Interview GTAI Korea: Overcoming the "sandwich"

Author / Editor: Robert Liebhart, MD at MM Maschinenmarkt Korea / Lisa Saller, Lisa Saller

Alexander Hirschle is the representative of GTAI (Germany Trade and Invest) in Korea and is giving a short overview about the Korean market situation and the relationship between Germany and Korea.

Alexander Hirschle, Director for Germany Trade and Invest in Korea
Alexander Hirschle, Director for Germany Trade and Invest in Korea
(Photo: GTAI (Germany Trade and Invest ))

How do you see the current market situation in Korea?

Last year Korea not only had some problems on the domestic market, but it was the first time, that the exports were below expectations. Of course this decrease of exports has many reasons, but the main reason is a structural one. Korea is in a sandwich position between a rising China that covers the cheap low end market and the countries that focus on the higher end like Germany, USA and Japan. Especially China is a big threat, as the Chinese companies improved a lot in the quality of their products. Of course there are still industries where Korean companies are world leader, but in order to be competitive Korea has to conquer the transformation process from a fast follower to a first mover. I’m very confident, that they will master this transformation, as they have very good structural basis.

Could you give some examples of the efforts to master the transformation to a first mover?

The Korean government strengthened the support for Korean small-medium enterprises. There was also a big investment in 17 creativity centers all over Korea. The approach of the Creative Economy will hopefully be fruitful and also have an positive effect on the manufacturing industry.

The Korean government also plans to invest almost 1bn US$ to transform 10,000 existing factories in smart factories till 2020. Of course the companies also have to invest money in order to build a smart factory, but overall it is a positive sign of the Korean government, that they want to solve the sandwich situation problem and invest in high quality. When Korean companies invest in capital goods and software, it could also be a good opportunity for German companies to participate and maybe also a good opportunity for some international technological cooperations between Korean and German companies.

How important is the Korean market for German companies?

With almost 52 Mio inhabitants Korea is rather small in comparison to other countries. Nevertheless the Korean importance for Germany is still growing and this year Korea became the 2nd most important country after China and before Japan. Korea is also one of the few countries in Asia, where imports from Germany could win market share during the last years. But not only is the domestic market interesting, but also the conglomerates and their subsidiaries all over the world. Another industry that is also very interesting for German suppliers is EPC. Korean EPC companies and German suppliers seem to be a good match. Overall Korea and Germany have many things in common and can learn a lot from each other.