Machinery Emerges as New Growth Driver for Korea’s Exports

According to the Ministry of Trade, Industry and Energy on Aug. 23, Korea’s general machinery exports stood at US$25.7 billion in the first half of this year and the export amount represented a year-on-year increase of 1.6 percent. The growth is noticeable compared to a year-on-year decline of more than 30 percent in exports of semiconductors and displays, which are Korea’s main export items. In the first half of the year, exports of general machinery accounted for 8.7 percent of Korea’s total exports.

Industry insiders attribute the revival of the Korean machinery industry not only to private efforts, but to the Korean government’s mid- to long-term R&D support, tax incentives, and the strengthening of an intergovernmental cooperation system. The business performances of Korean machinery companies also reached record highs. HD Hyundai Infracore posted 1.314 trillion won (US$994.8 million) in sales and 162 billion won in operating profit, respectively, in the second quarter of this year. They were up 10 percent and 87 percent year on year. Doosan Enerbility racked up 4.5394 trillion won in sales and 494.7 billion won in operating profit. They grew 18 percent and 50 percent, respectively. HD Hyundai Infracore enjoyed a big increase in exports to North America and the Middle East. Doosan Enerbility is beginning to make profits from overseas power generation projects.

Korean machinery companies’ growth was also driven by the Korean government. In particular, their exports to the Middle East market have been surging, which is due to the Korean government and the private sector having made thorough preparations for several years. Through the first half of this year, Korea’s machinery exports to the Middle East grew 26 percent year on year to US$1.3 billion.

The GCC Standardization Organization (GSO) in the Middle East has been enforcing technical regulations in domains such as machinery since 2021. The policy was to raise the levels of regulations on electromagnetic compatibility and restrictions on the use of hazardous substances among others. The Korean government has been in regular contact with GSO technical regulatory authorities since 2020 to discuss cooperation. The Korean government has secured the latest regulatory information and held joint workshops to share information. These efforts immediately paid off. HD Hyundai Infracore posted 116 percent sales growth in the Middle East and Africa region in 2022 compared to 2020. EM Korea, a mid-sized company in the machine tool and defense sector, also expanded its exports to the Middle East from Asia and North America.

Last year, the Korean government established a one-trillion-won industrial technology innovation fund to support commercialization after R&D. It held a roundtable of chief technology officers (CTOs) and announced its industrial technology innovation strategy. “The Korean government is also inducing innovation in the machinery industry through supports such as a decision to provide subsidies to expand the supply of electrification-based low-emission construction machinery,” an industry official said. “The Korean government’s institutional support in the mid- to long-term, sales diplomacy, and increased investment by the private sector are fueling an increase in Korea’s machinery exports.”