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Manufacturers Facing More Procurement Difficulties amid Japan’s Export Curbs
Material and Component Procurement Risks Grow
Manufacturers Facing More Procurement Difficulties amid Japan’s Export Curbs
  • By Jung Min-hee
  • October 1, 2019, 11:23
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South Korean manufacturers face increased risks in procuring materials and components due to Japan’s export curbs and an increase in the prices of materials and components made in China.

The Bank of Korea said in its report on Sept. 30 that 45.7 percent of the 199 South Korean manufacturers which participated in its recent survey answered that their material and component procurement risks increased from a year earlier due to Japan’s export curbs and an increase in the prices of materials and components made in China. They also said that the shortage of R&D personnel and a sluggish domestic demand are hindering import replacement in the materials and components industry.

43.2 percent of the respondents mentioned increased overseas procurement risks whereas 16.1 percent mentioned increased domestic procurement risks. 33.7 percent said that their conditions have been exacerbated with regard to material and component procurement from Japan. 17.6 percent answered that material and component procurement from China has become more difficult due to a rapid rise in price.

An increase in risk was mentioned by 41.4 percent of large corporations, 46.7 percent of enterprises of middle standing, and 43.2 percent of small and medium-sized enterprises. By industry, the same answer was given by 50 percent of those in the machinery and equipment industry, 45.5 percent of those in steel, and 41.7 percent of those in petrochemical and the ratio is 38.6 percent in automobile and 36.1 percent in IT.

32.5 percent of the respondents said that they can replace materials and components within three months, followed by three to six months (31 percent) and six to 12 months (16.2 percent). 5.5 percent and 14.8 percent answered at least one year is required and the materials and components they use cannot be replaced, respectively. The two groups mentioned quality issues (35.8 percent), supply schedules (16.6 percent) and procurement costs (15.9 percent) as hindrances.