Expansion of Overseas Production
South Korea’s exports of home appliances to other countries this year are expected to be halved compared to those of last year. This is largely due to the fact that domestic home appliances manufacturers are moving their production facilities overseas.
According to the data from Korea Electronics Association (KEA) on October 10, exports of major domestic home appliances, such as refrigerator, washing machine and TVs, to other countries increased to US$3.5 billion (3.89 trillion won) in 2014 from US$3.1 billion (3.45 trillion won) in 2011, but then decreased to US$2.9 billion (3.22 trillion won) last year. The figure is expected to go down further as much as US$1.2 billion (1.33 trillion won) to US$1.7 billion (1.89 trillion won) this year.
The rapid drop in exports of domestically produced home appliances is because home appliances makers are moving their large plants overseas due to the nation’s strict regulations and rigidity of employment as well as high labor costs. In the early 2000, they relocated their factories to China. Now, they are flocking into Vietnam on account of the rise in labor costs in China and various regulations.
As large firms moved their production bases to other countries, they use their domestic production bases for research and development (R&D) or development of some premium products. Therefore, market experts point out that the government should come up with measures to prevent the businesses of their partner companies from dwindling and the hollowing out of the domestic manufacturing industry.