Water Industry
The use of water is increasing rapidly with the increase in the global population, but the supply of water remains scarce. According to the OECD, more than 340 million people in 28 countries are having difficulties in getting water, and the number is expected to increase to three billion in 52 countries by 2025.
This is why the water industry, including the production and supply of residential and industrial water and the transport and treatment of wastewater, is drawing more and more attention in the current era. The water treatment sector, which covers the supply of freshwater and ultra-pure water, is currently accounting for the largest portion of the industry.
Global Water Intelligence (GWI), a London-based research institute, has recently forecast that the global water market will grow from US$482.8 billion to US$865 billion from 2010 to 2025. The OECD has predicted that the total investment in the water industry infrastructure will reach US$1.037 trillion by 2025, too. According to the Korean government, the global water industry is estimated to reach 1.600 quadrillion won (US$1.497 trillion) by 2015.
The government is planning to grow the domestic water industry to at least 20 trillion won (US$18.7 billion) in size by 2016. At the same time, it is going to put more than two water treatment companies on the global top 10 list until that year.
Korea, in fact, is already a leading player in water supply and drainage system construction and seawater desalination. Hyundai Engineering & Construction has completed a number of overseas projects with great success, and Doosan E&C’s share in the global seawater desalination equipment market is as high as 40 percent.
The growth of the domestic water treatment market has been led by public-sector organizations, including the Korea Water Resources Corporation. However, an increasing number of private-sector companies are participating in this market these days. Samsung, KOLON, Doosan, Hyosung and many more are expanding their business in the fields of water treatment, plant construction, and materials development.
Doosan E&C, as stated above, is the world’s largest seawater desalination equipment supplier, and the KOLON Group, regarding water as one of its future growth drivers, is in pursuit of the vertical integration of its water business units. Hyosung and SK Energy are working on related technologies, too.
In particular, chemical companies that have focused on the production of chemical fibers are moving aggressively to take the initiative in the fast-emerging market. They are concentrating on the development of membranes, which are a key material for water treatment. Woongjin Chemical came up with the first reverse-osmosis membrane in Korea back in 1994, and Cheil Industries, KOLON, and SK Energy have followed it since then. Woongjin Chemical was recently acquired by Toray of Japan. The water treatment membrane market is estimated at two trillion won (US$1.87 billion) as of the end of 2013, with an annual growth rate of 13 percent or so.
In the meantime, some experts are explaining that the technological gap with foreign companies and domestic regulations have to be dealt with first, if Korean companies are to enjoy the rapid growth of the industry. They are mentioning the privatization of facility operation and the like, with the domestic water industry having been spearheaded by the government.
Korean firms in the industry are increasingly penetrating overseas markets as well. What is as important as government support is the enhancement of technological strength in this vein. The industry consensus is that the firms’ technological level is about 70 percent of that of market leaders such as GE and Siemens. A very prudent and careful approach is necessary to take their market share with advanced materials and equipment. According to the Institute for International Trade (IIT) of the Korea International Trade Association (KITA), the overseas market penetration failure rate amounts to 29 percent on average in the water industry, which is much higher than in electrical (8 percent), telecoms (4 percent), or transport (8 percent).
Nevertheless, Korean companies have a high chance of success, since they have distinguished themselves in the construction, engineering, and plant operation sectors. “The water-related environment industries are growing rapidly, even in emerging countries,” said Yoo Ho-hyeon, senior research analyst at the LG Economic Research Institute, adding, “The Korean government would be well advised to focus its plant construction and equipment supply resources on the sector.”