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Electronics and Telecommunications Equipment
in Korea
Consumer Electronics
The consumer electronics industry includes household audio
and video equipment, such as television and stereo sets, and household
electronic equipment, such as washing machines and refrigerators.
In 1997, Korea's consumer electronics industry recorded a 5
percent drop in production because of the languishing domestic market and the
sharp decline in exports. The latter can be largely explained with reference to
two factors. First, in recent years, Korean firms have expanded their overseas
production systems for the main export items such as color TVs, VCRs, and audio
products. Second, Japanese firms have recently completed restructuring programs
which involved the improvement of the products manufactured in Southeast Asia.
From 1998, exports are forecasted to increase. As for color
TVs, VCRs, and audio products, exports will not rise in spite of the weakened
won since the overseas production system for those items has already been
improved. On the other hand, exports are expected to record a solid increase in
items such as washing machines, refrigerators, and air conditioners, where the
ratio of overseas to domestic production is low, due to the depreciation of the
Won and the curtailment of foreign outward investment.
Imports are expected to drop greatly in 1998 because of the
sharp depreciation of the Won. But the complete repeal of the system of
diversification of imports by country in the first half of 1999, together with
the recovery of domestic demand, will result in an increase in imports after
1999.
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Semiconductors
Semiconductor chips are a crucial element in a wide array
of electronic devices ranging from computers to telecommunications equipment.
More generally, semiconductors will be the backbone of the future Information
Society.
Korea's semiconductor industry now ranks third in the
worldwide market, after the United States and Japan, and accounts for 30 percent
of the global memory chip supply. A breakdown by company reveals that Samsung
Electronics is the world's largest memory chip maker, leading the technology and
the market. The industry has been a powerful engine behind Korea's spectacular
export growth, representing more than 10 percent of Korea's exports in 1997.
Policy-makers and industrialists believe that the industry could play a leading
role in bailing the country out of the current financial and economic crisis.
Notwithstanding, the industry is highly vulnerable to market
fluctuations as it is dependent on memory chips for nearly 90 percent of
revenues. What is worse, the industry is so heavily reliant on exports that it
is very susceptible to the typical rollercoaster-like curves in memory chip
prices, a fact which partly explains why the nation's semiconductor industry has
been hard hit by the global memory chip supply glut that began in 1996. Another
main factor for the industry's difficulties was the sluggish global demand for
personal computers, the product that accounts for 80 percent of world memory
chip supply.
As of September 1997, exports of memory chips showed signs of
recovery, even as the debt crisis swept across Asia. This strong performance was
partly due to an unexpected pickup in demand for memory chips, revolving
especially around the United States. Unfortunately, booming demand has done
little to improve profits, as the global memory chip industry remains locked up
in a glut. The deterioration in profits has cut into cash reserves, and has made
it difficult to raise investment funds for next-generation manufacturing
facilities.
Luckily for Korean memory chip makers, however, all facility
investment had been completed in the latter half of 1997. Thus, the credit
crunch did not have any impact on the production of 1997. Rather, it is expected
to help ease the supply glut. The problem lies in post-1998 production since all
of Korea's memory chip makers have suspended their further capital investment
for 64M DRAMs and next-generation 256M DRAM chips. While 16M DRAM chips, a
mainstay of the industry, have already passed their apex, 64M DRAM chips are
increasingly moving closer to a pinnacle of the typical memory chip curve that
swings up and down in four-year life cycles. The global PC market is preparing
for a renewed activation in the industry, since most PC buyers using 486
platforms are increasingly becoming fed up with old models and will likely jump
to new, innovative Pentium platforms. The explosive demand for notebook
computers will be boosted by a growing preference for mobility among PC users
and a steep decline in exorbitant prices that have worked as a major impediment
against the rapid proliferation of notebook models. Other positive factors are
the anticipated release of a new Operating System, Windows 98, and a
much-hoped-for takeoff in electronic commerce where PCs will function as prime
instruments. In addition, the debut of personal computers costing less than
US$1,000 will reinvigorate fresh demand.
Meanwhile, imports are expected to continuously grow, riding
high on the country's multimedia and mobile phone frenzy. The chips used for
multimedia and mobile phone systems are not produced locally with the result
that the higher the production in these equipment sectors, the more imports are
required.
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Telecommunications Equipment
The telecommunications equipment industry is composed of
wire and radio communication equipment. Wire communication equipment includes
wire telephone sets, telephonic switch board & exchangers equipment, carrier
current line system, telegraphic apparatus, and parts. Radio communication
equipment encompasses wireless telephone sets, transmission apparatus,
television cameras and receivers, receiving apparatus, and parts.
The production of telecommunications equipment in 1997
achieved a high boost due to the rapid expansion of the domestic market and the
increase in exports. In spite of the financial crisis and plummeting stock
market in the second half of 1997, the domestic market for telecommunications
equipment has increased steadily since various new services started and the
mobile telecommunications firms began to compete more fiercely than ever.
Specifically, Korean telecommunications firms started to provide second
generation cordless telephone (CT-2) service, wireless data communications
service, and personal communications service (PCS) in 1997. Exports recovered
from a slump in 1996 by means of the increased exports of wireless terminals
(handsets) to England and Germany and expanded investment in the
telecommunications industry of developing countries.
While imports of wired telecommunications and wireless data
communications equipment and TRS have increased, imports of wireless
telecommunications equipment, including mobile telephones and TV broadcasting
equipment, have decreased drastically as the country becomes more self-reliant
in these vital sectors. As a result, total imports of telecommunications
equipment are down.
In 1998, the growth rate of production of telecommunications
equipment is expected to slow down, in terms of the Korean won, since a sluggish
GDP growth rate, soaring interest rates, and higher tax rates will shrink
investment and consumer demand in this sector. The domestic market is also
expected to cool down drastically.
Exports are expected to increase due to the high price
competitiveness by dint of the devaluation of won against the dollar and the
reinforcement of domestic firms' foreign marketing to compensate for the dull
domestic market. Imports will decrease since the domestic market will be
stagnant.
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Computers and Peripherals
The major products that Korean computer manufacturers
produce are multimedia-capable computers such as desktop personal computers
(PCs) and notebook PCs, and peripherals such as hard-disk drives (HDDs), CD-ROM
drives, and printers. Korea is especially outstanding in the area of computer
peripherals. The share of peripherals of total computer products was 83% and 95%
of total production and exports in 1997.
The world demand for computers and peripherals in 1996 was at
a standstill, mainly because the purchasing of PCs has been underway since 1995.
However, this was not true in Korea, especially in 1997. The export growth rate
of Korea-made computer products maintained a two-digit figure, 14.8 percent in
1997. Some key reasons why this was possible include the fact that demand for
computer and peripherals recovered in the major world markets and that Korean
manufacturers have improved the technologies necessary for high-end peripherals.
The export of PCs in 1997 increased by 38.9 percent over 1996 due to the joint
production strategies adopted by both Korean large PC makers and foreign
companies. The export of peripherals showed an approximately 14 percent
increase, supported by the export of high-end products, including large-capacity
HDDs, printers, CD-ROMs, and floppy disk drives (FDDs). Exports to the United
States, the EU, and Japan were greatly increased, but those to other countries,
including Southeast Asian countries and China, did not increase significantly.
The reasons behind this decline are the foreign exchange crisis which struck
Southeast Asian countries and the increased manufacturing capacity of newly
industrialized countries such as China.
The demand for notebook PCs surged due to the remarkably
lowered price, whereas the demand for desktop PCs decreased somewhat due to the
negligible substitutions of 486 PCs for high-end Pentium PCs.
The production of computer products showed a steady increasing
trend in line with the continued increase in exports. The imports of computer
products decreased by 11 percent by virtue of the low domestic demand as well as
the increased import substitutions accomplished by the expanded production
capacity of Korean companies.
Export to the Southeast Asian region is not expected to rise
much due mainly to the foreign exchange crisis occurring in this region.
However, export to such countries as the United States, West Europe, and Japan
are expected to maintain a two-digit increase for the next three years. This is
due to the enhanced price competitiveness made possible by the deflated exchange
rate of the Korean Won. The major products likely to propel exports include
central processing units (CPUs) of both desktop and notebook PCs, high-capacity
HDDs, CD-ROM drives, monitors, and printers.
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Information
provided by the Korean Embassy
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