Time to do somethingElpida Memory was established in 1999 through a merger of the semiconductor operations of Hitachi and NEC. In 2003, it added the dynamic random access memory (DRAM) business of Mitsubishi. Japanese electronics giants teamed up to compete with top DRAM maker Samsung Electronics. Since then, such business linkups have become popular across the industry. In 2012, Sony, Hitachi and Toshiba spun off their display operations to create Japan Display. Mitsubishi Heavy Industries then led an alliance with three domestic shipyards.
Inter-company teamwork recently caught on with automakers in Japan. The three majors — Toyota, Nissan and Honda — joined forces with two other companies to announce in September that they will form an alliance in January to develop a so-called connected car. Chief executives of Toyota and Suzuki last week declared a partnership in environmental, safety and IT technology.
How much such teamwork will help Japan Inc. remains uncertain. Despite early hopes, Elpida ended up in the hands of U.S. rival Micron Technology in 2012. Joint-ventures in displays, shipbuilding and steelmaking have not been that profitable due to sagging demand in those fields.
But at least companies in the same industry tried to tackle their common challenges by joining forces.
Korean bureaucrats struggling to orchestrate restructuring in overcapacity and money-losing industries may ask why Korean companies cannot voluntarily team up as their Japanese counterparts have.
But they have missed an important factor. The Japanese government was behind the corporate and industrial alliances under the banner of the Hinomaru, the red disc representing the sun in the Japanese flag. The government designed and arranged the collaborations and promoted through funding and legal backup. In 2009, it created a unique public-private partnership called Innovation Network Cooperation of Japan together with 26 companies with initial capital of 300 billion yen ($2.89 billion). Its goal was to bolster competitiveness and new technologies across the board. The Ministry of Economy, Trade and Industry played a key role in consolidating the display sector and the restructuring of large companies like Toshiba.
Under the incumbent government, a law called the Industrial Competiveness Enhancement Act took effect in 2014 to further legitimize government subsidies and support for corporate alliances. The act brought together the thermal power generation operations of Mitsubishi Heavy Industries and Hitachi. The merged entity — Mitsubishi Hitachi Power Systems — became the world’s third largest in the sector following Siemens and GE.
Some say they discern expansionist ambitions from Japan, with the media questioning why the Hinomaru is associated with such business consolidations. We can only envy the wave of smooth mergers and consolidations in Japan. Government-sponsored mega-mergers took place in Korea following the 1997-98 foreign exchange crisis, but they were quite different from the dramatic corporate marriages in Japan.
Few can imagine such amicable unions in Korea. Despite years of warnings about the shipbuilding sector, the government and creditors have not even managed to run a state-owned entity Daewoo Shipbuilding & Marine Engineering well. Authorities lack consistency in their restructuring policies. They poured in billions of dollars to keep DSME afloat to no avail. Then they could not raise 300 billion won ($265 million) to save the world’s seventh largest container carrier operator, Hanjin Shipping.
Once-powerful Samsung Electronics and Hyundai Motor are grappling with their biggest challenges, from a global recall for Samsung and a lengthy strike at Hyundai Motor. The stumbles of the two largest corporate names in Korea took a direct toll on the economy. Authorities are at a loss and experts have run out of suggestions.
The only option left is for the president to sit down with business titans. She could ask Jay Y. Lee, vice chairman of Samsung Electronics, and Chung Mong-koo, chairman of Hyundai Motor Group, how the government could assist the two companies. She could go on and meet with mid-tier company owners and start-up CEOs.
I am not talking about the ceremonial meetings for photo ops. She should meet one-on-one, and if that’s difficult, keep the number to three for a lively debate.
If she devotes the rest of her term — 16 months — to promoting companies, we may have an enriched economy and business sector with brighter prospects under the next administration.
JoongAng Ilbo, Oct. 17, Page B8
*The author is the industry news editor of the JoongAng Ilbo.