Market situation Korea: Evolution of manufacturing industry
The vice president of the Korea Machine tool manufacturers association is giving a short overview about the Korean market situation and explains the next steps for the Korean manufacturing industry.
How was 2015 for the Korean machine tool makers and what is the outlook for 2016?
In 2014 the Korean machine tool industry was the world's fourth biggest producer with a volume of $ 56 bn, with exports of $ 22 bn, import of $ 15 bn and the domestic consumption was $ 49 bn. However Korean companies are recently struggling a lot because of internal and external reasons like the low oil price, declining commodity prices, the decline in the Won-Dollar exchange rates and the global recession. The Korean government is trying to actively support the domestic tool maker industry by investing 416.1 billion won (approx. $ 350 m) till 2020. The money will be invested in smart sensors, cyber physical systems, additive manufacturing, energy efficiency, Internet of things, cloud computing, big data and hologram technology, that are all together the 8 main important technologies for smart manufacturing.
In 2016 the domestic machine tool production is projected to increase by 4,0% compared to the previous year according to a survey conducted by the Korean Machine Tool Industry Association.
Especially small and medium enterprises are expecting an increase of the production, because compared to the big conglomerates they have a stronger focus on the domestic demand.
The sandwich position is a problem
What are the strengths and of Korean machine tool makers, and where do they struggle?
Our latest SWOT analysis showed, that for the domestic market the importance of domestic products is increasing, because of the easy and reliable supply. Additionally the export competitiveness of Korean machine tool manufacturers in the low and medium price segment is increasing. Especially the emerging markets are a big chance for the Korean manufacturers, as there is an increasing demand in rather cheap and good quality Korean machines tools. However in oversea markets 'made in Korea' still have difficulties to compete with the quality of German and Japanese machines and on the other side Korea has to compete with the competitive prices of Taiwan and China. This so called "sandwich position" will be one of the biggest problems to solve in future.
What are the countries Korean machine tool makers are the most interested in and what impact has the slowed growth of China?
Especially Vietnam and Indonesia were goal of the automotive and electronics industry namely Samsung Electronics and Hyundai Motors. Thanks to such big investments, Korean machine tool makers and other related companies were able to increase their exports.
China and Korea have intense trade relations which make Koreas exports sensitive to Chinas economy and policy. However till the 1990s the country with the highest export dependence was the USA. In 2000 the Korean government started their export market diversification policy to reduce dependences on exports of a particular country. As a result the dependencies on China and USA were lowered and new markets were developed. Exports to China are experiencing a variety of opportunities and challenges, but the enforcement of the FTA is expected to act as a variable in trade. After the enforcement the Korean machine tool makers will actively target the Chinese market because they have the opportunity to secure favorable trading conditions compared to their competitors.
Korea is prepared for the future
Industry 4.0 is the buzz word for the last few years in Germany. Do Korean companies also prepare for the next industry revolution?
While there is the Industry 4.0 in Germany, here in Korea we have the advanced manufacturing policy called "Manufacturing Innovation 3.0".
The focus of "Manufacturing Innovation 1.0" was the substitution of imports for the light industry. "Manufacturing Innovation 2.0" was focusing on the assembly equipment and "Manufacturing Innovation 3.0" will be a shift in all known paradigm of the current manufacturing technologies. The three main strategies of the "Manufacturing Innovation 3.0" is the enhanced focus on core competencies industries, manufacturing based innovations and the creation of 10.000 smart factories till 2020 through a convergence of IT, SW and Internet of things. This will be the next evolutionary step for the Korean manufacturing industry. Through one of the world’s best IT infrastructure with a robust manufacturing base "Manufacturing Innovation 3.0" will strengthen the competencies of the manufacturing industry. We expect to build a manufacturing process environment, where the production equipment will be able to exchange information through the internet of things and the whole production process will be optimized.