After years of lagging, Korea may have last laugh as leader
Korea is not familiar with being a pathfinder.
To rapidly grow the economy of the country, which was left in ruin after major hostilities between the Koreas ended, companies have opted to be fast followers to keep with the global pioneers. That was challenging enough at the time.
Government and business pledged many times to ditch the copycat strategy and take the lead, but they have failed in the past to keep their word.
That may not be the case anymore.
Fundamental changes to company structures and managements have started to have an impact on the way the enterprises approach their work.
In various fields, homegrown technology and products are beginning to secure the much-coveted industry "first" or "best" titles, setting the pace rather than chasing footsteps.
The government is amping up its investment, promising full-fledged support in fields that need help the most.
From underdog to industry leader
Hydrogen-powered vehicles or fuel-cell electric vehicles (FCEVs) are considered as the ultimate in clean mobility as it only produces water as byproduct in generating electricity.
Hyundai Motor, Korea's No. 1 carmaker by sales, and world's fifth when Kia Motors sales are included, used to be considered an underdog in the global auto industry. Its vehicles were derided as cheap and inferior versions of Japanese models.
That tide is turning as the company takes the leadership position in hydrogen mobility technology.
Almost 5,000 Nexos, the carmaker's flagship hydrogen-powered model, were sold last year, becoming the most popular model in the segment.
It was a watershed moment, as the company made the quantum leap from being a value-for-money producer to a technological leader in the industry.
Hyundai Motor initiated its research into hydrogen as a new energy source in 1998, six years later than rival Toyota.
But it was Hyundai that introduced the world's first mass-produced FCEV model in 2013. It was called the Tucson ix Fuel Cell and was able to go 415 kilometers (258 miles) on a charge.
A year later, Toyota launched Mirai.
The Korean automobile company finally snagged its first “first,” but the celebratory mood didn’t last long because Mirai, with its cheaper price, managed to do better in the market than its older counterpart.
In 2015, Hyundai Motor's sales objective was 1,000 units worldwide for the Tucson ix Fuel Cell, but the result was dismal, with only 269 units sold, most of which were those purchased for research purposes by institutions.
A total of 507 Mirais were sold in 2015. The next year, 2,046 units were sold. Hyundai sold only 242 Tucson ix Fuel Cell vehicles in 2016.
After four years of disgrace, Hyundai Motor eventually suspended the model in 2018.
“In terms of price, Tucson ix Fuel Cell didn’t have an advantage, and at the time it was quite hard to do aggressive marketing of the model as the infrastructure wasn’t fully prepared in the country,” said Lee Ho-geun, an automotive engineering professor at Daeduk University.
“For a vehicle that’s powered by a new type of energy source both for lithium-ion and hydrogen, infrastructure and a subsidy plan is very important.”
When Nexo SUV was launched in 2018 in time for the PyeongChang Winter Olympics, Hyundai Motor was ready to take the market again. The range was increased — 609 kilometers per charge — and the price was more competitive than before.
In its first year, 966 units were sold. Last year, 4,987 units were moved. As of the first half of this year, Nexo sold an accumulated 10,144 units, becoming the second FCEV model to surpass the 10,000 mark after Mirai, which sold 10,059.
Seeing opportunity in the sector, the government has pledged hefty investment to make the fledgling industry into a key growth engine for the country.
Ministries including those responsible for industry, science and transport jointly promised to jointly provide 800 billion won ($710 million) of funding next year to foster the economy's transition into being hydrogen-fueled. The project will include building more infrastructure for recharging the vehicle and managing the price of its fuel — hydrogen — at an optimal level.
Hyundai Motor Group Chairman Euisun Chung’s race to take the “first mover” position doesn’t stop here.
Chung said in three to four years, a follow-up Nexo model will be introduced, the first time any carmaker in the world has announced plans to have more than one FCEV model.
Chung said sales goals for its hydrogen-powered electric vehicles is 110,000 units per year by 2025 and secure facilities that are able to make 500,000 units of FCEV per year by 2030.
It is still too early to be carried away since the industry is still too young, and there is always a chance the leading player could change.
“Hydrogen mobility industry is like a start-up still,” said professor Lee.
“China pledged to secure 1 million units of hydrogen cars by 2030 when they don’t have a single model manufactured in the country at the moment. The real game is expected to begin after 2025.”
Lee added that the setup of charging infrastructure and an ecosystem where the cost of hydrogen will stay cheap has to accelerate.
Above and beyond memory chips
Semiconductors manufacturing is a key business in Korea, where the product generates 20 percent of exports.
Until now, Korea’s success in the semiconductor business was largely due to strength in the DRAM and NAND Flash memory chips.
Samsung Electronics controls for more than 30 percent of the global NAND Flash market, having long secured a dominant No. 1 spot in the industry.
The IT company recently started to veer its attention to a new battlefield: Non-memory chips, also known as system semiconductors.
This includes processors, image sensors and voltage regulators. For Samsung Electronics, its system semiconductor business includes the foundry business, which is manufacturing non-memory chips for outside clients, and its System LSI (large-scale integration) business, in which Samsung designs, manufactures and sells non-memory chips such as mobile processors and image sensors.
The non-memory chip market is much bigger than that of the memory chip. Global sales of semiconductors last year came to $418.3 billion according to data from Gartner. Of that, 26.7 percent is memory semiconductor while the rest — 73.3 percent — is non-memory chips.
According to market data from Gartner, Intel has 22 percent of the non-memory market — the largest — followed by TSMC and Qualcomm. Samsung Electronics only comes in fifth place with a mere 5 percent.
Acknowledging the weakness as well as possibility to turn it into an opportunity, Samsung Electronics is gearing up to secure the leading position in the field.
Samsung Electronics pledged to invest 133 trillion won in non-memory semiconductors through 2030, of which 73 trillion won will be spent on research and development while the remaining 60 trillion won will go toward building facilities.
“Samsung Electronics could have an advantage in delving into this sector as the company has experience and accumulated data from its memory semiconductor business as well as foundry and fabless,” said an industry source from the semiconductor industry.
“When the market is growing and there is only a few players who can pull off meticulous process, Samsung Electronics would want to develop its manufacturing capacity and expand its market share.”
The IT company is already seeing some major deals in the sector, as it was selected as a supplier for Qualcomm and IBM’s flagship processor chips.
The government’s initiative in the semiconductor sector is ambitious.
It recently announced the objective of securing 20 percent market share in the artificial intelligence (AI) semiconductor market — a separate categorization of chips used to operate any system utilizing AI — fostering 20 up-and-coming companies and 3,000 AI-dedicated workers.
The segment is expected to grow exponentially in the future as demand for AI-equipped systems, be it in smartphones, data servers, cloud services or autonomous vehicles, is set to grow.
Gartner data shows that the AI semiconductor market will reach $117.9 billion by 2030 from $18.5 billion this year.
Samsung is also investing in 5G network equipment betting that the fledgling network, often deemed as too expensive and not as fast as expected, will eventually become a mainstream network service.
Korea may have been the first in introducing the 5G network, but in terms of equipment that enables the super-fast network, Korea lags behind.
Samsung Electronics included 5G as one of its four future drivers in 2018, pledging to invest a hefty 180 trillion won in the business over the three years.
Yet in network equipment it stands in the world's fourth spot with 13.2 percent market share. Huawei has 35.7 percent and Ericsson 24.6, according to data from Dell'Oro.
In order for Samsung to step up in the area, it is vital for it to snag deals with U.S. network service providers, as the country accounts for roughly 20 to 25 percent of the global demand for the equipment.
Early this year, Samsung Electronics signed a $6.6 billion deal with Verizon, one of the world's largest wireless companies.
The Korean tech company says that the fact that it is not just an equipment company or a smartphone company but a comprehensive tech company will help in making effective forays into the market compared to other players such as Nokia and Ericsson.
"For 5G, speed is the key," said a spokesperson for Samsung Electronics.
"The fact that we have not only network equipment, but also semiconductor and hardware devices, will enable an integrated network service and compatibility for faster 5G connections. In this sense, Samsung Electronics has an upper hand."
BY JIN EUN-SOO, PARK EUN-JEE [email@example.com]
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