Korea's IT Exports Hit All Time Record in 2010

As reported by the Joongang Daily, Korea's IT exports hit an all time record of $153.9 billion, more than double the volume of IT exports in 2003.  The nation's trade surplus in the information technology sector was also a record at $78.2 billion.   Semiconductor exports were the single biggest export item for South Korea, totaling $50.7 billion.   Exports of flat screens reached $33.8 billion dollars, making them the fourth largest export item, following ships and automobiles.  Exports of televisions increased 42.6 percent to $7.4 billion.  Despite a late-year surge in exports of smart phones, overall exports of mobile phones decreased by 13.7 percent during the year, but they still totaled $24.7 billion.

Ministry of Knowledge Economy sources are predicting that IT exports will increase between five and ten percent this year and reach $160 billion.  Further evidence that the ICT sector and certain key technologies that anchor the information age are the main drivers of South Korea's export-led economy.

Korea's Export and ICT-Led Economy

It is January 2, but this is my first blog post of 2011.  As an industry colleague noted in a recent e-mail message to me, the world is changing fast, and IT is at the center of things.

The news about South Korea's all-time record trade surplus during 2010 is a significant piece of information about its ICT sector.  As reported by international media including Singapore's Straits Times, the nation logged a $41.7 billion trade surplus in 2010.  This raised Korea's global export ranking to seventh.

The ICT sector was at the center of this development.  The Ministry of Knowledge Economy noted that the record figures indicate the country had solid performances in many sectors including semi-conductors, automobiles, mobile communications and general machinery equipment, despite the appreciation of the Korean currency as well as the tension on the peninsula.  In addition to semiconductors and mobile communications, the display and television industries did their share to contribute to Korea's trade surplus.

There are many interesting aspects, including risks, to Korea's export-led economic growth, and this is a general topic that this blog will continue to follow in 2011.   However, at this point in time, South Korea is surfing a wave of change in the semiconductor, mobile and display industries worldwide.  The Japan Times carried an interesting article yesterday entitled "Digital age leaves myopic Japan facing manufacturing crisis."   The article noted that, in the past, Japan was able to gain market share because its products had a technological edge and their companies drew strength from vertical integration and testing in Japan's domestic market.  However, from the 1990s, the core technologies for many electronics products, including computers, TVs and DVD players went digital and with modular components.

In this new digital, modular age, Korean companies, led by Samsung and LG, but also including many SMEs and parts manufacturers, seem to be off to a very good start.

Korea's IT Trade Surplus Reaches New Record

As reported in the Joongang Daily, a new report by the Knowledge Economy Ministry shows that South Korea's IT trade surplus has reached record levels.  In April, Korea posted a record trade surplus of $6.71 billion in the information technology (IT) product sector, led by increased demand for semiconductors and display panels.  IT exports surged to $12.67 billion last month, the eleventh consecutive month the surplus has exceeded $10 billion.  Exports of mobile phones fell 28.2 percent to $1.75 billion, mainly due to increased overseas production by local companies as part of cost-cutting efforts.   Also, as mentioned in the last post, the popularity of the iPhone was an overall factor affecting the market for mobile handsets. (Click on the graphic to see a full size version.)

Korea Joins Top Ten Exporting Countries, Led by ICT Sector

There has been a great deal of commentary in the local media lately about the performance and goals of South Korean exports. The country has broken into the ranks of the top ten exporting nations in the world, with total exports valued at about U.S. $260 billion. and it has done so during a global economic crisis and with ICT-sector exports leading the way.
As reported in the Korea IT Times and other media, it appears that three of the four top spots in Korea's exports this year will be IT products. These are cell phones, semiconductors and display products including digital LCD televisions, which rank, which rank second, third and fourth on the list of Korean exports, following vessels (the shipping industry). The last year that three out of the top four exports came from the ICT sector was 2004.

Perhaps more important than the ranking of these major product categories is their total value, which this year will account for almost 25 percent of all Korean exports. Also, display exports showed a greater percentage increase relative to cell phones and semiconductors.
The reasons for the increase in ICT exports are different for each of the sub categories. For example, exports of displays (including television sets) skyrocketed after the introduction early this year of the new LED backlit models. They represented a breakthrough from the older models, being much thinner, lighter weight and lower in energy consumption. In other words, they were a breakthrough technology in the marketplace that made all of the competing products seem old fashioned. On the other hand, the increase in cell phone handsets, while reflecting consumer preferences for Samsung and LG products around the world, was not based on significant increases in the rapidly emerging "smart-phone" segment. This has been the subject of other posts and should be of great concern to Korean exporters. Especially since the worldwide transition in mobile communications is clearly toward hand-held computing and internet devices. It is a transition that will perhaps be more important than the arrival of personal computers three decades ago.

Korea's Dependence on Foreign Trade

One reads a great deal about South Korea's export-led economic growth and its dependence on foreign trade.  Nonetheless, I was struck by today's article in The Korea Times that graphically quantified Korea's dependence on exports.  Last year, imports and exports made up 92.3 percent of the Korean economy, breaching the 90 percent level for the first time.  Exports accounted for 45.4 percent of the national income, while imports made up 46.9 percent.

Such dependence on foreign trade is inevitable for an economy like Korea.  Other Asian economies depend even more heavily on trade.  Last year Singapore saw its ratio record 361.7 percent followed by Hong Kong with 348.4 percent.   Malaysia, Thailand and Taiwan also had ratios higher than South Korea.

I would only add that ICT exports and imports play a very important role in this overall picture.  It would be nice to break out the ICT sector to see just how things stand.

Korea the World's Largest Net Exporter of ICT Products

As reported by the Korea Times and other local media, a new OECD "Science, Technology and Industry Scoreboard" report shows that, as of 2007, South Korea was the world leader in exports of information and communications technologies. The nation exported a range of ICT products, including computers and cell phones, worth $97.4 billion in 2007, while importing technology goods valued at $54.1 billion. Furthermore, Korea's ICT trade surplus grew at an annual rate of 10 percent from 1996 through 2007. This record owes primarily to success of Samsung Electronics and LG Electronics in their exports of semiconductors, mobile phone handsets, televisions and other LCD products, and home appliances. However, despite the dominance of the two big chaebol groups, an industry expert noted that many of Korea's small and medium size industries also benefited from this export trend as they supplied critical electronic components here in Korea and for export. Think, for example of a 3G mobile handset. One of these today may contain 800 or more components. Until 1993 or later, Japanese firms dominated the market for handset components. However, when Korea chose to adopt the CDMA standard and became the first nation in the world to commercialize it, that picture started to change. It changed even more dramatically in favor of Korean exporters and components manufacturers when some large U.S. telecoms service providers announced they would use the CDMA standard.