The South Korean government is planning to build smart shipyards equipped with artificial intelligence (AI) technology to secure the cost competitiveness of the Korean shipbuilding industry. The plan comes after President Moon Jae-in announced during his visit to Geoje on September 14 that the government would promote the shipbuilding industry.
According to the Ministry of Trade, Industry and Energy (MOTIE) on September 30, the government will begin a preliminary feasibility study of the Korean Smart Shipyard (K-Yard) project within this year. Its total budget will amount to 400 billion won (US$360.04 million), including 250 billion won (US$225.02 million) from the central government and 150 billion won (US$135.01 million) from the local government and the private sector.
The government is planning to develop a smart shipyard simulation model first and set up a virtual reality (VR)-based production platform that allows one to track the whole production flow, and then to introduce a system that allows one to monitor the location of materials and blocks using technologies like AI and the Internet of Things. Based on this, it will establish the best shipbuilding model and adapt it to two small and mid-size shipbuilders that need innovation and restructuring.
An official from the MOTIE said, “The framework of the project is to test run two smart shipyards for six years between 2020 and 2025. We aim to build a smart shipbuilding system by connecting workers, who comprise the shipyards, with facilities, process and products. When the test project succeeds, we will apply the model to all shipyards.”
The government is planning to make shipyards, mostly small and mid-s ize ones, smart, despite the global shipbuilding market picking up. This is because it seeks to take back the mid-size bulk and tanker markets from China. Considering the shipbuilding industry as a whole, South Korea accounted for 43 percent, or 7.56 million CGT, of the total global shipbuilding orders of 17.81 million CGT this year, taking the top spot leaving China behind.
However, things are different in small and mid-size shipbuilders that fall behind in terms of research and development (R&D). They are lost out to Chinese companies which have the price competitiveness thanks to the government’s support. In fact, South Korean shipping company Polaris Shipping Co. sent a cape-size bulk carrier order to China this year. South Korean shipbuilding firms offered the price of US$50 million (55.55 billion won), while Chinese counterparts offered US$470 million (52.22 billion won). As a result, domestic small and mid-size shipbuilding companies won orders for only four tanker vessels in the first quarter this year and their share of the global market dropped from 10 percent in 2014 to 4 percent in 2016.
The government expects to raise the productivity by 20 percent and lower the production cost by 10 percent through the K-Yard project. An official from the industry said, “Large shipbuilders have succeeded in outpacing China again despite the country’s low prices. This is because of the South Korean shipbuilding industry’s expertise accumulated and market confidence. When the smart shipyard model is introduced in mainly small and mid-size shipbuilding companies, South Korea will be able to get ahead of China even in the small and mid-size ship market.”