Korea Strives to Become
Global Parts Sourcing Supplier

Gov't to raise 300 mid-size core companies by 2010

The government plans to channel 750 billion won by 2010 into securing core technologies as part of its efforts to foster the domestic parts and raw materials industry.
Lee Tae-yong, director-general of Capital Goods and Industrial Policy at the Ministry of Commerce, Industry and Energy, said, "The government will raise 300 mid-size core companies by 2010 with the goal of developing Korea into a global parts and raw materials center."Lee made the remark during a debate on the development of the parts industries, held at the Lotte Hotel on November 29. The debate was jointly organized by the FKI Special Committee on Parts and Raw Materials and the National Assembly Sci & Tech Forum.
Director-General Lee said the government will set aside 500 billion won for the next five years for developing futuristic core technologies and earmark 50 billion won each year for supporting 50 products which will be affected by an influx of imports following the projected FTA between Korea and Japan or whose exports to China can be expanded.
The government plans to ease the restrictions on the aggregate cross investments into parts and raw materials firms while encouraging establishment of joint ventures specializing in parts and raw materials R&D and prototype development, he said.
The Federation of Korean Industries suggested that parts and raw materials firms should be put on the list of companies whose employees are exempted from military duties as a means to secure excellent manpower.
Citing success stories on co-existence collaboration between large corporations and SMEs like that of Samsung Electronics, Hyundai Motor, Toyota and Nokia, Kim Dong-chul, president of Korea Materials & Components Industry Agency, said the government should first provide support to consortiums comprising of large corporations and SMES under conditions that large corporations purchase products of SMEs under the concept of coexistence collaboration.
Cho Kun-ho, FKI vice chairman, said some parts sectors have reached a world-class level thanks to collaboration among industry, academy and research institute circles, including the domestic IT and automotive fields, which have grown into global sourcing suppliers. However, most parts sectors are still vulnerable. Trade deficit related to parts imported from Japan was posted at $8.6 billion last year, accounting for 35.2 percent of Korea's aggregate trade deficit with Japan, he said.
Rep. Hong Chang-sun, president of the National Assembly Sci&Tech Forum, said Korea? parts and raw materials industry is facing structural problems: such sectors as petrochemical, electronics and primary metal parts, mostly exported to China are labor-intensive, whereas high-tech fields'portion of imported parts and materials is extremely high. In case of such high-tech displays as PDP, LCD and organic LED, 60 percent to 90 percent of their product prices are given to Japanese parts and raw materials makers. It is a reality that even digital TVs and CDMA phones, developed with Korea's own technology, have to pay 30 to 40 percent of product prices for importing foreign-made parts.
Rep. Kim Yong-kap, chairman of the National Assembly Industry and Resources Committee, said Korea depends on foreign countries for original technologies, and the wealth flight in the form of royalties is serious. Massive, across-the-board investments into the parts and raw materials industry and policy support need to be made in order to usher in a $30,000 national income era and foster Korea into a strong industrial powerhouse.
Hyun Myung-kwan, chairman of the FKI Special Committee on Parts and Raw Materials, said the committee was established last year because the development of the parts and raw materials industry is essential in solving such problems as bipolarizing of the economy. Since its inception, the committee has made efforts to strengthen the industry's competitive edge after designating 10 core parts and raw materials to be developed.
Chairman Hyun said the domestic parts and raw materials industry is facing woes like the lack of core technologies, minor parts firms and weak cooperative ties between suppliers and consumers. Such collaboration between parts suppliers and consuming companies has gained momentum, but failed to reach a systematic level of Japan.
In an effort to enhance competitiveness of the local parts industry, he said, R&D investments need to be concentrated on the development of core parts in consideration of the fact that Korea's R&D outlays account for one-tenth of Japan's.

Kim Dong-chul, president of Korea Materials & Components Industry Agency, speaks during a debate on the development of the parts industries.

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