KERI Report
Studies show that Korea’s competitiveness in the communication and information device sector, such as cellphones and laptop PCs, has overtaken by China in the Japanese market, and the country urgently needs to recover its international competitiveness.
Korea Economic Research Institute (KERI) announced on June 29 that there are warning signs ahead for Korea’s information technology equipment industry in a report called “Korean Information Technology Equipment Industry’s International Competitiveness Comparison of Korea, China and Japan and Policy Proposals.”
After an analysis of the international competitiveness index of 193 items in the information, communication, parts, and broadcasting equipment industry from 2009 to 2014, the report said that Korea’s index is lower than that of China in the communication and information equipment sector, and lower than Japan in the parts sector, including system semiconductors, on the trade between Korea, China, and Japan. Also, the trend becomes more permanent.
In particular, Korea’s exports of cellphones and LCD panels, the major export items of the country, are overtaken by China in six years in the export competition to Japan.
China has a comparative advantage in various sectors in the Japanese market, including the cellphones, LCD panels, laptop PCs, secondary storage, multimedia card, wireless communication device parts, photoelectron, and broadcasting equipment sectors.
The trend is more noticeable in the cellphone and LCD panel sectors. According to KERI’s comparative advantage index, Korea’s figure in the cellphone sector decreased from 5.36 in 2009 to 1.65 in 2014, while China’s figure increased from 2.04 in 2009 to 2.09 in 2014.
Also, the Korean index in the LCD panel sector significantly dropped from 18.47 in 2009 to 2.57 in 2014. However, the Chinese index, which had a large gap with Korea in 2009, grew from 3.74 in 2009 to 13.4 in 2014, increasing by 3.5 times.
The report said that Korea needs to upgrade its global production system and network in order for domestic companies to be specialized in high value added production process in the reorganization of production sharing structure in Northeast Asia.
In order to do so, the country needs to upgrade its global value chain by raising China’s status from the existing specialization structure using it as its global production base to an intermediate cooperative partner, suggested the report.
Also, it stressed, “As the export structure of the domestic information technology device sector has changed from complete products to parts, Korea should promote exports of high value added key components by strengthening core technology development.”