New Growth Engine
An increasing number of South Korean companies are turning themselves into materials manufacturers as the materials industry is emerging as a new growth driver.
One of the examples is LG Chem. Most of this company’s operating profit is derived from its petrochemical business but the company has no business unit that goes by the name of petrochemical. Instead, LG Chem has clarified that it is a company specialized in materials manufacturing by dividing its business units into those covering basic industrial materials, electronic and information materials, batteries, life sciences, etc.
POSCO, in the meantime, is trying to expand its business in the same market by shifting the focus of its business from steelmaking to the development of advanced materials based on lithium, magnesium and so on.
Likewise, Hyosung is commercializing carbon fibers, polyketones and aramid fibers. The company has concentrated on these advanced materials for more than 10 years. KOLON is working on transparent polyimide films and polyoxymethylene, in which the company is planning to invest more than 600 billion won in 2017 alone. The former is a key material for foldable OLED panels and the latter is for use in green cars.
According to experts, the above-mentioned trend is because of three reasons. The first one is intensifying competition with Chinese companies. When it comes to universal products based on already known production techniques, South Korean companies are unlikely to be on the winning side, even at the maximum level of productivity, in their price competition with Chinese suppliers.
The second reason is industrial structures that are more and more advancing these days in step with the fourth industrial revolution, in which research on the Internet of Things, robots and the like is requiring a faster development of novel materials with regard to sensors, electric vehicle batteries and so on.
The other one is the nature of the industry in which companies can enjoy lasting profits once they dominate certain markets. Experts point out that the materials industry is similar in nature to the semiconductor industry, in which Qualcomm has been dominant for a very long period of time based on its competitive edge in terms of technological strength.