2005 Prospects for Electronics and Automobiles Still Rosy
- KCCI projects a glimmer outlook for construction and textiles industries

Korea's industrial outlook for the year 2005 is generally bleak as such economic uncertainties as sluggish domestic consumption and the strong Korean won, along with raw material price hikes are weighing on the national economy.
The findings are based on a survey on the 2004 performances and the 2005 outlooks for all industrial sectors, conducted by the Korea Chamber of Commerce and Industry (KCCI). KCCI compiled forecasts that each industrial sector has made on its own.
The outcome of the survey shows that electronics and automobiles are predicted to continue a boom, riding on expected domestic demand and boosting exports in China and Southeast Asia. But the booming momentum for exports of other industrial sectors is forecasted to suffer a setback due to a worsening competitive edge.
Prospectors for such industries as construction and textiles are gloomy because of such unfavorable factors as raw material price hikes, a continued slump of the real estate market, Korea's being unlisted for textile quota benefits, and an influx of cheap Chinese products. In particular, the domestic semiconductor industry, which witnessed a whopping 30 percent growth rate last year, is likely to record a lower export growth rate due to worries about a global excess and a projection about sagging demands. Take a look into the 2005 prospects for each industrial sector.

Automobile industry
On the domestic front, the automobiles industry suffered a setback due to slumped domestic consumption last year, but basked in booming exports. The 2005 prospect for the industry is any let-up in the decrease in domestic demand and a slowdown in the export growth rate. The expected debut of diesel-fueled passenger cars and signs of stable oil prices are predicted to ease off a plunge in domestic sales. Exports are projected to rise at a slower pace than last year. By area, automobile exports to such areas as Europe, Eastern Europe and the Middle East are expected to be brisk, while Korea's portion of exports to the United States is projected to drop by 40.8 percent in the wake of a weak dollar and the establishment of an infrastructure for local auto manufacturing.

Electronics industry
The electronics industry fared well last year by posting a 14.6 percent increase in production, a 10.4 percent rise in domestic sales and a 30.8 percent surge in exports thanks to special excise tax cuts and a rising demand for new digital products.
Industry experts project that the booming trend would continue into this year due to an expected rise in big-ticket digital items and the export market would not be bad. They forecast that the electronics industry would see domestic sales rise by 9.6 percent and exports surge by 16.2 percent.

Semiconductor industry
The 2005 prospects for the semiconductor industry are not rosy. Last year the industry recorded a more than 30 percent growth rate in terms of production and exports. Chances are high that the industry would let up this growth due to such uncertainties as the appreciation of the Korean won and market surplus.
The market survey agency DataQuest predicted that the global semiconductor market would rise to $29.1 billion this year that is equivalent to a 10 percent increase over last year's $27.1 billion. But industry experts forecast that the prices of mainstay products would not fall below the $3 level this year, even if supply surpasses demand.

Steel industry
Domestic sales and exports of the domestic steel industry are projected to stand at levels similar to last year'.
Estimates made available at the Korea Iron & Steel Association show that aggregate demand for the steel industry edged up to 62,835,000 tons last year, a petty 1.5 percent rise over 2003. The steel industry is predicted to witness domestic nominal consumption (domestic sales plus inventory) rising another 1.5 percent to 47,405,000 tons as such items as sheets and coils are expected to rise due to booming automobiles and machinery industries, and such products as round bars and sections are likely to see slower growth rates.

Shipbuilding industry
Since last year the domestic shipbuilding industry has fallen into a phenomenon in which Korean shipbuilders have witnessed profitability falling despite their external growth.
The industry is projected to continue a growth in terms of production and exports thanks to technology renovation and the development of advanced shipbuilding methods and a rise in the demand for high value-added ships. But despite the growth, Korean shipbuilders are expected to witness their profitability declining due to price hikes of such items as sheets for shipbuilding and the appreciation of the Korean won.
Industry experts forecast that it would take some time for domestic shipbuilders to build and deliver ships they have landed at cheaper prices and their profitability is predicted to improve in the fourth quarter of the year.

Refinery industry
The refinery industry saw exports and production increase by 7.3 percent and 4.1 percent, respectively during 2004. On the other hand, domestic demand dropped by 1.9 percent due to a rise in such alternative fuels as city gas and slumped consumption, stemming from crude oil hikes. The trend is forecast to continue into the year 2005 with exports and domestic demand projected to rise by 1.1 percent and 0.7 percent, respectively.

Petrochemical industry
The petrochemical industry is expected to continue growth in 2005, albeit at a slower pace than last year. Production and exports are projected to grow 4.5 percent and 8.8 percent, respectively due to a rising demand from China and a delay of building new plants and expanding existing ones in the Middle East. Domestic demand is projected to decline 0.5 percent due to a sagging demand in related industries.

Machinery industry
The machinery industry is predicted to maintain a stable growth rate this year thanks to growth in related industries. Domestic demand and exports are projected to grow 6.0 percent and 16.9 percent, respectively, riding on facility expansion in automobiles and other relevant industries in addition to continuously rising demand from China and ASEAN countries.

Textiles industry
The domestic textiles industry, which saw production plunge by 11.6 percent last year, is likely to suffer a setback again as Korea is to be unlisted from the textile quota benefit recipients. Exports, which witnessed a little rise last year, are projected to decline by 7.1 percent due to Korea's graduation from textile quota benefit recipients and the U.S. strengthened curbs on textile imports. Domestic demand and production are expected to be a glimmer due to the overall economic slump.

Construction industry
The construction industry saw domestic project orders plummet by 16.8 percent last year as the private housing construction market shrank due to government policies designed to curb real estate price hikes, including stricter restrictions on reconstruction. The year 2005 is forecast to see the public sector remain stable and the private housing construction sector stay in the doldrums. Domestic project orders are projected to decline 1.1 percent in 2005. nw