[KMTI] Navigating Major End-User Industries : Automobiles

Korea's Automobile Sales Down at Home; Up Abroad in '12

Sale of Korean automakers in 2012 slightly decreased in the domestic market as a result of reduced production due to a shrinkage of consumption sentiment and delayed settlement of wage and CBA (Collective Bargaining Agreement) negotiations.

In contrast, exports increased slightly, recording 3,169,689 units in 2012 compared with 3,51,708 in 2011.

This year, domestic automobile demand is seen to remain bearish, staying in the neighborhood of 1.4 million units, while exports are expected to rise to 3.3 million units, a 3.1% increase over last year.

According to the 'Automobile Industry Trends in 2012' announced on January 10 by the Ministry of Trade, Industry & Energy (MOTIE), automobile production and domestic demand totaled 4,558,160 units and 1,541,715 units, respectively, down 2.1% and 2.4% year-on-year.

The ministry analyzed that domestic demand slowdown and occurrence of partial strikes caused by unrest in labor-management relationships had affected a delay in supply and led to the production decrease in 2012.

In fact, production in the 3rd quarter of 2012 fell to 935,520 units, down 13.9% from 1,205,440 units in the 2nd quarter, serving as a key factor in the annual total production contraction. Domestic sales were converted into a declining trend in four years since 2008 due to consumption sentiment shrinkage following the high oil prices and household debt increase amid domestic economic depression.

Despite export decreases to certain regions, including the EU, however, however, exports increased 0.4% to 3,165,689 units centering on the United States and emerging countries and maintained the previous year's level. Exports to the U.S. market, notwithstanding the fiscal cliff threat in the country, increased 18.4% owing to a steady recovery of demand for automobiles and enhanced quality competitiveness of Korean cars.

In December last year, meanwhile, production and exports of the Korean automobile industry decreased year-on-year, while domestic sales increased. Exports fell 10.3% to 270,336 units due to a decrease in the supply volume responding to the volume for domestic demand, etc

[KMTI] Navigating Major End-User Industries : Shipbuilding

Creating Blue Ocean With Offshore Platforms

Riding the wave of offshore supremacy, the order volume secured by Korean shipbuilders in 2012 reached about US$30 billion, according to Clarkson's data. 

Korean shipyards reconfirmed their global competitiveness particularly in the fields of offshore plants and high value-added ships by winning 73% of the world's LNG carrier orders (24 ships, about US$4.9 billion) and 67% of drillship orders (26 ships, about US$9.3 billion).

Among the two units each of LNG-FPSO and FPSO (about US$770 million/unit) ordered throughout the world in 2012, Korean shipbuilders clinched one of each and also won all four units of LNG-FSRUs (about US$1.2 billion) ordered last year.

The market scale of the global offshore equipment industry exceeded US$150 billion in 2012 and is projected to continue strong annual average growth of 7% for the next 20 years.

This year, Korea’s enthusiasm for the offshore sector is expected to heat up even further as major shipyards, including Hyundai Heavy Industries (HHI), Samsung Heavy Industries (SHI) and Daewoo Shipbuilding & Marine Engineering (DSME), have established a combined order-securing target of US$58.8 billion in which the offshore sector has taken the lion’s share.

Under this changing industrial landscape, domestic marine equipment companies are turning increasingly to production of equipment and materials for offshore plants. A survey conducted by the Leading Industry Development Support Corps for Southeastern Economic Region in June last year on 1,000 marine equipment companies based in the region found that about 300 companies (30%) were manufacturing and supplying single-product-type or module-type offshore plant equipment and materials, although the scales differed.

[KMTI] Navigating Major End-User Industries : Machinery

Production Scaled at 454 Trillion Won in 2013

Korean production in five major machinery sectors, i.e, general machinery, precision machinery, electric machinery, fabricated metalwork and transportation machinery, except shipbuilding, is expected to reach 454 trillion won in 2013, up 5.1% year-on-year, according to the Korea Association of Machinery Industry (KOAMI).

KOAMI also projected exports at US$194.6 billion (up 8.9%) and imports at US$104.7 billion (up 9.0%) for 2013, meaning that the nation would achieve a trade surplus of US$89.9 billion.

In its '2012 Machinery Industry Trends and Prospects for 2013' released on Dec. 28 last year, the association estimated that in 2012, general machinery production, exports, imports and trade surplus would post 112.9 trillion won, US$47.6 billion, US$38.3 billion and US$9.3 billion, respectively.

The association forecast that in 2013, export profitability may worsen due to sharp declines in the won-U.S. dollar exchange rate, etc. and that domestic production would shrink.

In the second half of the year, however, the industry is projected to recover slightly thanks to the Chinese government's economic stimulus policy and recovery of U.S. housing and construction investments.

In 2013, production of machine tools is expected to brisk, while production of construction & mining machinery, molds and heavy electrical machinery are projected to maintain 2012 levels. Exports of machine tools, molds and heavy electrical machinery are likely to post good performances. Meanwhile, business conditions for textile machinery and bearings are feared to worsen in 2013.

[KMTI] Navigating Major End-User Industries : Steel

'12 Exports Up 4.6%; Domestic Demand Seen to Rise in '13

In 2012, steel production stayed at the previous year's level due to stagnation of domestic demand following the economic recession.

The Korea Iron & Steel Association (KOSA) said that the domestic production of steel products recorded 72.91 million tons in 2012, a mere 0.9% year-on-year growth. Crude steel production also stood at 69.40 million tons, up 1.3%.

Exports of steel products in 2012 increased 4.6% year-on-year to 34.30 million tons owing to expanded demand in the United States, ASEAN and the Middle East. In contrast, imports decreased 10.2% to 20.76 million tons due to a slowdown of domestic demand and excess supply in the domestic market.

KOSA projected crude steel production at 71.21 million tons (up 2.6%) and steel goods production at 74.06 million tons (up 1.6%).

[KMTI] Navigating Major End-User Industries : Petrochemicals

Investment Projected at 6.3 Trillion Won in 2013

The Korean petrochemical industry's investment and exports in 2013 are likely to increase slightly from 2012 - investment to 6.5 trillion won from 6.3 trillion won and exports to US$46.6 billion from US$45.8 billion.

Chinese demand for Korean petrochemical products has led the growth of related enterprises. However, the industry may find it hard to sustain quantitative growth, which has depended on the growth of the Chinese market, in the future and market conditions are not stable either due to rapid expansion of facilities for non-petroleum base materials. Therefore, there is a high possibility that long-term and average profitabilities may decline.

China's per-capita consumption of general purpose plastics is 39kgs, exceeding the world's average of 26kgs by 50%. China's per-capita GDP had continued rapid growth until reaching he US$3,000 level, but after crossing US$4,000, the rate of consumption growth of plastics vs. economic growth slowed remarkably, so consumption is expected to slow continuously in the future. Meanwhile, the Korea Petrochemical Industry Association (KPIA) revealed that in 2013, the industry will see investment of 6.5 trillion won, up 200 billion won from 2012, and achieve US$46.6 billion in exports.

[KMTI] Navigating Major End-User Industries : IT Industry

Engine for Korea's New Economic Take-off

Korea's Internet economy accounted for 7.3% of the nation's GDP in 2012, providing a growth engine for the robust Korean economy. During the first two months of 2012, the IT industry registered a US$12.46 billion trade surplus. The figure represented five times the nation's total trade surplus during the same period.

As of the end of 2012, Korea ranked first in the UN's e-government appraisal list, dominating global IT markets. Illustratively, Korean companies achieved world-first ranking in mobile and smart phones for the sixth consecutive quarter (2Q '11 ~ 3Q '12).

Korea has a global market share of over 60% in the DRAM sector and also over a 45% share in NAN flash.

This year, Korea is moving to accelerate the development of new IT-related sectors with the cultivation of the SW industry, spread of IT convergence, development of 10 core IT technologies, nurturing of creative high-quality manpower and regionally specialized IT industries.

Moreover, Korea plans to invest further with a focus on 10 future-leading-type IT core technology tasks - next-generation devices, big data & artificial intelligence, hybrid storage, core IT materials, wired & wireless integrated network, terahertz & quantum information communication, unmanned platform, bio sensor, life-care robot and power semiconductors.

The nation also plans to support the cultivation of specialized and differentiated professional manpower and expand support significantly for the IT industry, considering regional characteristics.

Of particular note, the government said it would strengthen IT core capabilities further through new projects, such as support for Giga Korea, SW policy research and establishment of an IT startup forum.

The government plans to support 10.3 billion won this year alone for Giga Korea, an R&D project to build giga-class wireless environment by 2020, while investing a total of 550.1 billion won until 2020. It also plans to expand SW policy research functions and strengthen SE monitoring businesses, support the technology commercialization of SMEs and mid-tier enterprises and enhance regional SW industries.

In addition, it intends to dedicate budget to the activation of youth start-ups and creation of an IT venture growth ecosystem, designation of new collegiate IT research centers, support for the growth of domestic Wibro-related SMEs and mid-tier enterprises and establishment of e-document distribution centers.

To prepare a foothold for Korea's takeoff toward a world-leading IT country, it intends to invest 24.8 billion won in newly promoting R&D in 10 IT core technology fields, including smart equipment, source technologies for IT core materials and big data & artificial-intelligence SW technologies.

[KMTI] Navigating Major End-User Industries : 17 New Growth Engines in 3 Fields

[KMTI] Navigating Major End-User Industries : Highlights of Korean Industrial Policies in 2013

Nexus of Convergence, Creativity & Connectively

In pursuit of blossoming a Creative Economy, the Ministry of Trade, Industry & Energy (MOTIE) has unveiled an industrial policy package focusing on convergence, creativity & connectively.

The package focuses on three major areas - cultivation of leading-type new industries, structural advancement of key industries through convergence, and renovation of labor-intensive traditional industries - each with supporting tasks.

Under the ministry's program to cultivate leading-type new industries there are three tasks.

The first is to foster new convergence industries for people's happiness - safety, health, convenience, and culture - enhancing quality of life and creating high-quality jobs.

The plan calls for cultivation of 'Four New Convergence Industries" through organization of an inter-ministerial cooperation & convergence policy committee by September.

The first of the four convergence industries is safety. In this sector, the projects include disaster & calamity monitoring and lifesaving robots. The second industry, health, will develop smart medical equipment. Convenience, the third convergence industry, will feature smart electrical home appliances and home control service. The final industry in the program, Culture, will concentrate on 3D holography tech grafting digital performance & fashion, etc.

In support of the cultivation of leading-type industries, the ministry will pursue the establishment and promotion of 'Pan-Ministerial Improvement Methods Targeting Hardships & Restrictions Related to Convergence' to identify and improve 'partition-type' restrictions that undermine the creation of new convergence industries. This project will fall under the Industrial Convergence Development Committee to be set up in the first half of this year.

The final task under this program is to nurture creative & convergence-type core talents who can take the lead in convergence at industrial sites, including identification and planning of new convergence businesses and market exploration.

Under the program to achieve structural advancement of key industries through convergence, MOTIE identified two tasks.

The first task is to spread IT convergence through next-generation mainstay products, such as smart cars and offshore plants. This task will seek to develop green ships and build related infrastructures, preoccupy smart car technologies, develop technologies to enhance green car functions, and develop and commercialize core IT-converged offshore plant equipment & parts.

The second task is to expand investment in intelligent-type materials & parts and embedded software, the core of convergence competitiveness, and grow related industries. Here the focus will be on preparing 'First-Mover-Type Materials & Parts Development Strategies' by the end of 2013, promote 'Embedded SW-So-HW' linked-type convergence R&DB, and establish a 'Semiconductor 4.0 Strategy.'

Under the program to renovate labor-intensive traditional industries, the ministry has laid out two tasks.

The initial task is to nurture formerly labor-intensive traditional industries, like footwear, apparel, etc., into urban-type industries and promote convergence of living goods, including hanji (Korean paper), porcelain and jewelry, into famous brands. Under this task, MOTIE will work to identify projects for exchange and cooperation in footwear and textile industries by July, promote R&D of non-sewing footwear manufacturing processes & new materials and build urban-type, high-tech production facilities. The final task under this program is to improve the working environments of root enterprises, upgrade processes through IT convergence, promote automation projects and designate specialized industrial sites for establishment of jointly-utilized infrastructures like sewage & wastewater treatment facilities.