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Toward a stronger materials industry

Dec 10,2015

In the past two decades, the materials and parts industry, the middle section of the manufacturing industry, has accomplished notable growth. When statistics began to be collected in 1994, the trade balance in materials and parts was $4.9 billion in the red. But it has grown to $107.8 billion in surplus last year. From the beginning of this year to October, the accumulated surplus is $88.2 billion, and it is expected to be the second year in a row to have over $100 billion in trade surplus. The qualitative growth is also noteworthy. Korea is leading the global market in major electronics parts, including semiconductors, flat screen displays and secondary cells. Major global carmakers are also eager to import Korean auto parts.

The portion of imported materials and parts from Japan has fallen from 34.9 percent in 1994 to 16.7 percent this year, the lowest in history. And the portion of materials and parts exports in total export was 50.5 percent, the biggest in history. The industry is a solid mainstay in Korea’s exports despite domestic and international economic challenges. A special act on parts and materials was legislated in 2001 to allow for consistent government policies, and companies have been stubbornly pursuing innovation and improvements.

Of course, there are concerns Korea’s materials and parts industry is in a “nutcracker” crisis between China’s formidable emergence in high value-added products and Japan’s price competitiveness with the low yen trend. However, Korea attained success by predicting the changes of the times accurately and preemptively responding to the transition to the digital age in the late 1990s. This time, Korea can surely overcome the crisis and make another leap by wisely responding to the flow of the industrial convergence and paradigm changes in the manufacturing industry, notably smart factories and the Internet of Things.

The government is also drafting the materials and parts development strategy 2.0 to lead the global market and secure a technological lead beyond the strategy 1.0, which focused on catching up with the developed countries. At the same time, the World Premier Materials project and the 20 SW convergence parts development project will accelerate the early commercialization of new industries, and the companies specializing in materials and parts can utilize the free trade networks to join the global value chain.

Due to the nature of materials and parts networks, collaboration with the companies making the final products is very important. Fortunately, Korea already has a world-class portfolio of set industries such as automobile, smartphones and home appliances. The government will continue to aggressively support strategic cooperation between parts and materials companies and the users of their products.

by Yoon Sang-jick, Minister of trade, industry and energy




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