Korea Aims at Global Top Four Materials & Parts Powers by 2020

MKE's director general speaks of the prospects for the nation's manufacturing industries

"Once the Materials and Parts Future Vision 2020 is implemented without a hitch, Korea is forecast to rise to the global top four materials and parts powers by 2020," said Nam Ki-man, director general for manufacturing industries at the Ministry of Knowledge Economy (MKE).
The vision calls for raising materials and parts exports to $650 billion by 2020, a 2.8-fold surge over 2010, and the trade surplus to $250 billion in 2020, a 3.2-fold jump over 2010, he added.
The following are excerpts of a written interview between NewsWorld and MKE Dir. Gen. Nam in which he spoke of the current status and prospects of the nation's key industries as well as steps to ramp up their competitive edge.
Question: Will you tell our readers about the current status and prospects of the Korean parts and materials industries?
Answer: The Korean materials and parts industry posted $229 billion in exports in 2010, a 2.7-fold surge over 2001, to register a record high of $77.9 billion in trade surplus, a 28.9-fold jump over the same period. The sector ranked sixth with a 4.6 percent share in the global market in 2009, up from 10th place with a 3.4 percent share in 2001.
Once the Materials and Parts Future Vision 2020, announced by the MKE on Nov. 1 is implemented without a hitch, Korea is forecast to rise to the global top four materials and parts powers by 2020. The vision calls for four strategies: the development of advanced materials; making parts brand items through convergence and combination; the building of a sound materials and parts ecosystem; and taking the lead in global supply networks.
The vision calls for raising materials and parts exports to $650 billion won by 2020, a 2.8-fold surge over 2010, and the trade surplus to $250 billion in 2020, a 3.2-fold jump over 2010.
Korea aims at raising the portion of parts and materials in the export field to 55.0 percent in 2020, up from 49.1 percent in 2010.
The number of "core" materials and parts makers will rise from 241 in 2010 to 800 in 2020, while the number of specialized materials and parts makers will increase from 353 to 6,000.
Q: Why has the Korean materials and parts industry made such rapid strides?
A: Behind the explosive growth of the industry, which has seen its trade surplus register a 28-fold surge during the decade from 2001, are the Korean parts and materials makers' strenuous efforts for growth along with policy support from the government, which enacted the Act on Special Measures for the Parts and Materials Industry.
Korea has supported the Korean parts and materials industry to upgrade its industrial structure .
This is owed to Korean parts and materials makers' painstaking efforts for technology innovation, but the government has also played an important role by building a systematic support regime and offering intensive technology development support.
The government enacted the Act on Special Measures for the Parts and Materials Industry in February 2001 for the purpose of promoting the industry.
The government has supported R&D intensively in order to raise the technological competitiveness of the industry through the development of core materials and technologies and the improvement of reliability. According to reports by the Korea Institute for Industrial Economics & Trade (KIET) and the Korea Institute for Advancement of Technology (KIAT), the industry has seen its competitiveness rising from 74.2 percent of advanced countries' technological levels in 2001 to 93.6 percent in 2009. It has established the Reliability Center and the Materials Bank to facilitate technology development and improve reliability while providing support for M&As, marketing activities and commercialization projects to let parts and materials makers grow bigger and go global.
Many materials and parts segments' competitive edge has improved remarkably, but some core materials imports still remain a task to be tackled. The Materials and Parts Future Vision 2020 calls for a focus on securing a competitive edge in materials and for making preparations for sustainable growth in the next decade.
Q: Will you elaborate on the current status of the Korean machinery industry and strategies to promote exports?
A: The Korean machinery industry ranked ninth in the world with an annual high growth of more than 10 percent in 2010 when it posted 90 trillion won in production and 361 trillion won in exports. Korea saw the machinery field's portion of production among manufacturing industries surge from 6.2 percent in 2002 to 6.5 percent in 2009, exports surging from 6.1 percent to 8.1 percent, and the trade balance from a $340 million deficit to a $210 million surplus. Germany took a 17 percent share in the global market in 2009, followed by the United States with 12 percent, China with 9 percent, Japan with 8.5 percent, and ninth-ranked Korea with 3 percent.
Korea has seen signs that an increase rate of its share in the global machinery market is gradually declining, because of the advanced countries' technological advances and China's aggressive support policies. China rose to the global number three position due to the combination of China's manpower and Taiwan's technology.
Korean machinery makers are developing strategic items to ramp up their global competitive edge while strengthening marketing and after-sale service competitiveness.
The government plans to provide support to cultivate strategic items into top brands in the global markets within five years.
In the first half of 2012, the government will draw up global marketing strategies tailored to meet the industrial conditions of target markets and consider demand sectors and products, as well as strategies to strengthen a service competitiveness.
Q: Will you explain the current status and plans to develop futuristic vehicles?
A: The development of electric vehicles (EVs), plug-in hybrid electric vehicles (HEVs), fuel cell electric vehicles (FCEVs) and clean diesel vehicles (CDVs) are in the works in accordance with the government's second plan on the development and distribution of eco-friendly cars that runs from 2011 to 2015.
The government focuses on providing support so that Korean automakers can develop EVs with a competitive edge compared with counterparts from advanced countries. It is assisting with raising the efficiency of parts in HEVs and the localization of FCEVs and CDVs, which each fall behind counterparts of advanced countries. The government has provided support to improve the performance of core components in the mid-size EV segment during the period between 2011 and 2013 so that motorists won't experience inconveniences, making it seem as if they were driving gasoline-powered cars. It will also provide support to develop of low-priced EVs during the period between 2012 and 2013, which will be priced at the equivalent to gasoline cars and have similar performances to Hyundai's high-speed electric car BlueOn.
The government decided to provide support intensively for the localization of stacks which is a key component of fuel cell electric vehicles, and common rail parts of clean diesel cars. Also the government will assist in the development of the technology to improve plug-in HEV transmissions.
Q: Will you specify the current status of the domestic shipbuilding industry and strategies to ramp up its competitiveness?
A: The Korean shipbuilding industry is retaining the global No. 1 position. Korea ranked first with a 49.2 percent share in the global shipbuilding market in terms of winning shipbuilding orders during the first 10 months of the year, followed by China with a 32.4 percent share and Japan with 5.2 percent.
The demand for green ships is on the rise as the International Maritime Organization (IMO) will make it mandatory to reduce greenhouse gas emissions starting in 2013. But skepticism still remains over the uncertainties in the global shipbuilding market such as a ship glut and a delay in the economic recovery of advanced economies and a plunge in new ship orders that began in the second half of 2011.
Korea is striving to expand investments into the development of green ship technologies to overtake technology front-runners and keep latecomers at bay from the technological perspective.
In February 2011 the Small & Medium Business Administration and Hyundai Heavy Industries raised 30 billion won in a joint technology development fund as part of efforts to promote shared growth between large- and small-scale firms. Shipbuilders and equipment makers joined forces to develop core apparatuses and equipment on the condition of purchasing. Efforts will be made to nurture R&D manpower in shipbuilding technology foundation areas such as IT, chemistry and chemical engineering for producing green ship equipment to tackle technological convergence and interdisciplinary trends.
Q: What steps are in place to strengthen the competitiveness of the Korean steel industry?
A: The Korean steelmaking industry is grappling with worsening business uncertainties such as limited market demand and product portfolios as well as oligopolistic raw materials markets and climate change restrictions.
Steel production was 54 million tons during the first nine months of 2011, 21 million tons of which were exported abroad. Overall, steel production is forecast to rise approximately 10 percent during the whole of this year over last year when 65.94 million tons of crude steel production ― 52.39 million tons for domestic use and 24.88 million tons for exporting ― were recorded. The year 2011 saw 11.32 million tons of steel imports.
The industry, which is highly dependent on domestic demand and on a production structure centering around wider use products, has hit a wall in the exploration of demand markets. Domestic steel demand was 52.39 million tons in 2010, accounting for 68 percent of total production, compared to 24.88 tons of exports. Specialty steel exports were 4.95 million tons, accounting for 20 percent of the nation's total exports.
Steelmakers find it difficult to secure raw materials in whose markets are oligopolistic by companies and region, and they are scrambling for the development of eco-friendly technology in the wake of climate change restrictions.
The government plans to provide support to R&D activities for the development of new materials and extreme environment materials and imports that are on a sharp rise, while pushing green steel projects to develop CO2-free steelmaking technology using hydrogen instead of bituminous coal. It provides an overseas resources exploration fund to ensure a stable supply of raw materials such as crude ore and bituminous coal with the goal of raising the nation's own development rate of the top six resource necessities from 9.0 percent in 2009 to 42 percent in 2019. It needs to support steelwork construction and construction knowhow in order to promote diverse exports on top of the exporting of steel products.
Q: Will you give us some specifics about the current status of the petrochemical industry and steps to ramp up its competitive edge?
A: The domestic petrochemical industry, which began with the construction of the Ulsan Petrochemical Industrial Complex in 1972, has made strides to become a global top-five power in 40 years through technology innovation and facility expansion. The industry, which posted 63 trillion won in production in 2009, placed fourth with a 5.6 percent share among manufacturing industries, following the automobile, steelmaking and semiconductor industries. It also chalked up $35.7 billion worth of exports with a 7.7 percent share to become the fourth biggest exporter following semiconductors, shipbuilding and general machinery industries. A supply glut, continuous crude oil price hikes and climate change restrictions pose stumbling blocks to growth, however.
The industry strives to push common pipeline projects sharing energy, resources and equipment among companies in the same industrial complexes.
The government plans projects to explore and develop the global top-100 chemical materials while pushing to expand R&D infrastructure such as the tentatively named Chemical Materials Support Center and the Materials Bank.
The government seeks to help Korean petrochemical companies get bigger and go abroad through strategic alliances with foreign concerns and M&As. Samsung, LG and Honam petrochemical companies have been operating an olefins conversion unit joint venture to churn out propylene. Honam Petrochemical Corp. acquired the Malaysian petrochemical company, Titan, for $1.2 billion in July 2010.
Q: Will you tell us about the current status of the domestic textile & fashion industry and steps to ramp up its competitiveness?
A: The nation saw textile exports decline since 2000 when it posted a high of $18.8 billion in exports, but changed its course for growth since 2009. Textile exports are predicted to amount to $16 billion for the whole of 2011, up 15.1 percent over 2010.
The Korean textile industry has reinvented itself with 10 years of restructuring and a strengthening of R&D activities. Its domestic production base and manpower have been weakened due to a rise in its overseas investments.
The industry, which depends on mainstay exports such as chemical and knitwear fabrics, is required to make a foray into the less competitive value-added textile markets and strengthen its brand power.
It needs to strengthen its production foundation for new textiles such as environmentally-friendly green textiles, health-promoting textiles, highly-sensitive textiles, household wallpapers, sheets and blinds, as well as ultra-light composites, functional textiles and tire cords by forming consortiums according to each segment and conducting demand-specific R&D activities.
Korea strives to create a virtuous cycle of manpower development through collaboration among industry, academia and research circles and operate a program to nurture global brands, while pushing for Korean-invested firms' wider use of Korean-made materials and exploring overseas markets by forming cooperative networks with overseas Korean businessmen and related domestic organizations. nw

Nam Ki-man, director general for manufacturing industries at the Ministry of Knowledge Economy
Photo on courtesy of the MKE

Those who were presented with awards in recognition of their contribution to the development of the engineering industry pose for a photo session at the 2011 Engineering Day anniversary event that took place at 63 City in Yeouido on Nov. 18.
Photo on courtesy of the MKE

A view of the 2011 Machinery Day anniversary event that took place at 63 City on Nov. 11.
Photo on courtesy of the MKE

A view of the 3rd Chemical Industry Day anniversary event.