Key industries will wither in next decade: KIET report

By the year 2025, other than semiconductors and defense-related industries, leading Korean export goods will see a sharp drop, according to a study released Sunday by the Korea Institute for Industrial Economics and Trade.

The report from KIET noted that in 10 years, most of Korea’s leading industries will see a significant drop in growth and will likely wither if the current momentum continues.

The global market share of semiconductors is expected to expand from 16.5 percent as of 2015 to 18.2 percent 10 years later in 2025.

The machinery market share is expected to inch up from 2.8 percent to 2.9 percent while defense products are expected to slightly improve from 2.4 percent to 2.7 percent.

In the second quarter, Samsung Electronics and SK Hynix enjoyed all-time record operating profits thanks to the growing global demand for computer chips, as so-called fourth industrial revolution technologies, ranging from robotics to artificial-intelligence related technologies, have been increasing at an alarming rate.

Last month, Gartner projected that the global semiconductor business will likely expand 16.8 percent compared to last year’s, surpassing the $400 billion mark for the first time.

Korean companies dominate the global DRAM market, with Samsung and SK Hynix’s global market shares accounting for more than 73 percent. Also, Samsung leads in global market share in NAND memories with a 35.4 percent market share.

SK Hynix, which only has a 10.1 percent market share, is hoping to take a larger slice of the global market by acquiring Japan’s Toshiba, which has the second-largest global market share after Samsung, with 19.6 percent.

But unlike semiconductors, other major industries that have led Korea’s exports are expected to see a significant drop in global market share by 2025.

Korean automobiles’ market share is expected to nosedive from 5.2 percent to 3.8 percent while Korean ships’ global market share may shrink from 36.2 percent to 20 percent.

Petrochemical is expected to see a drop from 5.4 percent to 4.7 percent and textiles may fall from 2 percent to 1.2 percent.

Even Korean electronic consumer goods are expected to see a drop in its global market share from 3.1 percent to 2.5 percent, and telecommunication products such as smartphones may fall from 24.2 percent to 20.5 percent.

The research study cited unfavorable production conditions and late response in switching to new industries as the primary reasons for this trend. Additionally, the limitation of the domestic market, and more importantly, high labor costs were also considered factors that are hurting Korea’s competitiveness in export goods.

Although Hyundai Motor saw a slight increase in its revenue after gaining 1.4 percent compared to the first six months of last year to 47.7 trillion won in the first half of this year, the company’s operating profit shrunk 16.4 percent to 2.6 trillion won and net profit saw a sharper drop of 34.3 percent to 2.3 trillion won.

One of the key contributors was the sharp sales decline in China. In the first half, the Korean automaker’s sales in China fell 42.4 percent, compared to 1.5 percent overall sales increases in the neighboring market.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]