causes: increased cost burden due to rising prices of major raw materials (50.5%), increased exchange rate volatility and difficulties in financing (17.9%), difficulties in securing parts and production disruptions (15.1%), and reduced exports to Russia, Ukraine, and neighboring countries (11.5%).

One-quarter (25.1%) of these companies responded that they had no special response plan for the Russia-Ukraine situation. Other companies suggested countermeasures such as pre-purchasing major raw materials and parts and securing sufficient inventory (33.0%), diversifying supply chains to resolve parts supply issues (22.9%), and finding alternative export destinations to cope with the contraction of trade (12.2%).

There are also concerns that rising prices for raw materials and parts, triggered by the Russia-Ukraine crisis, could lead to product price hikes and act as inflationary pressure.

93.5% of companies responded that the unit prices of raw materials and parts would rise compared to the previous year due to the Russia-Ukraine crisis, and the average increase in unit prices for raw materials and parts among companies that predicted a rise reached 8.1%.

53.8% of companies that predicted a rise in purchase unit prices responded that they would raise product prices in response to the increase in raw material and component prices, and the average product price increase rate for companies that responded that they would raise product prices was 6.1%.

Meanwhile, regarding the impact of the Russia-Ukraine crisis on parts imports and supply chains, a majority of companies (57.5%) responded that it has a negative impact, while 37.3% responded that there is no impact.

Companies identified the following as necessary government support measures to respond to the Russia-Ukraine crisis: rapid acquisition and sharing of information regarding sanctions against Russia (30.5%), stabilization of financial and foreign exchange markets (28.1%), support for supply chain diversification (19.6%), support for finding alternative export destinations (16.1%), and ensuring the safety of local facilities and personnel in Russia, Ukraine, and neighboring countries (5.0%).
Kim Bong-man, Head of the International Division at the Federation of Korean Industries (FKI), stated, “What companies are currently finding most difficult is that the sanctions against Russia by Western countries, including the United States, are extensive and complex,” adding, “The government must promptly and accurately share information regarding the sanctions against Russia with companies so that companies can [address] Russia and"We must provide support to ensure a smooth response to the situation in Ukraine," he argued.