Choi Tae-hyun, director general for Materials 

and Components Industries at the Ministry of 

Trade, Industry and Energy

A  Korean midsize display equipment maker, SFA, has succeeded in developing a roll and inkjet printer, replacing photolithography. The company now substitutes all photolithographic devices imported from Japan.

SFA is one of the Korean companies that has successfully developed materials and parts previously imported from Japan and has contributed to cutting down the trade deficit in favor of Japan. 

Choi Tae-hyun, director general for Materials and Components Industries at the Ministry of Trade, Industry and Energy, (MOTIE), said his ministry announced on Jan. 16 that the Korean materials and parts industry chalked up a record $97.6 billion trade surplus over Japan last year thanks to the localization of core technologies. The figure represents some 2.2 times as much as the $44.1 billion Korea posted in overall trade surplus during last year. Korea’s dependence on imports from Japan dropped to a record low of 20.8 percent in 2013 from 23.0 percent in 2012. 

If this trend continues, the Korean materials and parts industry is predicted to grow to $100 billion in trade surplus during this year. MOTIE said that the industry is projected to export $275 billion and import $173.8 billion for a $101.2 billion trade surplus during this year, and its dependence on Japanese imports will plunge to a range of 10 percent. 

A look at 2013 figures on materials and parts exports and imports showed that the industry has made a strong showing in exporting materials and parts to China, as the industry saw China’s portion of exports surge to 34.8 percent in 2013, up 5.46 percent from the previous year, to $91.5 billion. The industry’s trade surplus between Korea and China stood at a record high of $47.2 billion.

Korea has emerged as the biggest materials and parts exporter to China, surpassing Japan. Korea’ dependence on materials and parts imports from China swelled to 26.8 percent in 2013. The surge was owed to an increase in Korean finished product makers’ rising purchases from Korean parts makers making inroads into China and a rise in importing primary metal and nonmetal minerals that are not produced in Korea. 

MOTIE officials said it is significant that such value-added segments as electronic parts, compounds, and chemical products have posted trade surpluses.

The industry’s trade deficit between Korea and Japan, the industry’s Achilles heel, declined $1.7 billion to $20.5 billion in 2013, the third such drop in as many years. 

A drop in the industry’s dependence on imports from Japan was attributable to diversifying import sources, MOTIE officials said. Korea’s textile, rubber, plastic products, and other labor-intensive product imports surged 0.3 percentage points to 26.8 percent from China and 0.7 percentage points to 9.2 percent from ASEAN countries.

Korean companies’ aggressive R&D activities to localize materials and parts technologies also made a point. The government shouldered 3.6 trillion won in extending support to R&D activities related to the Korean materials and parts industry. The industry racked up a record high of exporting $177.6 billion worth of materials and parts to the United States and Europe thanks to the effectuation of KORUS FTA and Korea-Europe Free Trade Agreement.   

The industry still has a daunting task: a chronic trade deficit favoring Japan. In particular, three segments accounted for 50.7 percent of the $20.5 billion trade deficit between Korea and Japan in 2013: a $4.4 billion trade deficit for chemical products, a $3.9 billion trade deficit for electronic goods, and a $2.1 billion trade deficit for precision machineries. MOTIE officials said the government plans to expand support for the development of advanced technologies and technology self-sufficiency to solve a chronic trade deficit favoring Japan, centered around value-added products.