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Korea’s Reliance on Japan Hits Record Low
Components and Materials
Korea’s Reliance on Japan Hits Record Low
  • By matthew
  • July 30, 2013, 06:51
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About five years ago, local textile company Youngdo Velvet succeeded in developing its own rubbing cloth to break the 20 year-long monopoly of Japanese companies in the industry. A rubbing cloth is a key component for manufacturing an LCD panel, which determines the brightness and resolution of TVs, smart phones, etc. Although Youngdo Velvet had some difficulties finding customers, the Korean government encouraged LG Display to employ the product, helping it to increase its domestic market share to up to 40%.

Korean dependence on Japan has dropped off sharply this year.​LIG ADP, an LCD equipment manufacturer, developed etching devices on its own not to be dependent on imported ones any longer, too. Its domestic annual sales are reaching over 250 billion won these days.

Korean materials and component manufacturers, which used to be busy imitating their Japanese counterparts until the 1990s, are sharpening their technological and price competitiveness at a rapid pace to significantly improve the adverse balance of trade in the industry.

According to the Ministry of Trade, Industry and Energy, the trade deficit with Japan in the sector decreased by approximately US$540 million to US$10.35 billion in the first half of this year. The reliance on imported components and materials dropped to 21.0% as well, which is the lowest ever in its history.

“It is also true that the prices of Japanese components have somewhat dropped due to the depreciation of the yen but the trade imbalance is being resolved anyway,” said the ministry. The deficit, which had amounted to as high as US$24.3 billion in 2010, declined to US$22.2 billion and is expected to further go down this year. It was 2001 that the government began in earnest to deal with the asymmetry. At that time, the government set up basic plans for the promotion of the industry and has invested 300 billion won each year since then to boost the competitiveness of companies in the sector. “A turnaround was prepared in 2010, about 10 years after the implementation of the policy, to improve the trade imbalance,” the ministry continued.

By major item, the dependence upon imported semiconductor photocells dropped from 53.4% to 8.7% between 2002 and 2011. The percentage decreased from 90.7% to 47.4% and 90.7% to 17.7% for steel sheets for surface treatment and LCD fluorescent lamps during the same period, respectively. In the auto industry, an increasing amount of Korean companies’ parts are finding their ways into Japanese carmakers like Toyota, too.

Under the circumstances, the overall trade surplus in the materials and component sector is showing an upward trend. The sum reached US$48.3 billion in the first half of 2013 to record a 12% growth year on year and set a new high. The export growth rate was 5.2%, close to nine times that of the entire industry, while its amount of export accounted for 47% of the total exports to make up for the decline in the shipment of finished goods amid the global economic recession.

At the same time, the sector’s concentration of exports to China has lowered substantially. It fell from 36% to 33.9% between 2010 and the first half of 2013, meaning that the quality of the trade structure has been improved.

The ministry is planning to further spur the development of the industry by means of the third industrial promotion plan scheduled to be announced in the latter half of this year. Korea is still highly dependent upon Japan and Germany when it comes to high added value ceramic and chemical components and the like. The government is going to focus its investment on these fields to catch up with Japan by 2020.