Korea, Republic of (ROK) - Industry
Up until the 1960s, manufacturing was chiefly confined to production for domestic consumption, and a substantial proportion of the output was produced by handicraft methods in homes and small factories. While textiles, apparel and footwear were the first modern industries to be developed, heavy industry has grown rapidly over the last four decades, promoted by a series of development plans. In the 1980s, the manufacture of metals, machinery, and electronic and other equipment overtook textile production as the country's leading industries in terms of value, employment and export earnings. In turn, in the 1990s, high-tech electronics have become the leading sector as South Korea became the world's leading semi-conductor manufacturer as well as the leading shipbuilder. Prosperity brought higher labor costs, and in the last decade, South Koreans have begun outsourcing production—particularly textiles and footwear but also more recently "commoditized" consumer electronics. During the past decade, increasing domestic production costs have encouraged the relocation of production plants in some industries—particularly textiles and footwear but more recently also consumer electronics— to overseas locations in Southeast Asia, Eastern Europe, China, Mexico, and Turkey. The ROK now ranks as a major Asian producer of electronics, automobiles, chemicals, ships, steel, textiles, clothing, shoes, and processed food. In 2002, industrial production grew 7.3% (although excluding the 21.4% growth in semi-conductors, only 5.8%) Other high value-added sectors showed above average growth: automobile production up 8.1%; machinery equipment up 7.9% and wearing apparel and fur articles, up 7.4%. The lower value-added sectors of textiles and basic metals showed the strains of global over capacity and low-cost competition. Textiles declined6.6% and basic metals increased a weak 4.6%. Long-term plans for the textiles and clothing sectors include a shift from the current mix of 5% clothing to 30% clothing by 2010 as part of the goal of doubling export value from the 2002 level of $15.7 billion.
Manufacturing in the ROK is dominated by a few dozen vertically integrated industrial conglomerates, known as chaebol , which have privileged access to financing and set the standards for contracting and procurement throughout the country. In 1995, the 30 largest chaebol accounted for 16.2% of GNP (up from 13.5% in 1992), according to the Korea Economic Research Institute. In 1999, the debts of the four biggest chaebol stood at approximately $140 billion. Unfortunately, many of the country's chaebol have racked up huge debts in order to finance industrial expansion, some more than five times their annual intake. Asset sell-offs by the four biggest chaebols, including Hyundai, Samsung, LG, and SK amounted to $15 billion in 1999.
Joint venture production with major US and Japanese car companies, growing domestic demand, and successful penetration of overseas markets by Korean-owned corporations has fueled steady growth in automobile output. The production of passenger cars more than doubled from 1990 to 1995. Total vehicle production in 1995 was 2,526,400, or 5% of world output. Vehicle production in 1998 was about two billion, or eighth of all OECD countries. South Korea's automotive industry is dominated by Hyundai, which accounted for 48% of all passenger cars, trucks, and buses domestically produced in 1995. Kia accounted for 25% of production that year; Daewoo, 18%; and others, 9%.
In 1998, the ROK was the second-largest world producer of new ships; in 2002 it was the world leader. In 2002, Korean shipbuilders got orders for 230 ships (2.6 million CGT), delivered 210 ships (6.8 million CGT), and had a backlog of 496 ships (17.1 million CGT). Production of electronics has shifted from assembly of imported parts to the manufacture of competitive high-technology products, such as office automation systems, for both the international and domestic markets. Daewoo Electronics (the second-largest chaebol, with substantial debts), LG and Samsung Electronics dominate in the production of consumer electronics; the televisions, videocassette recorders, stereos, refrigerators, washing machines, and microwave ovens produced by these companies are sold across the world. Daewoo Electronics also operates 36 overseas factories and planned to capture 10% of the world's market in consumer electronics by 2000. Samsung Electronics was the world's largest producer of computer memory chips by 1996.
By 2002, ROK had become the world's fifth largest steel producer, up from 10th in 1989, accounting for 4.8% of the world total. P'ohang Iron and Steel Co. (POSCO) produces about half of the nation's total steel output, and is the world's second largest steel mill, producing 27.4 million tons in 2002. There are about 200 steel companies in South Korea.