Intensifying Competition forTechnology in Northeast Asia                                                                  ...
Intensifying Competition for Technology in Northeast Asiathe growth of China’s companies. In 2008,China’s Huawei (1,737 ap...
LEE Sung-Ho, KIM Jung-WooRENEWABLE ENERGY: CHINA                                                         solar cell indust...
Intensifying Competition for Technology in Northeast Asiation of polysilicon requires complex expertise                   ...
LEE Sung-Ho, KIM Jung-Woo  |Table     4 Life Science Papers Included in SCIE by Country                                   ...
Intensifying Competition for Technology in Northeast Asia  |Table   5 Number of Pharmaceutical Companies with more than $1...
LEE Sung-Ho, KIM Jung-Wooby 3.4 years and Korea by 2.8 years.6 The gap                            employed other measures ...
Intensifying Competition for Technology in Northeast Asia  |Table     7 Current Status and Investment Plans for Fifth and ...
LEE Sung-Ho, KIM Jung-Woomassive foreign reserves worth $2 trillion.                             Meanwhile, Korea has a la...
Intensifying Competition for Technology in Northeast Asiadocks via a crane vessel to build and launch                     ...
LEE Sung-Ho, KIM Jung-WooAs for Japan, there is a plan to invest 1.6                            hardware, and as Korea is ...
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Intensifying Competition For Technology In Northeast Asia

  1. 1. FEATURE
  2. 2. Intensifying Competition forTechnology in Northeast Asia LEE Sung-Ho, KIM Jung-WooCHINA’S RISE AS A TECHNOLOGICAL China’s advancement is especially noteworthyPOWERHOUSE in technology. In dollar terms, China’s R&D investment surpassed Korea in 2001, and isThe structure of the world’s economy is currently over 1.5 times that of Korea. Japan,changing as China’s massive capital supplies on the other hand, has maintained its tech-and huge markets push it to the top of global nological superiority, investing three timesindustry. In the initial stage, China entered the amount invested by China and five timesthe global production system engaging itself the amount invested by Korea. In numberin manufacturing in the value chain and has of researchers, China (1,592,420 in 2008) hasplayed the role of production base. Today overtaken the US (1,412,639 in 2007), and nowChina is drawing attention as a major con- has six times more researchers than Korea andsumer market and technological powerhouse three times more than Japan.thanks to its strong basic skills, largeinvestments in new technology, abundant The catching up of China is also seen in thehuman resources, and strong government number of papers in the Science Citation In-support, not to mention its colossal domestic dex (SCI). China listed 112,804 papers on themarket. Against this backdrop, Korea, China, index in 2008 which is well over Japan’s 79,541and Japan are reorganizing their industries and Korea’s 35,569.1to develop new growth engines and enter themarket ahead of others. The number of patents is more evidence of |Table 1 R&D Investment and Number of Researchers in Korea, China and Japan Korea China Japan US Total R&D Investment ($ 100 million) 312.9 487.7 (2007) 1,507.9 (2007) 3,688.0 (2007) Ratio to Korea 1.0 1.6 4.8 11.8 Number of researchers (1,000 people, FTE) 236.1 1,592.4 682.8 1,412.6 (2007) Ratio to Korea 1.0 6.7 2.9 6.0 Source: Ministry of Education, Science and Technology (March 2010), Science and Technology Statistics; Ministry of Education, Science and Technology (October 2009), Science and Technology Statistics OECD (2010). Main Science and Technology Indicators. Volume Jan. 2010. Note: FTE refers to Full-Time Equivalent; investments were estimated in US dollars, and the figures are based on 2007 data except for Korea (2008); the number of researchers is based on 2007 data for the US and 2008 data for China.1 Ministry of Education, Science and Technology (March 2010), Science and Technology Statistics. April 2011 | SERI Quarterly | 53
  3. 3. Intensifying Competition for Technology in Northeast Asiathe growth of China’s companies. In 2008,China’s Huawei (1,737 applications), ranked atfirst place in the WIPO’s Patent CooperationTreaty, jumping from fourth place in 2007 tothe top in just one year. Huawei replaced Ja-pan’s Panasonic (1,729) which had maintainedthe number one position. Although Panasonic(1,981) topped the list again in 2009, Huawei(1,847) was close behind with only 34 fewer ap-plications.2As such it is now clear that China, after gain-ing experience as an imitator that relied oncheap labor, is now emerging as a strong tech-nology player and patent applicant in its ownright. Its number of patents has increased by14 times during the past 10 years, putting it It is now clear that China,third behind Japan and the US. This is the re-sult of China’s growth in patent applications in after gaining experience2009, during a time when advanced countries as an imitator that reliedwere decreasing investment in R&D becauseof the global financial crisis. on cheap labor, is nowChina’s potential in new globally promising emerging as a strongindustries like life sciences and clean energy is technology player andcontinuously rising. Already, the country hasshown remarkable performances in these ar- patent applicant in its owneas by outpacing Japan, the US, and Europe in right.the number of environmental patent applica-tions. Thomson Reuters predicted that Chinawill overtake Japan and the US to becomethe world’s leading innovator by 2012.3 Thesedevelopments are testament to the fierce com-petition among Northeast Asian countries formarket dominance sparked by China’s growth.Accordingly, this paper will survey how Ko-rea, China and Japan are faring in the bio-medical, IT, shipbuilding, auto and renewableenergy industries, and the increased competi-tion between the industries of these countries.2 WIPO. World Intellectual Property Indicators, 2010, 2009, 2008.3 Thomson Reuters (December 10, 2008). “World IP Today” Report Predicts China Will Overtake Japan and the United States to Become the World’s Leading Innovator by 2012.54 | www.seriquarterly.com
  4. 4. LEE Sung-Ho, KIM Jung-WooRENEWABLE ENERGY: CHINA solar cell industry, an area with mature tech-EMERGES AS THE BIGGEST nology, due to low production costs and largePRODUCER investments in facilities. The country is able to produce labor-and energy-intensive wafers,In the solar power industry, the world’s long- cells and modules at 35-40 percent lower costtime high performer Japan has lost market than Japan and Europe, thanks to its inher-share to China, which maintains cost advan- ent price advantages in labor and utility costs.tages and economies of scale. In 2006, China China also responded shrewdly to the expan-managed to list only one solar maker on the sion of the solar power market by rapidlyworld’s top 10 list, while four Japanese compa- building large solar cell production facilities.nies made the cut. In just three years, however, From 2006 to 2009, when the solar power mar-China would become the world’s largest solar ket recorded average annual growth of 80 per-cell producer, with four companies on the list cent, China’s production of solar cells surgedwhile the number of Japanese companies de- an average of 115 percent year-on-year.clined to two. Chinese companies, includingthe top four performers: Suntech Power, Yingli Korea, on the other hand, has a relatively largeSolar, JA Solar, and Trina Solar, have a 47 market share as a materials maker, particular-percent share in the global market. In produc- ly in polysilicon, where it maintains strengthstion, the capacity of China’s top seven solar in technology and price. The Korean companycell companies surged from 1.6GW in 2007 to OCI maintains high purity for its products,4GW in 2009, 2.7 times more than the total of and its price for polysilicon per kilogramall Japanese companies combined (1.5GW). equals that of the world’s top performers (in- cluding Hemlock and Wacker) while produc-China achieved high growth in the crystalline tion costs are at record low levels. The produc- |Table 2 Rankings of the World’s Top 10 Solar Cell Producers 2006 2009 Ranking Company (Country) Gross Power Generation (MW) Company (Country) Gross Power Generation (MW) 1 Sharp (Japan) 434 First Solar (US) 1,113 2 Q-Cells (Germany) 253 Suntech Power (China) 704 3 Kyocera (Japan) 180 Sharp (Japan) 635 4 Suntech Power (China) 158 Q-Cells (Germany) 551 5 Sanyo (Japan) 155 Yingli Solar (China) 525 6 Mitsubishi Electric (Japan) 111 JA Solar (China) 509 7 Motech (Taiwan) 110 Kyocera (Japan) 400 8 Schott Solar (Germany) 96 SolarWorld (Germany) 400 9 Shell Solar (Netherlands) 86 Trina Solar (China) 399 10 BP Solar (US) 86 SunPower (US) 398 Source: “Competition for Solar Cells between Japan, China and Korea” (Aug. 3, 2010). Economist. April 2011 | SERI Quarterly | 55
  5. 5. Intensifying Competition for Technology in Northeast Asiation of polysilicon requires complex expertise 2009, China has at least 80 turbine makers andin order to deal with variations in chemical re- more than 100 parts suppliers, with some ofsponses, and in this area China does not enjoy the latter possessing world-class productionadvantages. Although China has larger facility capacities and technologies. The world’scapacities than Korea, low product quality has second largest gearbox producer (as of 2009),limited actual production volume. Nanjing High Speed Gear Manufacturing, produces gearboxes with in-house technologyIn wind power, China is unambiguously far and supplies them to GE, while ZhongHangahead of Korea and Japan. While China in- Huiteng Windpower Equipment took 40cluded three companies, Sinovel (third), Gold- percent of the blade market, growing into thewind (fifth), and Dongfang (seventh) among second largest blade producer in the world.the world’s top 10 wind turbine manufacturers, Large wind turbine manufacturers in ChinaKorea and Japan failed to list even one. have already developed homegrown 1MW turbines at their own R&D centers and areChina’s wind turbine manufacturers are striving to develop large offshore turbinesalready producing large turbines with over of at least 3MW. China is also pursuing the1MW capacity as well as developing offshore commercialization of these offshore windturbines. It has also domesticated at least 70 turbines. Sinovel completed the constructionpercent of the parts for its current key model, of a 102MW offshore wind farm (34 sets ofa 1.5MW onshore wind turbine. As of late 3MW turbines) on Shanghai Donghai Bridge in 2010. Heavy industries in Korea and Japan are also developing 3MW or larger offshore |Table 3 The World’s Top Wind Turbine wind turbines. Manufacturers (2009)Ranking Company (Country) Capability (MW) Share (%) 1 Vestas (Denmark) 4,766 12.9 BIOMEDICAL INDUSTRY: HAVING SURPASSED KOREA, CHINA IS NOW 2 GE Wind (US) 4,741 12.8 CLOSING IN ON JAPAN 3 Sinovel (China) 3,510 9.5 China’s R&D investment in the biomedical in- 4 Enercon (Germany) 3,221 8.7 dustry has increased at an annual average of 5 Goldwind (China) 2,727 7.4 39 percent from 150 million yuan in 1996 to 6 Gamesa (Spain) 2,546 6.9 11 billion yuan in 2009, more than 1.6 times that of Korea. Moreover, China currently 7 Dongfang (China) 2,475 6.7 ranks third in terms of R&D investment in 8 Suzlon (India) 2,421 6.5 stem cells, investing 1.1 billion yuan in 2009. 9 Siemens (Germany) 2,265 6.1 The rise in R&D investment has escalated 10 REpower (Germany) 1,297 3.5 the number of life science papers listed on the Science Citation Index Expanded (SCIE). Others 7,034 19.0 China’s ranking in the index jumped from 24th Total 37,003 100 in 1997 to fourth in 2008, threatening Japan, Asia’s home of R&D investment in this area. Source: Li, J., Shi, P. & Gao, H. (2010). China wind power outlook 2010. Meanwhile, Korea climbed 12 positions from Chinese Renewable Energy Industries Association. 23rd in 1997 to 11th in 2008, but the gap with56 | www.seriquarterly.com
  6. 6. LEE Sung-Ho, KIM Jung-Woo |Table 4 Life Science Papers Included in SCIE by Country (Numbers based on cases) 1994-1997 1998-2001 2002-2005 2006-2008 Number of Ranking Number of Ranking Number of Ranking Number of Ranking Papers Papers Papers Papers US 188,627 1 205,363 1 223,551 1 184,383 1 Japan 51,417 3 66,233 2 66,806 2 47,799 2 China 4,190 24 11,571 13 25,527 8 38,901 4 Korea 4,175 23 9,103 20 14,165 13 15,203 11 Source: Ministry of Education, Science and Technology (2007, 2008, 2009). “Life Science White Paper.”China continues to widen. of Tamiflu, which is based on an ingredient ex- tracted from the traditional Chinese spice “StarThe Chinese government is nurturing re- Anise.”searchers necessary to develop chemical-based medicines based on traditional Chinese Furthermore, in 1999, China established themedicine and biomedicines such as stem cell Beijing Genomics Institute and became theand gene therapy. Under its “Thousand Talent only developing country to participate in thePlan,” China is aggressively recruiting talent Human Genome Project, where it obtained so-that has studied or has lived abroad while es- phisticated genome analysis technologies andtablishing biomedicine departments in univer- vast information on the correlation of diseasessities across the country. As a result, those who and genes from advanced countries, includinghave majored in biology and medicine surged the US, UK and Germany.4 The Beijing Ge-from 1,200 in 2001 to 55,000 in 2009 (4.6 times nomics Institute became the biggest researchthe number in Korea.) center for genome analysis in 2010 when it relocated to Shenzhen, employing more re-China has greatly increased infrastructure for searchers and enlarging the facilities to housethe research and development of chemical and 157 DNA sequencers which can decipher thebio medicines. The government reaffirmed the genome of 10,000 people a year. With this ca-potential of traditional Chinese medicine in pacity, the institute can analyze the sequencesthe late 1990s via joint development of the an- for companies specializing in gene analysistiviral drug Artemisinin with Novartis. There- across the world including 23andMe and Navi-after, the Chinese Academy of Sciences led the genics.biomedical area under the “10th Five-year Plan(2001-2005),” extracting distinctively effective Alongside the growth of the pharmaceuticalingredients from 5,000 traditional Chinese market, the number of Chinese companiesmedicines and building a database for them. A with more than $1 billion in sales revenue ex-prime example of its efforts is the development panded to three in 2009. Although the number4 The Human Genome Project was founded by the US and UK with 15 other countries and $3 billion to completely decipher the human genome. China was welcomed in when the huge international project came under financial pressure in the late 1990s. April 2011 | SERI Quarterly | 57
  7. 7. Intensifying Competition for Technology in Northeast Asia |Table 5 Number of Pharmaceutical Companies with more than $1 Billion in Sales Revenue and Combined Sales Revenue (2009) (Number of companies, $100 milllion) US Switzerland UK Japan France Germany Israel China Number of Companies 23 5 3 11 1 5 1 3 Combined Sales 2,156 840 733 627 420 416 139 52 Revenue Ranking in Combined 1 2 3 4 5 6 7 8 Sales Revenue Source: Pharma EXEC 50 (2004-2010), MedAdNews (July 2008), “Top 100 biotech companies,” websites and annual reports from each company, Thomson Reuters.is dwarfed by Japan’s 11 and a record total of IT INDUSTRY: CHINA CATCHES UP$62.7 billion in sales revenue, it still easily sur- WITH KOREA AND JAPAN IN CHIPSpassed Korea. AND DISPLAYSIn 2003, the venture company SiBiono proved China has emerged as the word’s largest pro-China’s potential with the development of the ducer of IT products, overtaking the US inworld’s first gene therapy medicine with the 2006.5 Especially in areas like telecommunica-financial support of the government. Since tions equipment and transmission for digital2004, global pharmaceutical companies – televisions, the country’s technologies rivalRoche (2004), Pfizer (2005) Sanofi-Aventis those of advanced countries. This is largely(2005), AstraZeneca (2007), GSK (2007), due to the government’s establishment of stan-Novartis (2008), Lilly (2008) and Johnson dards, a policy designed to encourage Chinese& Johnson (2009) – have established R&D companies to obtain technologies in coopera-centers in either Beijing or Shanghai, and the tion with their foreign counterparts. Such ef-Chinese government has supported them forts helped telecommunications equipmentin initiating joint research projects with supplier Huawei take a 17 percent marketChinese universities (including Tsinghua share in the second quarter of 2009 twentya nd Pek i ng Un iver sit y). I n add it ion, years after its establishment, coming thirdChinese contracted research organizations after Ericsson (32 percent) and Nokia-Siemenshave established partnerships with global (20 percent).companies in China to establish candidatelists and conduct preclinical and clinical However, China still lags far behind Koreatests. Wuxi PharmaTech, a leading Chinese and Japan in process technologies in areas thatcontracted research organization, recorded require large investments, such as semiconduc-a 10-fold growth in sales during the past five tors and displays. With regard to semiconduc-years ($330 million in 2010) and provides tors, China is behind advanced countries likeresearch services to 80 global pharmaceutical Japan by four years and Korea by 2.3 years. Incompanies. liquid crystal displays, China is behind Japan5 Reed Electronics Research. (2009). Yearbook of World Electronics Data.58 | www.seriquarterly.com
  8. 8. LEE Sung-Ho, KIM Jung-Wooby 3.4 years and Korea by 2.8 years.6 The gap employed other measures such as the imposi-is especially big in core components and equip- tion of import duties, capital investment andment. Chinese companies are underdeveloped tax cuts to expand the LCD industry.in key parts like glass substrates, color filters,polarizers, backlight modules, and LEDs, The rapidly growing domestic market andamong others. However, the technological gap entrance of global companies targeting theis expected to shrink due to the Chinese gov- market are also contributing to the technologyernment’s strong will to nurture the industry improvements in China.based on the huge domestic market. Based on the large demand for semiconduc-In 1991, the Chinese government established tors for IT equipment produced for boththe “Plan to Nurture the Semiconductor In- the domestic and overseas markets, Chinadustry” and included relevant policies in its five became the world’s biggest chip market inyear national development plan. It also recog- 2005 and has remained so ever since.7 Accord-nized the importance of television and LCDs ingly, Chinese foundry companies and globaland announced the “IT Industry Develop- semiconductor companies began to invest inment Plan” during the financial crisis in 2009 300mm fabs in earnest from 2004. In terms ofto develop technology and increase domestic wafer production capacity, China’s share inconsumption. Under the plan, approximately the global market climbed from 2 percent in100 billion yuan ( 17 trillion) will be invested 2003 to 8 percent in 2008, and is expected tointo the development of display technology for increase even further to 9.8 percent by 2012.three years, and domestic consumption will be As such, China can achieve technologicalpromoted with the “Make Home Appliances advancement by harnessing the benefits ob-Affordable” policy designed to provide rural tained from foreign companies in China andresidents with modern conveniences. In addi- acquisitions of advanced companies, posing ation to supporting technological development serious threat to the semiconductor industryand providing subsidies, the government has in Korea and Japan. |Table 6 China’s Policies to Support the Semiconductor and LCD Industries Period Policy Key Performances - Establishment of R&D funds aimed at developing core chips and social overhead capital 2006-2010 The 11th Five-year Plan - Technological development for flat panel display parts - Increased investment in the overall value chain of semiconductors - Production, assembly and integration of flat panel displays Plan to Nurture the - Reinforcement of cooperation with foreign countries all across the world, especially 2009-2011 Electronics and Information Industries Taiwan - Subsidy policies like the “Make Home Appliance Prices Affordable” policy to promote domestic consumption6 National IT Industry Promotion Agency (2008). “2008 Research on the Technological Status of the IT Industry.” Report on IT Technology Policy. No. 08-02.7 China’s global market share in semiconductors was 37 percent in 2008 at $92 billion. April 2011 | SERI Quarterly | 59
  9. 9. Intensifying Competition for Technology in Northeast Asia |Table 7 Current Status and Investment Plans for Fifth and Higher Generation LCD Lines Generation Number of Lines Operation Period Company (Country) 5 4 In operation SVA-NEC (China), BOE (China), IVO (China), Innolux (Taiwan) 6 2 2010-2011 BOE (China), Panda Electronics (China) 7.5 1 2012 Samsung Electronics (Korea) Sharp (Japan), LG Display (Korea), AUO (Taiwan)-IVO (China), CMO 8 7 2011-2012 (Taiwan)*, Century (Taiwan)**, BOE (China), TCL (China) Note: * CMO was acquired by Innolux (Taiwan), a subsidiary of Hon Hai (Nov. 2009). ** Century is Hon Hai’s subsidiary in China. Source: Compiled from reports from each company.China’s demand for LCD televisions has also development projects with partner companies.surged, taking a 19 percent share of the global In addition, Korea has reinforced its funda-market and doubling from 13 million units mental competitiveness by taking the lead inin 2008 to 26 million in 2009.8 As a result, the next-generation technologies such as greenmarket dominance of Chinese television mak- technology and tangible user interfaces, (flexers has grown.9 Despite the fact that the LCD view, ultra-clear and 3D). Moreover, the coun-panel production line in China stands at the try is setting industrial standards and seekingfifth generation, panel makers in Korea, Japan, R&D on future displays such as OLED.Taiwan, and China are making new invest-ments aiming at the Chinese television market.Accordingly, China’s share in the world’s LCD SHIPBUILDING INDUSTRY:KOREApanel production is expected to rise from 3.5 SPURS OFFSHORE DEVELOPMENTpercent in 2009 to above 8 percent in 2012 IN RESPONSE TO CHINA’Swhen the eighth generation line will be op- CHALLENGEerational. The technological gap is forecast tonarrow rapidly thanks to increased investment In 2010, China became the world’s biggestby Korean, Japanese, and Taiwanese compa- shipbuilder according to three major indica-nies, and partnerships. Close cooperation has tors based on the number of contract orders,been especially remarkable between China backlogs and volume of construction. China’s(television sets) and Taiwan (panels) with the shipbuilding industry was able to make suchpromotion of cross-strait cooperation. rapid progress largely thanks to its govern- ment. When orders plunged almost 80 percentIn response, Korea has raised its price com- during the global financial crisis, the govern-petitiveness by developing main materials, ment awarded 72 percent of orders to nationalimproving the efficiency of process manage- shipping companies. It also provided foreignment and pursuing more joint technological ship owners with substantial financing from its8 Jeong Dong-Young et al. (Dec. 2, 2009). “Emergence of China’s semiconductor and LCD industries and Korea’s response.” CEO Information. Samsung Economic Research Institute.9 Just five months after Samsung released its LED television in March 2009, Hisense and TCL also released their products. It only took Hisense three months to follow Samsung in releasing its own 3D LED television in June 2010, reducing the time gap. In China’s television market, domestic companies were ranked in the top five while Japan’s Sony and Sharp were placed sixth and eighth and Korea’s Samsung and LG stood at ninth and tenth (as of the first half of 2010).60 | www.seriquarterly.com
  10. 10. LEE Sung-Ho, KIM Jung-Woomassive foreign reserves worth $2 trillion. Meanwhile, Korea has a large pool of engi- neers and technicians, with the former havingThe rapid growth of China’s shipbuilding especially outstanding capabilities in shipindustry has been made possible by its price design. Korea’s shipbuilding capabilities in-competitiveness and technologies obtained cluding design, production, and maintenancefrom Japan. The Chinese government is also are superior to those of China and are at leastproviding full support with the aim of estab- equal to or better than those of Japan (withlishing itself as the top shipbuilding country. the exception of processing and materials forWages of Chinese field technicians are only certain specialized ships). Based on its highlyone sixth of their Korean counterparts (as of competitive basic design and welding, Korea200810), and the technological gap between builds a large number of customized, sophis-China and other countries is narrowing as ticated ships like container ships, tankers andJapan continues to relocate its shipyards to LNG carriers. On the other hand, China andChina and Southeast Asia. In 2008, China Japan lag behind in those lines as the formersucceeded in producing homegrown LNG lacks the technology while the latter lacks thecarriers and ultra-large container ships. In designers (with only one fourth the number ofthe same year, the biggest shipyard in China, designers in Korea).Dalian Shipbuilding Industry, constructedthe world’s largest dock (674m x 96m). Now, In addition, Korea has continued to makewith the motto “Carrying Chinese freight on significant improvements in productivity byChinese ships,” the government is pursuing enhancing process methods and pursuing“Enlargement” (building large facilities) for innovations. For example, Samsung Heavythe consolidation of shipyards, under a plan to Industries (SHI) transferred blocks made ondevelop world-class shipyards. land weighing about 3,000 tons to floating |Table 8 Three Major Indicators and Market Share of the World’s Shipbuilding Industries in 2010 Indicator/ Country World China Korea Japan 1,000 DWT 146,074 61,205 46,557 31,388 Volume of Construction Share (%) 100 41.9 31.9 21.5 1,000 DWT 120,602 58,459 46,142 7,299 Contract Orders Share (%) 100 48.5 38.3 6.1 1,000 DWT 472,596 192,915 156,605 82,988 Backlog in late December 2010 Share (%) 100 40.8 33.1 17.6 Note: DWT refers to “Deadweight Tonnage,” the amount of weight a ship can safely carry. Source: Qiu Gang et al. (Feb. 2011). China Industry Review. SERI Beijing Office.10 “The World’s No.1,” Loopholes Ahead (July 14, 2008), Nikkei Business, PP. 100-106. April 2011 | SERI Quarterly | 61
  11. 11. Intensifying Competition for Technology in Northeast Asiadocks via a crane vessel to build and launch 2020. China also has 30,000-40,000 research-ships there. Since developing the technique in ers who specialize in hybrid and electric cars2001, SHI increased the weight of the blocks to while Korea has less than 1,000.135,000 tons in 2006 and 10,000 tons in 2007, tobe transferred onto a floating dock. Hyundai Chinese companies plan to release 25 types ofHeavy Industries developed an on-land ship- green vehicles by 2012, among which 13 willbuilding method in 2004 and a T-shaped dry be pure electric cars (i.e. not plug-in hybriddock in 2008 to enhance the efficiency of its or hybrid cars). Korean companies, however,docks.11 announced that they would rollout only two kinds of electric cars during the same period.In the face of China’s challenge, Korea’s ship- In production, compared to car makers inbuilding industry is expanding its role from advanced countries who produce their own“carrier builder” to “ocean developer.” A engines, Chinese car makers jointly developsurge in demand is expected especially for drill module parts such as engines and transmis-ships designed to explore deepwater oil fields, sions, raising their competitiveness on thefloating production storage and offloading whole.facilities (FPSO) for offshore crude oil, andLNG-FPSO and LNG-FSRU (Floating Stor- It is likely that China will achieve its target,age and Re-gasification Units).12 as such activities are fully supported by the government, and the domestic market is the biggest car market in the world, surpassing theAUTO INDUSTRY: CHINA FOCUSES US in 2009.ON GREEN VEHICLES |Table 9 Investment Plans of Korea, China, andWhile Korea has successfully created its own Japan on Green Carsmodel in the current auto market, China has Korea China Japanfailed to come to the forefront in the globalmarket despite its 60-year-long history in the Investment 273.6 billion 17 trillion 1.6 trillion (Period) (2004-2010) (2010-2020) (2007-2012)industry. However, the situation is expectedto change as Korea’s interest and investment Distribution 200,000 units 1 million units 5 million unitsin green cars for the future falls well short of plan (2020)China’s plans. Sources: “China’s rapid rise to a manufacturing superpower… ‘rushing’ for technological development” (Nov. 17, 2010),In the fierce technological competition against Hankyung Magazine. No. 780.Japan over green cars, China has set up a plan BOK Deuk-Kyu (Jan. 27, 2011). “The impact and coun- termeasures to the emergence of green cars and cheapto distribute 5 million green cars by 2020 with cars.” SERI Report.an investment of 100 billion yuan from 2010 to11 On-land shipbuilding refers to building ships on land and delivering them to floating docks using air-cushion skid loaders to launch the ships from deep sea. The T-shaped dry dock method refers to additionally building the ships’ body on a T-shaped dock, which is an extension of 25 percent of the existing dock to double productivity.12 Samsung Heavy Industries exported ship deck plans and maintenance know-how to Atlantico Sul Shipyard with the purpose of exploring oil fields in Brazil in 2006. In so doing, SHI won contracts that include eight drill ships (worth $5.5 in total) by acquiring a 10 percent stake of the company and establishing a partnership.13 “China’s rapid rise to a manufacturing superpower…‘rushing’ for technological development” (Nov. 17, 2010), Hankyung Magazine. No. 780.62 | www.seriquarterly.com
  12. 12. LEE Sung-Ho, KIM Jung-WooAs for Japan, there is a plan to invest 1.6 hardware, and as Korea is in the age of digitaltrillion in developing green cars from 2007 to hardware.2011. Already a superpower in the world’s carmarket, Japan has prepared for the green trend In the wake of the global financial crisis, Japanin the car market. Toyota, maker of the world’s has abandoned its previous strategy of focus-first commercially available hybrid car, the ing on high value added products and is aim-Prius, has long prepared for the future, while ing at the “volume zone”.14 Korea is also react-Nissan plans to release 500,000 electric cars by ing to the new environment with development2015. In the number of patents on green cars, of new products. With China fast emergingJapanese companies far exceed Korean com- as a strong competitor in the world’s marketspanies, holding 30 times more patents. and industries, Korea needs to maintain or enhance its strengths while devising new equa-With the share of green cars expected to tions for success not only by fully harnessingamount to 20-50 percent in 2020, the world the Chinese market but also by developingshould keep a close eye on whether China will new technologies to avoid further narrowinggrow into a strong car producer in the green the technological gap and pioneering newera. markets. Translator: Yi ChiwonCONCLUSION: A NEW FORMULA KeywordsFOR SUCCESS IS NEEDED Technology competition, renewable energy, biomedical industry, IT industry, shipbuilding, greenKorea has become a success story in the carsworld’s shipbuilding, LCD and car industriesthrough its quick decision making and inten-sive advance investment during the recession.However, if Korea’s industries rely on the con-ventional methods deployed thus far, China’srise will significantly hamper their future pros-pects. With the ability to pursue massive in-vestment based on its huge foreign reserves of$2.85 trillion (as of Dec. 2010), and a domesticmarket of 1.3 billion people, China presents adaunting challenge to Korean industries. If thecurrent trend continues, it is likely that Chinawill be a dominant force in the age of green in-novation, as Japan was in the age of analogue LEE Sung-Ho is a research fellow at SERI. His research inter- ests include IT and green industry and infrastructure planning. He14 The term “volume zone” was first used in the 2009 Economy holds a PhD in policy analysis from the RAND Graduate School. White Paper by the Ministry of Economy, Trade and Industry Contact: slee1009@seri.org of Japan. It refers to the social class that has $5,001-$35,000 in disposable household income in Asian countries (China, Hong KIM Jung-Woo is research fellow at SERI. His research areas Kong, Taiwan, Korea, Malaysia, Thailand, Singapore, the include efficiency analysis, impact of R&D, and econometrics. He Philippines, Indonesia, Vietnam and India). The number of holds a PhD in Management Engineering from Korea Advanced people in this class was 8.8 billion in 2008, a six-fold increase Institute of Science and Technology. from the 1990s. Contact: jwkim@seri.org. April 2011 | SERI Quarterly | 63