AutoParts 1216

Overview of Koreas Industries 2010
Parts and Materials Auto Parts Displays Communications Equipment Semiconductors Wind Power Generation Tourism and Leisure
Promising Investment Opportunities
CONTENTS
02_ Industry Overview 05_ Position and Status of the Korean Automotive Industry 16_ Competition Status 20_ The Changing Environment and Promising Products of the Auto Parts Industry 22_ Promising Investment Regions in the Auto Parts Industry 24_ Government Policy and Incentives 28_ Case Study of Successful Inbound FDI: Bosch 29_ Relevant Organizations
02
Auto Parts
1. Industry Overview
Automotive Industry Statistics (2009)

Description Automotive industry Auto industry No. of manufacturers No. of employees Production (KRW billion) Shipments (KRW billion) Value-added (KRW billion) Exports (US$ million) Imports (US$ million) Trade balance (US$ million) Overseas direct investment (US$ million) Inbound foreign investment (US$ million) Facilities investment (KRW billion) Koreas Auto Parts Industry 3,037 259,435 118,296 117,807 37,672 37,121 5,867 31,253 813 505 3,110 35 93,674 64,950 64,704 21,077 25,411 2,489 22,921 457 417 1,889 Auto parts industry Engine parts Body parts 3,002 165,761 53,346 53,103 16,595 11,710 3,378 8,331 356 88 1,220 591 29,771 7,876 7,832 2,801 30 626 38,048 11,342 11,298 3,718 82 Other parts 1,785 97,942 34,128 33,973 10,075 243 -
Source: Korea National Statistical Office (NSO); KOTIS (www.kotis.net); Ministry of Knowledge Economy (MKE); Korea Development Bank (KDB); ExportImport Bank of Korea NB: Number of manufacturers and employees, shipments and production are as of 2008.
Management Performance of the Auto Parts Industry

Description Growth Sales growth rate Growth rate of total assets Growth rate of stockholders equity Profitability Interest expenses and net income to total assets Net income to capital stock Operating income to sales Stability Stockholders equity to total assets Debt ratio Total borrowings and bonds payable to total assets Productivity Property, plant and equipment per capita Gross value-added per capita Gross value-added to output
Source: Bank of Korea (BOK) NB: The figures are as of Aug. 2010.
(Unit: %, KRW million)
2003 13.4 11.7 20.2 9.1 57.9 5.9 38.9 157.1 26.8 71 60 26.4
2004 18.0 14.2 17.5 8.4 55.1 5.4 37.6 166.3 26.7 77 62 25.3
2005 19.0 16.2 18.2 8.6 64.3 4.8 39.2 155.2 27.5 86 64 22.7
2006 10.6 11.6 11.0 7.3 52.2 4.8 39.7 151.8 28.1 90 68 23.3
2007 9.7 8.1 13.4 7.6 62.3 4.6 40.6 146.2 27.5 95 67 22.1
2008 4.2 15.6 25.1 6.2 48.2 4.3 43.9 127.6 28.6 99 68 22.1
Industry Overview
03
Production of Auto Parts by Item

Detailed Item 2006 2007 2008
(Unit: KRW billion)
No. of Production Shipments No. of Production Shipments No. of Production Shipments manufacmanufacmanufacturers turers turers Engine parts Body parts Suspension systems and parts Brakes and parts Power transmission and parts Steering systems and parts Wheels and parts Radiators and parts Exhaustion systems and parts Safety seat belts and parts Air bags and parts Fuel tanks Heater units Other parts Wiring harnesses Electric parts 839 702 150 336 502 263 84 53 165 47 38 58 17 675 n/a n/a 6,084 10,438 1,301 3,495 7,587 2,518 1,182 434 2,047 357 544 634 103 6,893 n/a n/a 6,052 10,431 1,301 3,482 7,558 2,510 1,178 436 2,031 356 544 633 103 6,871 n/a n/a 655 592 110 245 446 217 71 39 123 40 28 38 16 520 89 32 6,863 10,498 1,427 3,632 8,760 2,489 1,113 372 2,041 374 706 404 188 6,998 1,866 1,050 6,839 10,497 1,427 3,625 8,735 2,488 1,102 373 2,024 371 709 403 186 6,977 1,858 1,048 614 562 107 234 408 190 58 32 122 36 25 34 17 463 78 31 7,805 10,959 1,329 3,802 7,993 2,540 1,087 370 2,059 435 755 315 140 7,743 1,764 523 7,763 10,939 1,325 3,803 7,954 2,538 1,072 371 2,054 435 751 315 140 7,733 1,759 524 Koreas Auto Parts Industry
Source: NSO NB: The figures for 2006 are based on manufacturers with at least five employees, while those for 2007 and 2008 are based on manufacturers with at least ten employees.
Image courtesy of KIA Motors
Note: For more detailed information about the scope of the parts and materials industry, see the Enforce Decree to the Act on Special Measures for the Promotion of Specialized Enterprises, etc. for Components and Materials.
04
Auto Parts
Auto Manufacturers in Korea (2009)

Hyundai Motor Foundation Location Dec. 1967 Ulsan, Jeonju, Asan Kia Motors Dec. 1944 Gwangmyeong, Hwaseong, Gwangju 32,616 Passenger cars, SUVs, CDVs, buses, trucks, CSVs 18,416 1,450 1,137 413 736 China, Slovakia, USA GM Daewoo Aug. 2002 Gunsan, Changwon, Bupyeong 16,922 Passenger cars, CDVs, buses, trucks Ssangyong Motor Jan. 1954 Pyeongtaek, Changwon Renault Samsung Sep. 2000 Busan
No. of employees Types of vehicles produced
55,984 Passenger cars, SUVs, CDVs, buses, trucks, CSVs 31,859 2,962 1,607 703 911 China, India, Turkey, USA, Czech Republic
4,763 Passenger cars, SUVs
7,539 Passenger cars
Sales (KRW billion) Net income (KRW billion) Production (1,000 units) Domestic demand (1,000 units) Exports (1,000 units) Overseas factories Koreas Auto Parts Industry
9,533 -344 532 115 429 -
1,067 -346 35 22 13 -
3,656 80 190 134 56
Source: Korea Automobile Manufacturers Association (KAMA); business and audit reports of each company NB: Production, domestic demand, and exports are as of 2007.
Image courtesy of HYUNDAI Motor
GM DAEWOO
SSANGYONG Motor
RENAULT SAMSUNG
KIA Motors
Position and Status of the Korean Automotive Industry
05
2. Position and Status of the Korean Automotive Industry
Position and Status of the Auto Industry

The automotive industry, a key source of strength in the manufacturing sector, accounted for 10.5% of Koreas production output, 10.2% of exports, and 10.6% of the workforce as of 2008. Position of the Automotive Industry (2008)
Production (KRW billion) Automotive industry Percentage of automotive in the manufacturing sector 118,296 10.5 Value added (KRW billion) 37,672 10.3 Employment (thousand persons) 259 10.6 Exports (US$ million) 37,122 10.2 Trade balance (US$ million) 31,253 Facilities investment (KRW billion) 3,045 6.9
Source: Korea Institute for Industrial Economics & Trade (KIET), ISTANS Major Industry Indicator NB: 1) Figures for exports, trade balance and facilities investment are as of 2009. 2) Includes auto parts.
Koreas Auto Parts Industry
The automotive industry is currently in the initial stage of maturity, having gone through the phases of assembly production and localization during the 1970s, mass production and export during the 1980s, and the independent development of models during the 1990s. As of 2009, Korea had the worlds fifth largest auto industry, accounting for 5.7% of global production, and ranked 12th and 4th worldwide in terms of domestic sales (1.39 million vehicles) and exports (2.14 million vehicles), respectively. Development Stages of the Korean Automotive Industry
High Japan USA Germany China Korea France
Low
Introduction
Source: KIET
Growth
Maturity
Decline
1) For the scope of the parts and materials industry, refer to Article 2 of the Act on Special Measures for the Promotion of Specialized Enterprises, etc. for Components and Materials and the provisions under Article 2 (The Scope of Parts and Materials) of the Enforcement Decree to the same Act.
06
Auto Parts
Global Top 5 Auto-producing Countries

2007 Country Production 2008 Share in the Country global market (%) 15.9 14.7 12.2 8.5 5.6 Japan China USA Germany Korea Production 2009 Share in the Country global market (%) 16.3 13.1 12.3 8.5 5.4 China Japan USA Germany Korea
(Unit: 1,000 vehicles)
Production
Share in the global market (%) 22.5 12.9 9.3 8.5 5.7
1 2 3 4 5
Japan USA China Germany Korea
11,596 10,751 8,882 6,196 4,086
11,563 9,299 8,671 6,041 3,826
13,790 7,934 5,696 5,206 3,512
Source: KAMA
The image of Korean-made cars has improved significantly of late in overseas markets. Korean car manufacturers, once better known for their price competitiveness, are now recognized as offering higher quality competitiveness in the markets for small- and medium-size passenger cars and small SUVs. Led by these improvements, Korea is displaying its ability, raising market share in the major automotive markets including the U.S. and China even in the midst of a sluggish global automotive industry which has been seriously affected by the global financial crisis. While the big 3 auto makers have been performing sluggishly in the U.S. market, Korean auto makers have increased their market share up to 7% through the continuous improvement of quality and brand image and aggressive marketing.
Market Share Changes in the U.S. Automotive Market

60.0 54.9 50.0 40.0 30.0 20.0 10.0 0.0
Source: Wards
(%)
Korea 51.8 48.1
Japan
USA
Europe 44.8
35.0
37.1
39.7
40.5
4.5 2006
5.6
4.8 2007
5.9
5.1 2008
7.8
7.1 2009
8.4
1) The scope of parts and materials industry is based on Article 2 of the Special Act on the Development of the Parts and Materials Companies, Etc. and Article 2 (Scope of Parts and Materials) of the Implementation Decree on the same Act.
07
Demand and Supply in the Auto Industry In 2009, although global demand for automobiles declined significantly due to the economic recession caused by the global financial crisis, Korea saw soaring domestic sales as the Korean government implemented a new policy to promote domestic demand for vehicles. Exports declined in line with the global economic recession; however, as the margin of reduced production was smaller than that of its rivals, Korea ended up increasing its market share in global production. Domestic demand remained sluggish at below 1.2 million cars per year, down from 1.6 million cars in 2002, but returned to a significant increase in 2009 brought about by the Korean governments implementation of a new policy to cut taxes on new vehicle purchase amid the economic recession caused by the global financial crisis.
Demand and Supply Status in the Automotive Industry

2008 YoY change (%) Production Domestic demand Exports Imports Overseas production
Source: KAMA
(Unit: 1,000 vehicles, US$100 million)
2009 YoY change (%) 3,512 1,394 2,148 69 1,901 -8.2 20.8 -19.9 -13.8 30.5
2010 H1 2,099 710 1,388 49 1,232 YoY change (%) 37.3 14.7 48.0 53.1 49.5 Koreas Auto Parts Industry
3,826 1,154 2,683 80 1,457
-6.4 -5.3 -5.8 9.6 25.5
Domestic demand underwent a downward trend in 2008 due to the credit crunch and worsening consumer confidence resulting from the economic recession, and the trend remained the same until the 1st quarter of 2009. From the 2nd quarter of 2009, domestic auto sales increased rapidly as the Korean government began cutting taxes on new vehicle purchase as part of its efforts to boost domestic demand.
Demand and Supply Trends in the Automotive Industry

4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 1991
Source: KAMA
(Unit: 1,000 vehicles)
Production Exports
Domestic demand Overseas production
1993
1995
1997
1999
2001
2003
2005
2007
2009
08
Auto Parts
Since 2002, exports in the automotive industry have increased rapidly as auto makers have strengthened their export strategies, improved the image of quality in overseas markets, and diversified export items as part of their efforts to overcome sluggish domestic demand. Despite unfavorable external conditions including overseas rivals growing emphasis on small passenger cars, which have been the main export item of Korea, and local production at factories operating overseas, the Korean auto industry has maintained an upward trend in exports by focusing on emerging markets in the Middle East, Central and South America, and Eastern Europe, and by pursuing diversification of its export items. As of 2009, by region, North America was the largest importer of Korean auto parts at 28.3% (U.S.A. 23.5%), followed by the Middle East (19.5%), Western Europe (14.1%), and Central and South America (13.2%), showing signs of a decline in exports to North America and Western Europe and an increase in exports to the Middle East and Central and South America. Overseas production, which exceeded 100,000 vehicles in 2002, has rapidly grown to post 1.88 million in 2009, reaching almost 2 million. In 2009, production increased in emerging markets including China, India, and the Czech Republic, posting growth of 29.5% year-on-year. In China, the worlds fastest growing market, Korean auto makers annually produced nearly one million cars, sourcing 85% of parts locally and pursuing localization strategy by revising domestic models to suit the tastes of Chinese consumers. Since beginning production in 2005, the U.S. factory has achieved an annual production capacity of 600,000 and has set plans to expand production by localizing parts and establishing technology and design institutes. Therefore, the global strategies of Korean auto makers are likely to become more sophisticated, thus marking a departure from previous models which focused on the establishment of production facilities. India will be used as a global production base for small passenger cars, while Turkey and Slovakia will play an important role as a strategic entry point to the European market. Overseas production is planned to be expanded in the emerging markets including Russia and Brazil.
Global Production Strategies of the Korean Automotive Industry

Eastern Europe
Support for European market entry Production capacity: 600,000 units
Russia
Development of new market (in progress)
China
Global growth engine Production capacity: 1.03 million units
USA
Improvement of brand value Production capacity: 600,000 units
Turkey
Eurasia region export base Production capacity: 100,000 units
India
Global production base for small cars Production capacity: 600,000 units
Brazil
Development of new market (in progress)
09
Status of the Auto Parts Industry

Demand and Supply in the Auto Parts Industry As of 2008, the auto parts industry accounted for 4.8% of Koreas manufacturing industry, with a total production amount of KRW53 trillion, and 4.5% with value added at KRW16 trillion. Position of the Auto Parts Industry (2008)
Production (KRW billion) Auto parts industry Percentage of auto parts in the manufacturing sector 53,346 4.8 Value added (KRW billion) 16,595 4.5 Employment (thousand persons) 166 6.8 Exports (US$ million) 11,710 3.2 Trade balance Facilities investment (US$ million) (KRW100 million) 8,331 1,221 2.8
Source: Korea Institute for Industrial Economics & Trade (KIET), ISTANS Major Industry Indicator NB: Figures for exports, trade balance and facilities investment are as of 2009.
The recent growth of the domestic auto parts industry can be attributed to the significant development of the domestic auto industry. Therefore, despite declining demand for automobiles affected by the global financial crisis, the domestic auto parts industry has managed relatively well compared to its overseas rivals. This can be attributed to an increase in demand for domestic auto parts from overseas auto makers expanding their global sourcing and to a continuous increase in the delivery amount of domestic auto makers due to their increased production and overseas investment. Recently, the auto parts industry has seen the share of exports in total sales increase, and that of the OEM go into decline, due to the growth of direct exports to global auto makers and parts manufacturers, and an increase in the export of domestic parts to the overseas factories of domestic auto makers. The share of OEM in total sales reached 86.7% in 2002, and then decreased to 76.8% in 2009, while that of the exports stood at 7.6% in 2002, and then increased to 18.6% in 2009. Sales by Year in the Auto Parts Industry
Sales OEM 2005 2006 2007 2008 2009 326,834 360,004 386,409 368,486 342,236 A/S 22,878 23,400 23,185 22,109 20,533 Exports 67,610 76,704 92,306 105,271 82,689 Total 417,322 460,108 501,900 495,866 445,458 YoY change (%) 14.1 10.3 9.1 -1.2 -10.2
(Unit: KRW100 million)
Source: Korea Auto Industries Coop. Association (KAICA)
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Auto Parts
Exports of auto parts have shown a sharp upward trend since the mid-2000s; however, struck by the recession of the global automotive market, which was affected by the global financial crisis, exports started to decline in 2009. Exports of auto parts demonstrated a rapid recovery after the second half of 2009, posting remarkable growth of 89.2% in the first half of 2010 year-on-year.
Imports and Exports in the Auto Parts Industry

16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 Koreas Auto Parts Industry
604 594 564 1,817 3,134 5,446
(Unit: US$ million)
Trade balance Exports Imports

9,602 8,400 6,835 8,332
2000
Source: KOTIS
2001
2002
2003
2004
2005
2006
2007
2008
2009
The upward trend in exports may mainly be attributed to demand from Korean factories operating in India and China. Furthermore, the surge in exports of OEM parts to overseas auto makers demonstrates that the competitiveness of the Korean auto parts industry has greatly improved. In the aftermath of the global financial crisis, Western auto parts manufacturers struggled with the deterioration of businesses, bankruptcies, and weakened competitiveness. As a replacement for the Western auto parts, demand for domestic auto parts with quality and price competitiveness increased, leading to a rapid recovery in the export of domestic auto parts. Meanwhile, with regard to major import and export items, body and other parts, gearboxes, and clutches and parts can be cited as export items, while import items include gearboxes, engine parts, and fuel pumps for internal combustion engines. Imports from Japan and Germany of gearboxes are increasing as multi-step gearboxes for luxury cars and automated shift gearboxes (ASG) for commercial vehicles depend on imports. With the recent expansion of domestic production of environment-friendly vehicles, the import of GDI engine fuel pumps and ECUs for hybrid vehicles has increased, together with an increase in buy-back from Korean parts manufacturers operating in China.
Image courtesy of SSANGYONG Motor
11
Imports and Exports of Major Auto Parts

HS Exports 8708999000 8708290000 8708400000 8708930000 8708940000 8512900000 8708700000 8413304000 8511909000 Item Other parts and accessories Auto body and other parts (excludes seat belts) Gear boxes Clutches and parts Steering wheels, steering columns and steering boxes Parts for lighting or signaling equipment Road wheels and parts Fuel pumps for internal combustion engines Parts for electrical ignition or starting equipment for internal combustion engines Silencers (mufflers) and exhaust pipes Gearboxes Other parts and accessories Parts for diesel engines Fuel pumps for internal combustion engines Auto body and other parts (excludes seat belts) Steering wheels, steering columns and steering boxes Road wheels and parts Parts for folk-lift trucks and other works trucks Drive axles equipped with differential gears Parts for lighting or signaling equipment 2009 Share (%) 8,842 630 308 159 153 144 133 120 99 78.1 5.6 2.7 1.4 1.3 1.3 1.2 1.1 0.9
(Unit: US$1,000)
2008 10,795 619 271 174 189 144 227 81 140
8708920000 Imports 8708400000 8708999000 8409992000 8413304000 8708290000 8708940000 8708700000 8431200000 870850 8512900000
Source: KOTIS
86 901 766 321 121 120 118 72 56 48 45
0.8 30.3 25.8 10.8 4.1 4.0 4.0 2.4 1.9 1.6 1.5
102 1,213 Koreas Auto Parts Industry 939 410 170 143 124 89 95 61 48
As domestic auto makers operating overseas increase local production, an increasing number of auto parts manufacturers are entering overseas markets on their own or in alliance with their trading partners. As of the end of 2008, 110 domestic auto parts manufacturers were operating overseas with roughly 310 factories, demonstrating the prevalence of globalization in the auto parts industry. With the global expansion of the operation and production volume of auto makers, the auto parts industry will likely see an increase in exports for the time being until parts can be sourced at the local level. From the long-term perspective, the supply and demand system will likely be kept at a stable level through the localization of auto parts, as the auto parts industry shifts its focus toward global sourcing with the popularity of the buy-back phenomenon. However, if the domestic production base is not to be expanded, domestic demand for auto parts will likely remain at current levels.
Note: For more detailed information about the scope of the parts and materials industry, see the Enforce Decree to the Act on Special Measures for the Promotion of Specialized Enterprises, etc. for Components and Materials. Note: For more detailed information about the scope of the parts and materials industry, see the Enforce Decree to the Act on Special Measures for the Promotion of Specialized Enterprises, etc. for Components and Materials.
12
Auto Parts
Current Status and Trends of Foreign Direct Investment into Korea As of the end of 2008, 250 foreign companies were operating in the domestic auto parts industry. Foreign investment companies were mainly supplying key parts with high-level technology, and as their parent companies had greater negotiating power, their operating income to sales exceeded the industry average. Most of the worlds top 10 auto parts manufacturers were investing in the domestic auto parts industry through their respective subsidiaries. Delphi, Visteon and JCI of the U.S., Bosch, Siemens and ZF of Germany, Yajaki and Denso of Japan, and Valeo of France were all active investors doing business in the domestic auto parts industry. In most cases, foreign investors owned more than 50% of the equity interests in the foreigninvested firms in which the worlds top 10 auto parts manufactures are participating, while only three possessed less than 50% in foreign equity ownership.
Current Status of FDI in the Korean Auto Parts Industry by Year

Prior to 1999 No. of foreign companies Investment amount
Source: KAICA
(Unit: US$ million)
2000
2001
2002
2003
2004
2005
2006
2007
2008
139
17
18
13
14
14
12
11
1,271
226
36
150
821
321
183
76
n/a
n/a
Domestic parts manufacturers, which are controlled by the worlds top-tier firms, tend to have highlevel technology and greater negotiating power versus purely domestic parts manufacturers in their relations with auto makers. Therefore, the existing trading relationship, where auto makers are at an advantage over their parts suppliers, is likely to change significantly. As foreign investors acquire domestic parts manufacturers which have been subcontractors of domestic auto makers, domestic parts manufacturers will likely face increased global competition as they are integrated into the global sourcing networks of foreign-invested companies. Large auto parts manufacturers with advanced technologies enter Korea with the expectation of using the country as an axis for executing their global network strategies. Global auto parts suppliers tend to have majority equity ownership in their invested firms in Korea as a part of their strategy. Despite the presence of major auto producing countries, notably Japan and China, Korea is seen as a country of significant strategic importance based on such factors as market size and production environment.
13
The Worlds Major Auto Parts Manufacturers Operating in Korea

Investor company TRW Denso Delphi Foreign-invested company (equity ownership) Shinhan Valve (25%) Denso PS (44%) Delphi Korea (100%) Daesung Electric (49.5%) Packard Korea Inc. (50%) Korea Delphi Automotive Systems (50%) Robert Bosch Robert Bosch Korea (100%) Supplied parts Engine valves Electric parts, air conditioning systems Seatbelts, air bags Electric parts Electric parts Electric parts, steering and brake systems Fuel injection system, electronic control systems Engine control, fuel injection systems Engines, gearbox parts A/C compressors Clutches, friction materials Air conditioning systems Crash pads, trims Embedded modules Interiors Koreas Auto Parts Industry
Kefico (50%) Magna Powertrain Valeo Magna Powertrain Korea Inc. (100%) Valeo Climate Control Korea (100%) Valeo Pyeong Hwa (49%) Visteon Halla Climate Control (70%) Duckyang Ind. (51%) Visteon Interiors Korea (51%) Johnson Controls Johnson Controls Automotive Interiors Korea (100%) Johnson Controls Automotive Korea (100%) Continental Automotive Systems Corp. (65%)
Continental AG
Fuel injection systems, electronic control systems Exhaust systems
Faurecia
Faurecia Exhaust Systems Korea (100%)
Current Status of Auto Parts Manufacturers Hyundai Mobis (KRW10,633 billion), Wia (KRW3,118 billion), Mando (KRW1,512 billion), Halla Climate Control (KRW1,409 billion) and Hyundai Powertech (KRW1,304 billion) are the five leading Korean auto parts manufacturers whose annual sales each exceeded 1 trillion won as of 2009. These are first-tier producers and suppliers of such major parts as transmissions, axles, and brake systems. Of the five companies, Hyundai Mobis, Mando, and Wia - through the delivery of modules perform part of the assembly process conducted by the auto makers, which explains their designation as 0.5-tier parts suppliers. In addition, some manufacturers like Halla Climate Control, SL, and Dymos have also been working to become module-based producers through the manufacture of certain modules and submodules.
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Auto Parts
Koreas Top 15 Auto Parts Manufacturers

Company 1 2 3 4 5 Hyundai Mobis Wia Dymos Hyundai Powertech Korea Delphi Automotive Systems Dukyang Ind. Halla Climate Control Sejong Industrial Mando Kyungshin Industrial Kefico Heesung Catalysts Corp. Johnson Controls Automotive Korea S&T Daewoo Faurecia Exhaust Control Systems Korea Delivery amount 5,354 2,096 680 602 595 Sales 10,633 3,118 909 1,304 724 No. of employees 6,017 1,950 1,100 1,133 2,019 Major products Modules & systems Transmissions, axles Power-trains, seats Gearboxes
(Unit: KRW billion)
Brake, steering and power transmission systems
6 7 8 9 10 11 12 13 Koreas Auto Parts Industry
544 533 502 402 352 333 318 313
592 1,409 357 1,512 606 708 521 211
759 1,710 786 3,750 1,116 977 n/a 572
Crash pads Air conditioning systems Mufflers, catalytic converters Brake, steering and suspension systems Wire harnesses, junction boxes Engine control units, power-train control units Automotive catalysts Seats
14 15
304 300
440 n/a
1,200 214
Chassis, air bags, engine parts Exhaust manifolds, catalytic converters
Source: KAMA NB: Based on delivery amount as of 2009.
Image courtesy of SSANGYONG Motor
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Global Rankings of Major Auto Parts Manufacturers

2007 Company 1 2 3 Denso (Japan) Bosch (Germany) Magna International (Canada) Continental AG (Germany) Delphi (U.S.) Sales 37,510 34,000 25,645 2008 Company Bosch (Germany) Denso (Japan) Continental AG (Germany) Magna International (Canada) Aisin Seiki (Japan) Sales 33,901 27,762 25,012 2009 Company Denso (Japan)
(Unit: US$100 million)
Sales 28,731 25,617 20,585
Bosch (Germany) Aisin Seiki (Japan)
25,000
23,295
Continental AG (Germany) Magna International (Canada) LG Chem (Ranked 6th)
18,744
22,283
20,796
17,367
Korean companies
Hyundai Mobis (Ranked 27th)
6,074
Hyundai Mobis (Ranked 19th)
8,845
13,080
Hyundai Mobis (Ranked 12th) Mando (Ranked 76th) 2,367 Mando (Ranked 73rd) 2,200 Mando (Ranked 61st) Wia (Ranked 65 )
Source: Automotive News
th
11,209
2,137 1,096 Koreas Auto Parts Industry
Of the companies on the list of the global top 100 auto parts manufacturers by sales in 2009, batteries producer LG Chem made its debut on the list, ranking 6th at US$13 billion, by expanding the development of electric vehicles, while Wia, which specializes in transmissions, also entered the list for the first time, ranking 65th at US$1.9 billion, as its sales remained on an upward trend due to its parent company Hyundai Motors increased sales. The sales amount of Hyundai Mobis stood at US$11.2 billion, rising 7 places from 19th to 12th yearon-year, while Mando ranked 61st, rising 12 steps from 73rd to 61st from the previous year with a sales amount of US$2.1 billion. The domestic auto parts industry expanded its world market share as the sales and production of domestic auto makers increased along with the exports and overseas production of domestic parts manufacturers. In terms of sales, the world market share of the top 5 companies rose to 3.2% in 2007 from 1.3% in 2001.
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Auto Parts
3. Competition Status
Competitiveness of the Korean Auto Parts Industry

In order to pursue continuous growth outside of the sluggish domestic market, the domestic auto parts industry is targeting overseas markets. Some auto parts manufacturers grew into large companies and succeeded in specialization and the acquisition of certain core technologies, allowing cooperative design with auto makers. However, compared to Japanese and Western auto parts suppliers, Korean auto parts manufacturers are smaller in size, and have relatively less competitiveness in terms of technology and accessibility to overseas markets.
Competitiveness in the Auto Parts Industry (Korea versus Japan)
Japan = 100
124 Koreas Auto Parts Industry
80
85 75 73
78
75
Production Technology Quality
Price
Design technology
Production technology
Technology for development of new products
Source: Korea Automotive Research Institute (KARI)
With regard to the competitiveness of the Japanese and Korean auto parts industries, Korea has the upper hand in price competitiveness, whereas Japan has the advantage in terms of quality and technological competitiveness. In terms of price competitiveness, the Korean auto parts industry has a 25% advantage over Japans, while production and quality competitiveness stands at 80-85% of the level of the Japanese industry, thus showing a narrowing of the gap between the two countries. However, technological competitiveness stands at merely 75% of the level of the Japanese industry, showing a wider gap than in the areas of quality, production and price competitiveness. In particular, design technology is showing the widest gap with Japan.
Competition Status
17
Competitiveness of Environment-friendly Vehicles The history of the development of environment-friendly vehicles in Korea is very short, which explains its weakness in the patent field. However, due to the establishment of infrastructures in the relevant industries, Korea is assessed to possess technology that reaches 70-80% of the level of advanced countries. With regard to motors and batteries, which are major parts for hybrid vehicles, the technology of a single item reaches nearly 90% of the level of advanced countries, while the technology of transmissions for hybrid vehicles stands at a low level, at a mere 50-65% of the level of advanced countries. Comparisons of Technology Competitiveness of Environment-friendly Vehicles
Clean diesel vehicle Key technology Common rail fuel injection system After-treatment system Turbo-charging system Advanced combustion technology for diesel engine 65% Koreas Auto Parts Industry
Compared to advanced countries (Europe) (Plug-in) Hybrid vehicle Key technology
60%
60%
65%
Efficiency of gearbox transmission 85%
Density of motor output
Density of inverter Density of battery power energy
Advanced countries (Japan) Korea Compared to advanced countries Electric vehicle Key technology
1.11kW/kg
4.7kW/L
90Wh/kg
82% 96%
1.1kW/kg 99%
3.1kW/L 66%
70Wh/kg 78%
Density of motor output
Density of energy storage
Rate of independent reduction of weight 28%
Reaction to brake system
Advanced countries (Japan) Korea Compared to advanced countries

Source: MKE
3.2kW/kg
142Wh/kg
10ms
2.8kW/kg 88%
145Wh/kg 102%
0%
12ms 120%
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Auto Parts
As Korea has accumulated experience of developing motor systems in past electric vehicle development projects, motors for hybrid vehicles, as a single item, have reached a high level of technological development. However, technology development at the system level is still insufficient. Conversely, with regard to batteries, as domestic auto parts suppliers including Samsung SDI and LG Chem focused on developing lithium-ion batteries, which attracted attention as batteries for environment-friendly vehicles, Korea has secured technology and market share and is ready to compete with Japanese suppliers.
SWOT Analysis of the Korean Auto Parts Industry

Strengths - Existence of the relevant industrial infrastructure (electronics, information and communications, machinery such as molds and tools, and material industry including metals and chemicals) - Existence of logistics and communication infrastructure (between consumers and suppliers of parts and raw materials) Koreas Auto Parts Industry - Secured competitive edge in terms of middle-level quality products (quality and technology are competitive considering lower price) - Rapid improvement of quality and technology - Advanced IT and communications technology Opportunities - Increased global outsourcing from advanced manufacturers - Weakening competitiveness of Western auto parts manufacturers affected by the global financial crisis - Increased market share in the overseas sales of domestic auto makers - Rising nearby markets including China and India - Rising Korean and Japanese auto makers - Conclusion of FTAs with major vehicle trading countries in progress Threats - Price of raw materials remaining on an upward trend - Parts manufacturers in emerging countries (China and India) improving competitiveness through overseas M&As - Changes in the structure of the auto parts industry due to the trend oriented toward environment-friendly vehicles Weaknesses - Insufficient number of specialized and large-size parts manufacturers - Insufficient investment in research and development - Insufficient key technologies for chassis and power-trains - High dependence on domestic auto makers - Mass production of environment-friendly vehicles lags behind advanced countries.
Competition Status
19
Trading Relationship in the Auto Parts Industry

The Korean auto parts industry consists of parts suppliers numbering nearly 900 in the first tier and up to 3,000 in the second and third tiers. Nearly 13.0% (118 companies) of those in the first tier are large firms, while 87.0% (792 companies) are small- and medium-size. The total delivery amount stood at KRW34 trillion as of 2009. Small and medium-sized manufacturers account for the absolute majority of domestic manufacturers. However, as the importance of the auto parts industry within the automotive industry increases as a whole, the Korean auto parts industry has also seen an increase in the percentage of large firms (from 7.0% for 2001 to 13.0% for 2009). The exclusive trading system, which has been a target of criticism due to the dependence of auto parts manufacturers on their respective parent companies, has shifted toward an open trading system since the Asian financial crisis, which has allowed them to transact with a variety of companies on the demand side. Companies with only one trading partner accounted for 50.0% of the entire auto parts companies in 2009, down from 55.4% in 2001. Delivery of Auto Parts to Auto Makers
Delivery amount 2008 Hyundai Motor Kia Motors GM Daewoo Ssangyong Motor Renault Samsung Daewoo Bus Tata Daewoo Commercial Vehicle Total 172,436 89,667 74,392 14,315 10,234 3,586 3,865 368,495 2009 169,791 96,006 49,967 15,375 4,005 2,491 4,601 342,236
(Unit: KRW100 million)
No. of auto parts companies Percentage of making delivery to each company delivery amount 2008 2009 355 359 307 222 141 187 204 1,775 357 354 331 163 214 197 208 1,824 53.3 52.1 52.4 42.1 37.5 55.0 67.3 52.1
Source: KAICA NB: The percentage is delivery amount vis-a-vis each auto makers sales.
By item, chassis, power trains, and electric parts, which boast a high level of technology, are traded with a large number of auto makers, while parts relating to suction and exhaust devices and exteriors and interiors are traded with a relatively smaller number of auto makers. No. of Companies with Multiple Trading Partners (2009)
No. of parent companies in transaction Total 1 No. of companies on the supply side %
Source: KAICA
2 219 24.1
3 109 12.0
4 59 6.5
5 47 5.2
6 or more 21 2.3 910 100.0
455 50.0
20
Auto Parts
4. The Changing Environment and Promising Products of the Auto Parts Industry
The Changing Environment of the Auto Parts Industry
Higher oil prices, diversification of customer needs, growing emphasis on the environment protection, and the development of green technologies have had the effect of accelerating the development of products and technology related to environment-friendly vehicles, as well as expanding the range of application of IT technology to vehicles and parts, which is likely to facilitate the convergence of technologies. Innovation in the automotive industry will move toward the development of new materials and smaller and lighter vehicles, and the application of electronics and information technologies. From the long-term perspective, as new parts continue attracting attention due to the rising of environment-friendly vehicles, and the dependence on internal combustion engines continues decreasing, it is likely that the key parts industry for environment-friendly vehicles will continue to grow while the parts industry related to power-trains will decline significantly. The Changing Environment and Developing Technology of the Auto Parts Industry
Information technology
- ITS - Intelligent vehicles
Electronics
- Virtual technology - Cutting-edge electric parts - Prevention and safety technology - High-level credibility and quality technology
Environment and energy

- Recycling - Ultra-high fuel efficiency vehicles - Fuel cell vehicles - High-efficiency systems Future vehicles
Convenience vehicle technology

- Convenience technology for the elderly - Seat layout and shape
Strengthening environmental regulations Return of the era of high oil prices Diversification of customer needs Rapid growth of aging population
Growing importance of developing S/W
Material technology
- Polymer materials - Ultra-lightweight materials - High-strength materials
Moving toward electronics and information technologies New materials, moving toward smaller and lighter vehicles Growing emphasis on safety Advent of the ubiquitous society Intensification of global competition Emphasis on brand value
Promising Products in the Auto Parts Industry

The efforts of auto makers to reduce costs have led to the expansion of opportunities for modulation and global sourcing among parts manufacturers. The diversification of customer needs and the growing emphasis on environmental and safety issues have also resulted in the strengthening of technological development with regard to electric parts and future car parts. In particular, the strengthening of global sourcing has contributed to an increase in OEM deliveries by Korean parts manufacturers equipped with high-quality competitiveness and lower prices to
The Changing Environment and Promising Products of the Auto Parts Industry
21
global auto manufacturers. Furthermore, foreign auto makers operating in Korea are also likely to create opportunities for auto parts suppliers to participate in global sourcing. Domestic auto makers are adjusting their sourcing strategies to enable key modules to be developed and delivered under the responsibility of parts suppliers. In addition, module parts can be cited as a promising item as auto makers plan to increase the modulation rate up to 50% in the future from a mere 12% in 2001. Amid forecasts that the percentage of electric parts looks likely to increase to 40% in the entire parts, the car electronics industry - including safety, A/V and navigation systems - looks set to grow faster than expected. In particular, IT technology and quality, in which Korea has a competitive edge, will make the car electronics industry far more competitive in the global market. With regard to general parts, including switches and wirings, domestic manufacturers are actively taking part in the industry, while, with regard to control units, motors, and sensors, Korean suppliers are actively forming joint ventures with foreign parts manufacturers. With regard to car electronics, auto makers are showing a tendency to add an interface to connect with external devices, or use Bluetooth technology, rather than pursue built-in devices, in an attempt to cut production costs. Consequently, parts manufacturers can tap into markets on their own, making it possible for Korean manufacturers, who are at a relative disadvantage in trading with auto makers overseas, to gain access to new markets. Environment-friendly vehicles are in the early beginning stage of development, with R&D being conducted mainly on automobiles. However, as transition to environment-friendly vehicles is viewed as a major change in the existing automotive industry paradigm, the auto parts industry is poised to proactively respond to this change. Domestic auto makers began releasing hybrid cars in 2009, and announced plans to focus on releasing environment-friendly vehicles including electric cars by 2011. Therefore, parts related to environment-friendly vehicles are attracting a great deal of attention. In particular, Korea has a competitive edge in batteries, which are key parts for hybrid and electric vehicles. Due to the mass production of hybrid cars, specialized parts - including batteries, electric motors, generators, ECUs, IPUs, power inverters, compressors, and high-voltage wirings - are likely to be added to existing internal combustion engines. In particular, the electric car industry will see notable changes in parts as the use of batteries and electric parts, the main power sources, will grow significantly. Furthermore, technologies are being developed in order to increase the efficiency of existing internal combustion engines, and the outlook for parts related to multi-step transmissions and high-powered micro engines looks promising. The future for pre- and post-treatment technologies for vehicles powered by internal combustion engines, technologies for alternative fuel vehicles, recycling technologies, high-powered engines, and smaller and lighter vehicles also look promising.
Note: For more detailed information about the scope of the parts and materials industry, see the Enforce Decree to the Act on Special Measures for the Promotion of Specialized Enterprises, etc. for Components and Materials. Note: For more detailed information about the scope of the parts and materials industry, see the Enforce Decree to the Act on Special Measures for the Promotion of Specialized Enterprises, etc. for Components and Materials.
22
Auto Parts
5. Promising Investment Regions in the Auto Parts Industry
The automotive clusters are located around Ulsan, Incheon, Hwaseong, Gwangju, Gunsan, Asan, and Busan, with the auto parts clusters around Busan and Gyeonggi, S. Gyeonsang, S. Chungcheong and N. Gyeongsang Provinces. Auto parts innovation centers and industrial complexes have been set up in the cities of Ulsan and Busan, and N. Jeolla Province in order to establish an infrastructure that will enable auto parts suppliers to focus on the development of technology and capitalize on joint facilities. Projects designed to accumulate various parts industries in a complex are under way, including the strengthening of innovative regional capacity by supporting cooperation among the industrial, academic and research sectors suited to specific regional conditions, and by maximizing the mutual synergy effect of unique developments through the formation of ultra-broad clusters. As the connection between auto makers and auto parts manufacturers is important, the automotive module business should be conducted around each area where automobiles are produced. Furthermore, auto parts manufacturers specializing in large or heavy parts should be chosen to operate in close proximity to the auto makers, pursuing growth in connection with the auto makers. As the production lines for electric, intelligent and IT-based auto parts do not need to be situated near auto makers, these industries should be located where auto parts and electronics industries have developed, thus connecting with other auto makers and auto parts manufacturers. Promising niche markets for each area are as follows: - N. Gyeongsang Province: Auto parts capitalizing on materials - Daegu Metropolitan City: Intelligent automobiles - S. Gyeongsang Province: Auto parts linked to the machinery industry - Ulsan Metropolitan City: Highly functional auto parts related to large module production - Busan Metropolitan City: Unit parts As S. Chungcheong Province, along with the Seoul Metropolitan Area, is rising as a key base for research and development by the automotive industry, the outlook for the environmentfriendly vehicle design and convenience parts look promising in this area.
Image courtesy of KIA Motors
Promising Investment Regions in the Auto Parts Industry
23
Distribution of Auto Parts Manufacturers throughout the Industrial Complexes

Dalseo
No. of companies: 33 No. of employees: 5,325
Namdong
Gyeongsan
Siheung
No. of companies: 37 No. of employees: 4,784 Gyeonggi Province Seoul Incheon Gangwon Province
Gyeongju
Ansan
Hwaseong
No. of companies: 40 No. of employees: 4,786 N. Chungcheong Province N. Gyeongsang Province
Pyeongtaek
No. of companies: 30 No. of employees: 4,113 S. Chungcheong Province Daejeon Daegu N. Jeolla Province S. Gyeongsang Province Gwangju S. Jeolla Province Busan Ulsan
Ulju
Asan
Cheonan
Gunsan
Yangsan
Iksan
Gijang
Gwangsan
Sasang Changwon
No. of companies: 37 No. of employees: 12,101 Jeju Province No. of companies: 21 No. of employees: 1,028
Bukgu
Gimhae
Saha
No. of companies: 16 No. of employees: 903
Gangseo
Industrial Complexes of Auto Parts Manufacturers No. of companies: 18 No. of employees: 1,731
As the largest industrial complex of commercial vehicle factories with automobile assembly plants, N. Jeolla Province can be used to develop highly functional light materials and environment-friendly auto parts, capitalizing on the infrastructures related to materials, whereas Gwangju can specialize in the automobile molding sector related to the processing of auto parts.
24
Auto Parts
6. Government Policy and Incentives
Strategies to Develop New Growth Engines

Basic Plans In order to achieve the goals of becoming the worlds 4th largest green car producing country by 2013 and entering the ranks of the worlds top 4 auto makers by 2018, the Korean government is strengthening its system for planning and prediction of technology developments for a green transportation system, and has formulated an R&D support policy with the aim of creating a consumer-centered technology development system. In order to accomplish these goals, the following actions will be taken: Technology equivalent to the level of the advanced countries will be secured by obtaining key source technologies for green vehicles. Core parts for PHEV, fuel batteries and electric vehicles such as batteries will be developed early on. Support will be given to small- and medium-size auto parts manufacturers to develop and produce cutting-edge parts and materials for which the automotive industry has so far depended on imports so as to avoid risks posed by research and development, which is a matter of the highest priority. The Korean government has established a comprehensive supporting system for the prediction of future core technologies, the development of technologies, and the demonstration, verification and evaluation of parts (Green Network) (2009-2013). By supporting high-quality human resources and reducing the cost of purchasing expensive equipment, auto parts manufacturers are being encouraged to participate in the development of green car parts and improve their reliability, leading to globalization as a whole.
Government Support Plans for the Development of Green Vehicles

2009 - Develop core technologies to commercialize green vehicles including PHEV at an early stage - Improve systems to vitalize the commercialization of green vehicles - Establish a green network - Develop an on-line power feeding and collecting system for electric vehicles 2010 - 2013 - Initiate project to verify fuel cells - Develop original technology and localize parts and materials - Designate test-bed areas for verification - Establish on-line infrastructure for the examination of electric vehicles and prepare for commercialization 2014 - 2018 - Massive production of green vehicles
Government Policy and Incentives
25
Tasks for the Automotive Industry

Project name Policy measures Year of project completion Host organization (Supporting organization)
Secure key technologies for green vehicles at an early stage Key point Develop plug-in hybrid vehicles (PHEV) with 16/32/64km capacity Set up measures to cope with EURO 6 and restrictions on the emission of CO2, develop technologies for clean diesel Develop common key source technology parts for green vehicles Innovate transportation system based on online electric vehicles 2010 R&D 2013 MKE
Supporting point
MKE (Ministry of Environment)
Key point
MKE
Supporting point
Ministry of Education
Strengthen competitiveness of green vehicle exports Koreas Auto Parts Industry Supporting point Establish a green network to foster green car parts Establish a technology support center to verify and evaluate green vehicle parts Establish the basis for a green car verification project Financial project (Pilot project) Financial project 2013 MKE
MKE
MKE (Ministry of Land, Transport and Maritime Affairs)
Establishment of a Green Network to Foster Green Car Auto Parts A comprehensive supporting system for domestic auto parts manufacturers was established in order to predict future key technologies, develop technologies, and demonstrate, verify and evaluate the performance of parts. By supporting high-quality human resources, reducing the cost of purchasing expensive equipment, and verifying the performance of green car parts at the global level, the Korean government is making concerted efforts to improve the reliability of the domestic auto parts industry and advance into global markets. The main focus is on establishing a green network by supporting the manufacturers of green car auto parts. In order to support the green network system, a linkage system is being set up for work on the investigation and analysis of advanced technologies, the establishment of a technology-linked network and a Data Bank, measures to deal with patent and standardization, and support for the globalization of auto parts manufacturers. In order to support auto parts suppliers with high-quality human resources and reduce the cost of expensive equipment, verification, analysis and demonstration processes will be performed on the green vehicles equipped with pilot products. In order to improve the reliability of auto parts manufacturers and expand overseas sales, a green car auto parts verification and evaluation system will be set up at the global level.
26
Auto Parts
Establishment of the Green Network to Support Parts Manufacturers

Development of parts for green vehicles and entry into the market
Function and Price Demand for the development of new products Evaluation and approval
Product design
Examination of real vehicles
Entry into the global market
Difficulties - Analysis of advanced technologies - Market status and outlook
Realization of the functions
Examination of a single product
Difficulties - Costly and time consuming - Development of overseas sale routes
Difficulties - High-level human resources - Avoidance of patents
Difficulties - Insufficient equipment - Standardized DB
Production of pilot products

Difficulties - Insufficient facilities - Acquisition of reliability
Provision of technology information Koreas Auto Parts Industry
Support for business and expansion of sale routes (support for globalization)
Support for technology, human resources and infrastructure
Support for commercialization
Market status Technology status Analysis of advanced technologies
Technology information and DB Human resources network Analysis of patents and standardization
Base for examination and assessment Examination and analysis of real vehicles Green car verification project
Base for parts verification Strengthened global cooperation Support for global standards
Information network
Technology network
Certification network
Network connection
Green network
Basic Plans for the Development of Auto Parts Materials

As the parts and material industries are emerging as a key growth engine for the development of Korean industry as a whole, strategies have switched from fostering finished-product industries to improving the connection with parts and material industries. Recently, the Korean government has been seeking ways to cope with the new challenges by assessing the changes in capacity of the domestic parts and materials industry and reviewing the problems resulting from rapidly changing inner and outer environments. The vision of advancing into the worlds top 5 auto parts and materials industry by occupying the 5th largest market share worldwide by 2012, which is just two steps up from Koreas current position, has been presented.
Government Policy and Incentives
27
In order to achieve this goal, objectives have been set to improve the key source technologies of parts and materials to 90% of the level of the advanced countries and to achieve a trade surplus of US$90 billion by 2012. The strategy has been set to refine the structure of the parts and materials industry via the formation of a basic strategy triangle consisting of strengthening the competition base, establishing an innovative infrastructure, and leading globalization. The effectiveness of promoting the parts and materials industry by strengthening the connection among policies will be improved, and the establishment of an open technology innovation system with stronger strategies of technology development will be pursued, while the equal distribution of resources in parts and materials technologies with long-term performance potential will be sought. A total of KRW1 trillion 289.3 billion will be invested (annual average of KRW322.3 billion) from 2009 to 2012, with the focus on the development of technologies related to convergence parts and materials and key source materials in connection with the governments green growth policy. Based on this comprehensive vision, the key tasks and strategies for each task have been set as follows: Strengthening the competitive base 1. Securing promising top 100 core technologies for parts and materials 2. Developing 70 key materials to create future markets 3. Promoting 400 core companies for parts and materials Establishing an innovative infrastructure 4. Promoting business that caters to consumers reliably 5. Fostering 50,000 personnel with expertise in parts and materials 6. Enhancing knowledge and information service systems Strengthening the global network 7. Attracting foreign investment in the parts and materials sectors and expanding trade
Project to Develop Industrial Source Technology

The project to develop industrial source technology is the key mid- and long-term R&D project of the Ministry of Knowledge Economy. This year, it has been restructured and reconceived as a unified project from the existing mid- and long-term R&D project, which was designed to support each sector of industrial technology, information communications, and energy resources, respectively. Seven detailed projects for the industrial technology sectors (including automobile, bio technology and robotics) and new tasks for 15 fields have been chosen (approximately KRW2 billion will be supported for each task, with a development period of five to seven years). Mid- and long-term plans will be drawn up by identifying advanced automotive technology development status and new technology through the project to develop industrial source technology, and new tasks will be derived from each key task through detailed planning. The goal is to develop market-leading automobiles by commercializing future vehicles with the capacity to resolve the issues of air pollution, global warming, and safety and convenience. In 2009, ten tasks were chosen related to the automotive industrys receipt of finance amounting to almost KRW19.5 billion.
28
Auto Parts
7. Case Study of Successful Inbound FDI: Bosch
Bosch, the German auto parts manufacturer, produces nearly 65,000 brake systems daily in six countries around the world. Bosch is the worlds largest developer of auto parts and technologies, focusing on the development and production of key auto parts including power-trains, chassis, gasoline and diesel systems, and safety equipment technologies. In Korea, Bosch produces and sells auto parts, auto parts for after-market, industry automation products, motor tools and accessories, and security technologies. Bosch has a number of branches in Korea including Robert Bosch Korea, Kamco, ETAS Korea, and Bosch Rexroth Korea, and joint ventures including Doowon Precision Industry and Kefico, and employs more than 3,000 people (including joint ventures) at present. Furthermore, Bosch holds an important position in the R&D field as it has more than 300 research and development engineers and a technology institute equipped with cutting-edge examination and application devices. The headquarters in Yongin, newly established in October 2007, acts as a main center for eight nationwide offices including five major production facilities (in Daejeon, Gunpo, Anseong, Buyong, and Busan). By expanding its technology institutes, Bosch was able to enter the automotive technology business - including gasoline and diesel engine fuel-injection systems, chassis systems, and engineering for electric and electronic applications and control devices. Bosch recorded sales of KRW9.4 trillion in 2007, holding a strategically important position in the Asia and Pacific region. Boschs performance in the Korean market is attributed to the rapid growth of the Korean automotive market and its efforts to maintain a cooperative relationship with Korean auto makers. As a major auto parts supplier, Bosch has been providing high-quality parts with advanced systems and technologies, thus helping Korean auto makers to compete successfully in the domestic automotive market and advance into existing global automotive markets including those of North America and Western Europe. Bosch jointly established SB LiMotive with Samsung SDI with 50% equity ownership, and is planning to develop, produce and sell lithium-ion batteries for automobiles. This new joint venture is planning to produce high-efficiency lithium-ion battery systems by 2011, targeting overseas markets. In order to push forward with this project, the two companies are planning to invest a total of US$400-500 million over five years. The headquarters in Suwon will be in charge of developing battery cells, and lithium-ion cells are also planned to be produced in Korea.
Case Study of Successful Inbound FDI: Bosch / Relevant Organizations
29
8. Relevant Organizations
Automotive Industry-related Organizations
Name of organization Korea Automotive Technology Institute (KATECH) Website URL www.katech.re.kr Key activities Established in 1990 in an attempt to supplement the research and development capacity of the auto parts industry, which was suffering from a shortage of high-quality human resources and expensive equipment, KATECH has continuously supported the research and development efforts in the auto parts industry. By working on development projects including technologies for nextgeneration vehicles, vehicle-based technologies, technologies for future vehicles, and tasks requested by individual companies, KATECH has led comprehensive and systematic technology support and the development of new technologies in the auto parts industry, ranging from cutting-edge core parts to new products, KAP, a public company operated with a degree of private autonomy, was established to promote the growth of the auto parts industry. KAP focuses on supporting small- and mediumsize auto parts manufacturers experiencing difficulties with basic technologies, establishing quality systems, conducting business management, and providing overall information on the automotive industry. KAICA represents the auto parts industry by supporting auto parts manufacturers, making suggestions to the government, and assisting auto parts suppliers entry into the global market by supporting exports and making necessary arrangements. KAMA focuses on promoting the automotive industry by effectively pushing forward with projects including fostering the automotive industry and responding to trade issues; proposing polices and ways to improve systems related to environment and safety; working on investigation and research related to the automotive industry; and issuing statistical data. Conducting studies on policies related to the innovation of industrial technologies, executing planning of mid- and longterm technologies, and analyzing performances. Establishing bases for industrial technologies (education and training of human resources, cooperation between industry and academy, promotion of new technology culture, installation and management of equipment). Promoting global cooperation on industrial technologies. Transferring industrial technologies and accelerating business. Fostering industries unique to each region and supporting the innovation of regional industries. Fostering and supporting the auto parts and materials industry.
Korea Automotive Parts Industry Promotion (KAP)
www.kapkorea.org/en_in dex.do
Korea Auto Industries Coop. Association (KAICA)
www.kaica.or.kr/eng/ind ex.php
Korea Automobile Manufacturers Association (KAMA)
www.kama.or.kr
Korea Institute for Advancement of Technology (KIAT)
www.kiat.or.kr
30
Auto Parts
Automotive Industry-related Organizations

Name of organization Korea institute of Industrial Technology Evaluation and Planning (KEIT) Website URL www.keit.re.kr Key activities Planning, evaluating, and managing tasks regarding projects for the development of industrial technologies. Investigating demand, level and outlook of industrial technologies to plan technology development tasks. Investigating technical and economic validity, and financial stability of the technology development tasks. Planning, evaluating and managing support project tasks aimed at improving the technologies of small-and medium-sized companies. Operating and supporting the management system for overseeing all phases of technology innovation. Korea Core Industrial Technology Investment Association (KITIA) www.kitia.or.kr Supporting and adjusting investment from organizations in companies that have passed the technology evaluation of the Korea Institute of Industrial Technology Evaluation and Planning (ITEP). Providing financial support and post- management for companies that have received investment from organizations. Registering and managing investment association specific to parts and materials. Proposing to the government and relevant organizations the policies required to establish and improve systems related to the development of parts and materials technologies. Accelerating global industrial cooperation and exchange in the parts and materials field. Promoting projects focused on the development of parts and materials technologies. Innonet www.innonet.net Providing a comprehensive information system for companies in order to ensure the timely supply of information required to manage businesses, and promptly address difficulties at operation sites.
31
Invest KOREAs Global Network

39 Korea Business Centers Supporting Foreign Investors Worldwide HEAD OFFICE 13, Heolleungno, Seocho-gu, Seoul, Republic of Korea Tel: (82-2) 3460-7545 Fax: (82-2) 3460-7946, 7 ikonline@kotra.or.kr NORTH AMERICA New York, USA Tel: (1-212) 826-0900 Los Angeles, USA Tel: (1-323) 954-9500 Chicago, USA Tel: (1-312) 644-4323 Dallas, USA Tel: (1-972) 243-9300 Washington D.C., USA Tel: (1-202) 857-7919 San Francisco, USA Tel: (1-650) 571-8483 Detroit, USA Tel: (1-248) 355-4911~3 Vancouver, Canada Tel: (1-604) 683-1820 Toronto, Canada Tel: (1-416) 368-3399 Fax: (1-212) 888-4930 Fax: (1-323) 954-1707 ASIA & OCEANIA Fax: (1-312) 644-4879 Fax: (1-972) 243-9301 Fax: (1-202) 857-7923 Fax: (1-650) 571-8065 Fax: (1-248) 355-9002 Fax: (1-604) 687-6249 Fax: (1-416) 368-2893 Singapore Tel: (65) 6221-3055 Sydney, Australia Tel: (61-2) 9264-5199 Melbourne, Australia Tel: (61-3) 9699-3833 Tokyo, Japan Tel: (81-3) 3214-6951 Osaka, Japan Tel: (81-6) 6262-3831 Nagoya, Japan Tel: (81-52) 561-3936 Fukuoka, Japan Tel: (81-92) 473-2005, 6 Beijing, China Tel: (86-10) 6410-6162 Shanghai, China Tel: (86-21) 5108-8771, 2 Guangzhou, China Tel: (86-20) 8334-0052 Qingdao, China Tel: (86-532) 8388-7931, 4 Hong Kong, China Tel: (852) 2545-9500 Taipei, Taiwan Tel: (886-2) 2725-2324 Kuala Lumpur, Malaysia Tel: (60-3) 2117-7100 Fax: (65) 6223-5850 Fax: (61-2) 9264-5299 Fax: (61-3) 9699-3811 Fax: (81-3) 3214-6950 Fax: (81-6) 6262-4607 Koreas Auto Parts Industry Fax: (81-52) 561-3945 Fax: (81-92) 473-2007 Fax: (86-10) 6505-2310 Fax: (86-21) 6219-6015 Fax: (86-20) 8335-1142 Fax: (86-532) 8388-7935 Fax: (852) 2815-0487 Fax: (886-2) 2757-7240 Fax: (60-3) 2142-2107 Madrid, Spain Tel: (34-91) 556-6241 Helsinki, Finland Tel: (358-9) 638-122
Fax: (34-91) 556-6868 Fax: (358-9) 638-611
EUROPE Frankfurt, Germany Tel: (49-69) 2429-920 Hamburg, Germany Tel: (49-40) 3405-740 Munich, Germany Tel: (49-89) 2424-2630 Paris, France Tel: (33-1) 5535-8888 Moscow, Russia Tel: (7-495) 258-1627 London, UK Tel: (44-20) 7520-5300 Brussels, Belgium Tel: (32-2) 203-2142 Milan, Italy Tel: (39-02) 79-5813 Zurich, Switzerland Tel: (41-44) 202-1232 Stockholm, Sweden Tel: (46-8) 30-8090 Copenhagen, Denmark Tel: (45) 3312-6658 Amsterdam, Netherlands Tel: (31-20) 673-0555 Vienna, Austria Tel: (43-1) 586-3876 Fax: (49-69) 2533-89 Fax: (49-40) 3405-7474 Fax: (49-89) 2424-2639 Fax: (33-1) 5535-8889 Fax: (7-495) 258-1634 Fax: (44-20) 7240-2367 Fax: (32-2) 203-0751
MIDDLE EAST Fax: (39-02) 79-8235 Fax: (41-44) 202-4318 Fax: (46-8) 30-6190 Fax: (45) 3332-6654 Fax: (31-20) 673-6918 Fax: (43-1) 586-3979 Dubai, United Arab Emirates Tel: (971-4) 332-7776 Fax: (971-4) 329-1300
www.investkorea.org
August 2010
13, Heolleung-no, Secho-gu, Seoul, Republic of Korea [Investment PR Team] tel. +82-2-3460-7534 fax. +82-2-3460-7920 e-mail. ikonline@kotra.or.kr

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Overview of Koreas Industries 2010

Promising Investment Opportunities

Automotive Industry Statistics (2009)

Management Performance of the Auto Parts Industry

(Unit: %, KRW million)

Production of Auto Parts by Item

(Unit: KRW billion)

Image courtesy of KIA Motors

Auto Manufacturers in Korea (2009)

No. of employees Types of vehicles produced

4,763 Passenger cars, SUVs

7,539 Passenger cars

9,533 -344 532 115 429 -

3,656 80 190 134 56

Image courtesy of HYUNDAI Motor

Position and Status of the Korean Automotive Industry

2. Position and Status of the Korean Automotive Industry

Position and Status of the Auto Industry

Koreas Auto Parts Industry

Global Top 5 Auto-producing Countries

(Unit: 1,000 vehicles)

Japan USA China Germany Korea

11,596 10,751 8,882 6,196 4,086

11,563 9,299 8,671 6,041 3,826

13,790 7,934 5,696 5,206 3,512

Market Share Changes in the U.S. Automotive Market

Korea 51.8 48.1

Position and Status of the Korean Automotive Industry

Demand and Supply Status in the Automotive Industry

(Unit: 1,000 vehicles, US$100 million)

3,826 1,154 2,683 80 1,457

-6.4 -5.3 -5.8 9.6 25.5

Demand and Supply Trends in the Automotive Industry

(Unit: 1,000 vehicles)

Domestic demand Overseas production

Global Production Strategies of the Korean Automotive Industry

Position and Status of the Korean Automotive Industry

Status of the Auto Parts Industry

Koreas Auto Parts Industry

(Unit: KRW100 million)

Source: Korea Auto Industries Coop. Association (KAICA)

Imports and Exports in the Auto Parts Industry

(Unit: US$ million)

Trade balance Exports Imports

Image courtesy of SSANGYONG Motor

Position and Status of the Korean Automotive Industry

Imports and Exports of Major Auto Parts

2008 10,795 619 271 174 189 144 227 81 140

86 901 766 321 121 120 118 72 56 48 45

Current Status of FDI in the Korean Auto Parts Industry by Year

(Unit: US$ million)

Koreas Auto Parts Industry

Position and Status of the Korean Automotive Industry

The Worlds Major Auto Parts Manufacturers Operating in Korea

Fuel injection systems, electronic control systems Exhaust systems

Faurecia Exhaust Systems Korea (100%)

Koreas Top 15 Auto Parts Manufacturers

(Unit: KRW billion)

Brake, steering and power transmission systems

6 7 8 9 10 11 12 13 Koreas Auto Parts Industry

544 533 502 402 352 333 318 313

592 1,409 357 1,512 606 708 521 211