The Electronics Industry of South Korea

In 1989 South Korea was a major producer of electronics, producing colour televisions, videocassette recorders, microwave ovens, radios, watches, personal computers, and videotapes. In 1988 the electronics industry produced US$23 billion worth of goods (up 35 percent from 1987), to become the world’s sixth largest manufacturer. The total value of parts and components (including semiconductors) produced in 1988 totalled US$9.7 billion, overtaking consumer electronics production (US$9.2 billion) for the first time. Manufacture of industrial electronics also grew significantly in 1988 and totalled US$4.6 billion (20 percent of total production). Electronics exports grew rapidly in the late 1980s to more than US$15 billion in 1988, up 40 percent from 1987–to become Seoul’s leading export industry. Although South Korean electronic goods enjoyed substantial price competitiveness over Japanese products, the electronics industry continued to be heavily dependent on Japanese components, an important factor in South Korea’s chronic trade deficit with Japan. Some South Korean firms formed joint ventures with foreign concerns to acquire advanced technology. In the late 1980s, South Korea’s leading electronics firms (Samsung, Lucky-Gold star, and Hyundai) began establishing overseas plants in such markets as the Federal Republic of Germany (West Germany), Britain, Turkey, and Ireland.

Get Help With Your Essay
If you need assistance with writing your essay, our professional essay writing service is here to help!
Essay Writing Service

By 1990 significant shifts were occurring within the electronics industry. In 1989 South Korea had lost some of its cost advantage to newer consumer electronics producers in Southeast Asia. At the same time, production of electronic components and of industrial electronics, particularly computers and telecommunications equipment, continued to expand to such an extent that overall demand for South Korean electronics products was expected to increase modestly in the early 1990s. In 1990 Seoul projected that the microelectronics industry would grow at an annual rate of 17.2 percent in the early 1990s.
First into the field were three American companies- Motorola, Signetics and Fairchild. That small beginning soon became a flood, with the Japanese leading the way. Today there are 168 Japanese electronics companies operating in Korea through 139 joint ventures and 29 wholly Japanese. The United States comes a poor second with 27, of which 14 are wholly owned. However, the American operations tend to be larger. In addition, there is a Dutch, a West German and three Hong Kong companies.
As an indication of the extent to which foreign capital has poured into Korean electronics the Ministry of Commerce and industry reported earlier this year that of the $724M invested by foreign enterprises in Korean domestic industry up to December 1974 no less than 17% went into the electronics sector.
With a growth rate of nearly 60% annually for the past six years-and the bulk of production going direct to hard currency overseas markets-it is hardly surprising that the industry accounts for nearly 6 % of the nation’s total G.N.P.
Development Plan for the Industry
Such rapid development owes much to the aggressive support provided by the South Korean Government. In 1966 electronics was designated as a strategic export industry and provided with various financial aids and preferential tax treatment. Early production had been confined to radio sets, telephones and similar low technology products. Because of a shortage of technical knowledge the work was mainly achieved by domestic companies entering into licensing agreements with foreign manufacturers.
During the first five-year development plan, however, electronics began to take on a new importance and in 1965 domestic production of record players began. That was followed a year later by the assembly of television sets.
The industry really began to develop in the late 1960s with the manufacture of semiconductors such as transistors, integrated circuits and components for the booming computer industries of the world.
Since then tape recorders, desk and hand-held calculators and colour television sets have extended the wide range of Korean-made electronic products finding their way to world markets, often carrying the brand name of their Japanese and United States partners. Today about 80% of output is sold in more than 50 countries.
From a total production of $22M worth in 1966 the industry reached $734M in 1974. In the same period exports grew from $4M, representing 18% of production, to S553M, or 68 % of the total. The production target for 1975 was $780M, of which about $620M worth was earmarked for export. But with demand in Japan and the United States down by about 28 % and 14% respectively, that will take some achieving. To stimulate orders from depressed markets export prices have been lowered by amounts varying from 2% on radios to nearly 30 % on calculators.
In spite of slackening demand, the Government is pressing ahead with expansion plans aimed at a six-fold increase in the value of production by 1981. However, there will be a small drop in the proportion exported-from 68% in 1974 to 52% in 1981. That is planned to take into account the growth of domestic demand as Korean wages increase and local materials are substituted for imports.
The expansion plan calls for a further 560 factories to be built at a cost of $1,081 M of which it is hoped $53OM will be foreign investment.
Incentives for Foreign Companies
In October 1973 the Government established an industrial estate at Gumi in Gyeongbug province, near the Seoul-Pusan motorway, exclusively for electronic and allied industries. In addition to the provision of normal services for industrial estate users, a wide range of incentives have been offered to foreign investors.
They have been exempted from a range of income, corporate and property taxes for the first five years and receive a 50% reduction for the next three years. The remittance of profits and dividends is guaranteed from the first year and the remittance of principal foreign investment is guaranteed after two years of business operation.
It is not surprising that within a very short time 60 com-panies were in occupation with room for a further 250 on the 2,600-acre site. By 1977-78 exports from the estate could be earning $400M a year.
Low Labour Costs
The key attraction from the beginning has been the low wages paid to everyone from a skilled engineer to a labourer. A new study produced by the Korean Ministry of Commerce and Industry, ‘Investment Opportunities for the Electronic Industry’, contains this significant statement:

‘At the present time Korea has no legal minimum wage system. Basic wages comprise only a portion of workers’ income and vary with the size of companies’ or personal ability. The monthly starting wage is now $130 for engineers, $80 for technicians, $30 for workers and $90 for clerical or administrative workers.

‘Employers pay one to four months bonus annually to employees and serve usually one hot meal a shift, but this is not legally required. Transportation compensation is optional, depending on factory location’.

The minimum age for starting work is 13, although employers are required to keep a register of workers under 18 and must obtain parental approval in writing.
The standard working day in the electronics industry is eight hours a day for six days a week. But that can, and often is, extended to 60 hours a week or more.
Good attendance, frequently interpreted as 100% atten-dance, must be rewarded by an extra eight days leave with pay a year. Workers who achieve 90% lose five of the eight days. Legal holiday entitlements are a further 16 days a year.
Major Companies
LG Electronics 
LG Electronics Is a South Korean multinational electronics company headquartered in Yeouido-dong, Seoul, South Korea and the flagship subsidiary of the LG Group. The company operates its business through five divisions: Mobile Communications, Home Entertainment, Home Appliances, Air Conditioning, and Energy Solutions. It is the world’s second-largest television manufacturer (after Samsung) and the world’s fifth-largest mobile phone maker by unit sales in the second quarter of 2012.
Employees 91,045 (2011)
Operations
LG Electronics has about 75 subsidiaries worldwide. LG Electronics owns Zenith and controls 37.91 percent of LG Display.
Home Entertainment
The Home Entertainment division offers Plasma TVs, LCD TVs, PDP Modules,  OLED Panels, USB Memory, Flat Panel Computer Monitors, Home Theatre Systems, Blu-ray Disc players, DVD Recorders, Super Multi DVD Rewriters, CD±RW, Notebook PCs, Desktop PCs, MP3 Players. The Home Entertainment division merged with the Business Solutions Division in October 2010.
Mobile Communications
The Mobile Communications division provides mobile communication terminals, personal computers and communication devices.
LG mobile devices are made for GSM networks as well as for CDMA networks worldwide. LG phones are available also in unlocked versions that can be used on any GSM network worldwide.
LG sold 116.7 million mobile phones in 2010, corresponding to a market share of 8.4%.
Home Appliances
The Home Appliances division manufactures refrigerators, washing machines, microwave ovens, vacuum cleaners, compressors, and motors.
Its 2007 sales totalled KRW 11.8 trillion, accounting for 29% of the company’s total revenue. The division’s profit was KRW 717.1 billion. About 35% of the company’s home appliance revenue comes from the North American market.
Air Conditioning & Energy Solutions
The Air Conditioning & Energy Solutions division makes air conditioners and LED lighting.
Samsung Electronics Co., Ltd.
Samsung Electronics Co., Ltd is a South Korean  multinational  electronics  company headquartered in Suwon, South Korea. It is the flagship subsidiary of the Samsung Group and has been the world’s-largest IT Company by revenues since 2009. Samsung Electronics has assembly plants and sales networks in 61 countries and employs around 221,000 people.
Samsung Electronics is the world’s largest mobile phone maker and world’s second-largest semiconductor chip maker (after Intel Corporation). It has been the world’s largest television manufacturer since 2006 and the world’s largest maker of LCD panels for eight consecutive years. It has the largest market share worldwide in memory chips. With the introduction of the Samsung Galaxy S mobile phone, the company’s Smartphone line-up was first place in terms of global sales figures for 2011. Samsung has also established a prominent position in the tablet computer market, with the release of the Android-powered Samsung Galaxy Tab to compete with the iPad from Apple.
Products
LCD and LED panels
By 2004 Samsung was the world’s-largest manufacturer of OLEDs, with a 40 percent market share worldwide, and as of 2010 has a 98% share of the global AMOLED  market. The company is leading the world OLED industry, generating $100.2 million out of the total $475 million revenues in the global OLED market in 2006. As of 2006, it held more than 600 American patents and more than 2,800 international patents, making it the largest owner of AMOLED technology patents.
Mobile phones
Samsung’s flagship mobile handset line is the Samsung Galaxy S, which many consider a direct competitor of the Apple iPhone. It was initially launched in Singapore, Malaysia and South Korea in June 2010, followed by the United States in July. It sold more than one million units within the first 45 days on sale in the United States.
Semiconductors
Samsung Electronics has been the world’s-largest memory chip maker since 1993. In 2009 it started mass-producing 30 nm-class NAND flash memories. It succeeded in 2010 in mass-producing 30 nm-class DRAMs and 20 nm-class NAND flashes, both of which were the first time in the world.
Televisions
In 2009, Samsung sold around 31 million flat-panel televisions, enabling to it to maintain the world’s largest market share for a fourth consecutive year.
Samsung launched its first full HD 3D LED television March 2010. Samsung had showcased the product at the 2010 International Consumer Electronics Show (CES 2010) held in Las Vegas.
Other
Samsung produces a wide range of printers for both consumers and business use, including mono-laser printers, color laser printers, multifunction printers, and enterprise-use high-speed digital multifunction printer models.
In 2010, the company introduced a number of energy efficient products, including the premium laptop R580, notebook N210, the world’s-smallest mono-laser printer ML-1660, and color laser multifunction printer CLX-3185.
Samsung has introduced several models of digital cameras  and camcorders  including the WB550 (premium camera), ST550 (the dual-LCD-mounted camera), and the HMX-H106 (64GB SSD-mounted full HD camcorder). In 2009, the company took the third place in the compact camera segment. Since then, the company has focused more on high-priced items. In 2010, the company launched the NX10, the next-generation interchangeable lens camera, thereby commencing the race toward the new category of camera market.
The Steel Industry of South Korea
In 1989 South Korea was the world’s tenth largest steel producer, accounting for 2.3 percent of world steel production. South Korea continued to expand crude steel production–19.3 million tons for 1988, up 14.9 percent over 1987. Domestic demand for steel products increased 8.5 percent from 15 million tons to 16.3 million tons over the same period because of the growing demands of South Korean industry. Domestic demand accounted for 70 percent of the total, mostly because of the increased needs of such steel-consuming industries as automobiles, shipbuilding, and electronics.
The steel industry grew in the 1970s after the government constructed the POSCO mill to service Seoul’s rapidly growing automobile, shipbuilding, and construction industries. In 1988 South Korea’s steel industry included 200 steel companies. Iron and steel production was expected to increase in the early 1990s, given the output increases in domestic user industries. Exports were likely to be flat or to decline because of decreased international demand.
Major Companies
POSCO
POSCO (formerly Pohang Iron and Steel Company) is a multinational steel-making company headquartered in Pohang, South Korea. It had an output of 35.4 million tonnes of crude steel in 2010, making it the world’s fifth-largest steelmaker by this measure. In the same year, it was the world’s largest steel manufacturing company by market value.
POSCO currently operates two integrated steel mills in South Korea, in  Pohang  and  Gwangyang. In addition, POSCO operates a joint venture with U.S. Steel, USS-POSCO, which is located in Pittsburgh, California.
Operations
Head Office
POSCO’s Headquarters, along with the POSCO Centre, form the ‘brain’ of the company, overseeing major tasks, such as the management, planning, and finances  of the steelworks at Pohang and Gwangyang. The construction of POSCO  headquarters at 1 Goedong-dong, Nam-gu, Pohang, was completed on April 1, 1987, and has since become a structure that symbolizes the entire company.
POSCO Centre
Winner of the 1995 Seoul Architectural Award for its progressive combination of modern design and eco-friendly engineering, POSCO Center is regarded as Korea’s first state-of-the-art intelligent building. This landmark in the heart of southern Seoul’s Teheran Valley high-tech venture corridor also hosts a wide variety of free cultural programs, events, and exhibitions throughout the year.
Pohang and Gwangyang Steelworks

Pohang – Constructed in four phases between April 1970 and February 1981 along Korea’s southeast coast, the nation’s first integrated steelworks has produced 230 million tons of pig iron through March 2004 – enough to build some 250 million compact cars. Crude Steel Production (2004) = 12.67 million tons
Gwangyang – Constructed in four phases between September 1982 and October 1992 on Korea’s southern coast, the nation’s second integrated steelworks is among the world’s most advanced. Gwangyang focus on manufacturing automotive steel, high-strength structure steel, API line pipe steel, and other strategic product categories. Crude Steel Production (2004) = 16.23 million tons

Subsidiaries

SNNC
POSCO M-Tech
POSCO plantEC
Sungjin Geotec
POSCO AST
POSCO TMC
POSMATE
POSCO NST
POSHiMETAL
POSFINE
Seungkwang
eNtoB
POSRI
POSTECH VCC
POSCO E&E
POREKA
POSCO A&C
Busan E&E
POSWITH
POSecohousing
POSPlate
Songdo SE
Suncheon ECOTRANS Co., Ltd.
Posco-Nippon Steel RHF Joint Venture
United Spiral Pipe LLC

Major competitors

ArcelorMittal
Nippon Steel
JFE Group
Nucor Corporation
Tata Steel
Bhushan Steel

Hyundai Steel Co., Ltd,
HSC (formerly known as Hyundai INI Steel, and before that, Inchon Iron & Steel Co., Ltd., is a steel company headquartered in Inchon and Seoul, South Korea. Established in 1953, Hyundai Steel is the oldest/most experienced steel making company in Korea and is currently one of the major companies of the Hyundai-Kia Automotive Group.
Hyundai Steel is the world’s second largest EAF steel producer. Hyundai Steel produces a wide variety of products ranging from its high quality H-beams to reinforcing bars. Currently, Hyundai Steel operates 4 factories, 3 factories are located in the Incheon, Dangjin, and Pohang province of Korea and the other factory is located in China’s Chungdo province.
In addition to Hyundai Steel, the Hyundai-Kia Autmotive group includes steel companies such as, Hyundai Hysco (formerly known as Hyundai Steel Pipe Co., Ltd.) and BNG Steel Co., Ltd. (formerly Sammi Steel Co., Ltd.). Hyundai Steel uses the EAF process to manufacture steel while BNG and Hyundai Hysco are cold rolling mills.
Hyundai Steel, in 2004, had purchased the facilities of the defunted Hanbo Steel in Dangjin. They have taken the once rundown steel company and has refurnished and revitalised its facilities to make it one of the most efficient steel plants in Korea. Currently HSC is planning to create third Blast Furnace at Dangjin. Once Hyundai Steel completes its BF no.3 in 2013, the total annual capacity of the company will reach 23 million tons per annum and the Hyundai-Kia Automotive Group will become the only car maker with an in-house steel mill to supply steel sheets for the production of automobiles.
Competitors

Hyundai Hysco
POSCO
BNG Steel
Dongkuk Steel
Dongbu Steel
Sinhwa Steel
Union Steel
Korea Iron & Steel Co., Ltd.

Dongbu Steel 
DBS, is a South Korean multinational corporation and have made significant contributions to the steel and iron industries both in Korea and abroad. Dongbu Steel is a leading producer of cold-rolled products and are positioned to become the world’s leader for steel sheet products, steel and iron coating, and new products. Dongbu Steel have played a key role in the development of Korea’s core industries including automotive, electronics and construction. Its steelworks in Asan Bay, Incheon and Pohang have a combined annual production of 2.5 million tons and sales exceeding 2.2 trillion KRW (2.5 billion USD).
The company’s products include cold-rolled steel sheet, galvanized steel sheet, pre-painted steel sheet, tinplated steel sheet, medium and large diameter pipe, welded light H-beam, PEB, cold heading quality wire, cold drawing bar, and more. The Asan Bay Works, established in 1999, has the world’s first fully automated process from production to physical distribution. Because of this innovative process Dongbu Steel have realized the world’s lowest production costs, positioning Dongbu Steel as the most competitive company specialized in coating and steel sheet.