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Korea`s shaky exporting biz lines

Posted December. 18, 2000 15:34,   


The five major business lines supporting the Korean economy--semiconductors, automobiles, steel, shipbuilding, and electronics (electric home appliance and information and communication)--have been surrounded by foes on all sides.

Owing to the slumping world economy, the sales unit prices of semiconductor and steel products, Korea's major export items, are plunging and the steel and shipbuilding industries are suffering from trade frictions with the United States and European Union (EU).

To make things worse, developing countries, including China, have been advancing into the markets of advanced countries at a rapid pace by boasting their strong competitiveness in the prime cost.

The five business lines are the main pillars of the Korean economy in real terms with exports of $70 billion during the first 10 months of this year, accounting for about half of the nation's total exports.

Plunge in price resulting in bad bargain:

The demand reduction and falling prices in the wake of economic setback are the common agony of the five business lines.

In particular, the semiconductor industry is facing a crisis in keeping payability as the plunge in the semiconductor price continued for nearly one year. The price of 64-mega DRAM plummeted from $9-10 per unit early this year to $3 at present. Moreover, prospects for the price to continue to fall until the first half of next year are predominant.

To cope with this, Samsung Electronics Co., the No. 1 semiconductor producer in the world in the market share, has decided to lower the prime cost of the 64-mega DRAM to $2 until June next year.

The same case has been applied to steel. The export price of hot coil dropped from $332 per ton in the second quarter (April-June) to $245 in November.

"We plan to explore the export market actively next year, taking into account the decreasing domestic demand," said Lee Kye-Ahn, president of Hyundai Motor Co. "However, we are worried because of the gloomy prospect that the volume of the U.S. automobile market will drop to 16 million units next year from 17.6 million units this year."

Trade frictions batter exports:

The shipbuilding industry, which has already secured orders for the coming two years, is in a relatively favorable position. However, trade frictions have escalated as the EU has called creditors' financial supports to some ailing shipbuilding companies and orders received at low prices into question.

The steel industry has already been hard hit by the anti-dumping suit filed by the U.S. Related U.S. companies filed suits against Korean-made reinforcing rod and stainless steel in June and August, and 14 items have been placed under the import restrictions or the investigation of U.S. authorities.

Korea being attacked from both sides due to chase by developing countries:

Korea's main competitors, including China and Taiwan, have been launching attacks in waves. Taiwan has set a goal, under which it will overtake Korea within two years through intensive investment in the TFT-LCD (thin film transistor-liquid crystal display) field, where Korea ranked second (31%) in the world market share.

China, the latecomer in the semiconductor business, is actively chasing Korea after acquiring some technologies from Japan. The Chinese government has decided to build 60 memory assembly lines in Beijing and Shanghai over the coming 10 years.

Worries are pervasive in Korea's related industries that Korea's main products, including semiconductors, textile, and petrochemicals, may loose competitiveness within two or five years if this trend continues.