No Title Speaker 1 Future technology including intelligent future cars Youngmyun Yoo 2 NVH technology Youngmyun Yoo 3 Metal-forming technology and CAE Man Soo Joun 4 Die manufacturing technology and industries in Korea Su Jin Kim 5 R&D activities in Korean research institute Choondal Park Case studies by KITECH (Korean Institute of Industrial 6 Eoksu Kim Technology)
The KSP team agreed that UPSRJ's plan is appropriate to focus on education in the early stage and to extend to research and enterprise support after three years when graduate program starts and UPSRJ could benefit from KSP team's advisory on improving the plan. The scope was narrowed down to improving UPSRJ's plan to establish and operate CETAI aiming at educating talents strong in manufacturing.
Korea’s similar experiences are RIC (regional innovation center), TIC (technology innovation center) and RRC (regional research center), Prototype Manufacturing Support Center, laboratory, factory building, shared equipment center. In terms of education, automotive university clubs, TBI (technology business incubator) and BI (business incubator) will be applicable to CETAI in its early stage. It will
102 • 2013 Knowledge Sharing Program with Mexico desirable that CETAI starts as a prototype manufacturing center for students and entrepreneurs.
Above all, given that the university which has a long-term development strategy starts with small investment and manpower in the beginning, phased strategies are essential. For the first 10 years, it is necessary to focus on improving students' practical skills in manufacturing engineering. In other words, advanced topics such as NVH, ECU (electronic control unit) and bio-fuel require a wide array of co-work. Though stakeholders - government, industry - show interest in CETAI's ambition for this, it would be wise to seek more advisory in developing goal and detailed plan. When there are plenty of manpower with the stable courses of graduate school and reputation in 10 years or so , it will be suitable to combine research and practical education.
It may be too big a goal for CETAI to innovate the automobile industry. Receiving manpower from neighboring states also cannot be an appropriate measure. The nearby industrial zone is small so it cannot accept all the manpower trained by the university. And because an aviation college has already opened in Queretaro, CETAI may well to focus on the automobile sector.
2. Korea's Experience
2.1. Korea's higher education
Korea's university graduation rate is the highest in OECD countries. Koreans' high zeal for education is the driving force of Korea's economic growth. One of the primary educational policies in 1970s was to attract talented students to engineering college. It is no exaggeration to say that 1980s and 1990s were the golden era of engineering college. Major government projects were related to engineering education. In the meantime, the quantitative expansion of engineering college led to depreciation of technical manpower and later avoidance of engineering career.
Korean universities are classified as national university, city/provincial University, and private university by founder type. National university, excluding Teacher College, consists of ten large universities and about thirty small- and medium-sized ones (including Teacher College). Most of national universities were established by the Ministry of Education, but KPU and KOPO (Korea Polytechnics), which aim to be polytechnic universities, were founded by the Ministry of Trade, Industry and Energy and the Ministry of Employment and Labor respectively. KOPO is a Korean polytechnic college and has about 30 campuses scattered around the country. Since the number of students began to decrease ten years ago, merging national
Chapter 2 _ CETAI’s Future Strategy to Develop Human Resources for the Automotive Industry in Queretaro • 103 universities were at the top of the agenda in Korea's education policies. Lots of national universities were merged, and admission quota continued to be downsized. One of the peculiarities of Korean universities is a very high percentage of private ones. Currently, there are about 140 four-year-program private universities and roughly 170 community colleges (2- or 3-year program). Because students are unwilling to enter regional universities and the number of students in the capital region considerably exceeds admission quota of national universities, academic achievement of students in private institutes is relatively higher.
The higher education in Korea is somewhat unusual. Although it seems an inevitable consequence of many students' desire to go on to university, commercial motivation in establishing and managing universities as well as professors' tendency to put their field first have much more responsibility. An unequivocal example has been demonstrated recently; in the continuity index between major and job, Continued (38.3%) was similar to discontinued (37.5%). This shows a serious problem because college education has great influence on individual's life. Engineering programs are no exception. Most of programs have a similar number of professors and students, regardless of industry demand or employment rate. Most universities segmented mechanical engineering department into many programs such as mechanical engineering, mechanical design, manufacturing engineering, precision mechanical engineering, agricultural machinery, shipbuilding and marine engineering, aeronautical engineering and mold engineering. As a result, the primary field of professors in each sector is overlapped. It means that diversity of professors' research is limited. To solve those problems, the government and scholars have carried out a variety of policies for recent fifteen years. The government introduced a new academic system, under which students get to choose their majors after the freshman year, and compelled the schools to reduce the number of mandatory courses. Korean Society for Engineering Education has been established and put emphasis on training human resources in accordance with industrial needs and on-site practice. Recently, employment rate is getting more important in university evaluation. As youth unemployment after graduation becomes a big issue in Korean society, students who prepare to enter college increasingly show a tendency to put employment rate first.
Until the middle of 2000s, people who prepared to enter college showed a tendency to consider the university reputation first and choose their major regardless of their talents. So there occurred a strange phenomenon that they applied for universities located in the capital region. This problem still exists, but lately has eased off to a certain degree. For the solution of the problem, Korean government implements policies to kick out insolvent colleges and compels every higher education institute to disclose data about themselves online (www. academyinfo.go.kr).
104 • 2013 Knowledge Sharing Program with Mexico 2.2. History and current situation of Korea's engineering education
When described by and large, the history of engineering education and research in Korea after the 1990s is summarized as follows: cultivation in accordance with 'selection and concentration strategy' for regional specialization in 1990s, connection and cooperation between college and industrial infrastructure and innovation lead and support for business convergence in 2000s.
When it comes to Korean history of engineering education, KAIST (Korea Advanced Institute of Science and Technology) is a hallmark. KAIST was founded to train highly-qualified scientific and engineering talents needed by the country and provide a model of research-focused university. When it was established, financial support was given to all freshmen, and in addition exemption from military service was granted. Those privileges greatly helped to attract talented students to it. Now KAIST has grown into the world-class institute of science and technology that represents Korea. KAIST was set up before the regional specialization program began in 1973. That was the turning point from the liberal arts-centered education to the science-centered one.
The Korean government announced the heavy chemical industry development policy in 1973. At the moment, Korea was a least-developed country, whose export was $1.67 billion and income per capita was only $318. However, the announcement determined what the Korean future would be like. The development policies of other countries for heavy chemical industry were unsuccessful, while Korea's success is an exceptional case. One of the reasons for Korea's success is the policies that laid stress on engineering human resources. The best examples were the university specialization policy and the special exemption of military service, which became effective in 1973. The special exemption of military service induced many excellent personnel to get into vocational high school or engineering college. The Specialization Engineering College Program implemented in 1973 chose four major local universities as a selection and concentration strategy, mass-produced technicians in mechanical engineering, electronics, chemical engineering and material engineering, and provided human resources needed by the heavy chemical industry development policy.
As a result of the Specialization Engineering College Program, plenty of highly skillful technicians came out early, but there was a side effect showing the unequal distribution of the graduates. By the mid-1990s, major universities all over the country were promoted with detailed specialization sectors through the National Engineering College Program and the Specialization Engineering College Program. These programs were carried out until engineering college and graduate school
Chapter 2 _ CETAI’s Future Strategy to Develop Human Resources for the Automotive Industry in Queretaro • 105 were evidently evaded. As an extension to the former programs, BK21 and NURI (New University for Regional Innovation) programs were enforced in the 2000s. Recently the manpower training policy in lead industry was implemented, and now LINC (Leaders in Industry-university Cooperation) program has taken effect. Those industry-academy cooperation projects work on a certain extent, but they do not prevent the reluctance, which is an initial goal, to enter the engineering colleges.
And Accreditation of Architectural Engineering Education was established to bring the innovation in engineering education. Most of engineering colleges set up the innovation center in engineering education and introduced the accreditation system by ABEEK. Now the course evaluations become necessary, and the professor's academic-industrial cooperative performance is also assessed as well as the amount of their theses. Although there are still lots of perfunctory sides, the accreditation system should need the efforts for progressive usage of it. And also the interests and supports for the education authorities and industry are required because the accreditation system itself tends to regard formal factors as important elements.
The role of universities in the regional industry development is training and supply of novices as well as, more importantly, training of workforce in enterprises. The contract department is operated throughout the country for the purpose of training of industrial business workers. The contract development consists of the master's course and the doctor's course, and is operated by the financial support of the country and industry. An academic-industrial cooperation R&D project is a human resource training task supplied to each professor, and the worker training project of the master's and doctor's is enforced as well. It is thought that those projects have played a positive role in vitalizing the graduate schools in stagnant regions. And Track System, in which a company signed a contract with a department, was introduced and government has encouraged that system. Students who participate in the Track can receive a scholarship according to the contract, and they will be granted an additional points if they have a job at that company. Enterprises that take part in the contracted department have been making the efforts on on-site practice-based education by developing the curriculum along with the colleges and giving the practical training chances. Except the course that mentioned above, field worker retraining project, which is non-degree course, is provided under the government financial support.
Recently, industrial convergence area project, that is campus construction in an industrial complex, has been carried out. That task is for the purpose of spreading the example of Korea Polytechnic University (KPU), which was set up to reinforce industry-academy collaboration education and research. Although there are several failure cases in KPU, KPU succeeded in evolving into the model school of industry-academy collaboration. However, there is a problem regarding of large
106 • 2013 Knowledge Sharing Program with Mexico budgets, and it is discovered that there are some problems in supplying high- quality workforce to small components and material industry, which was the initial aim. Therefore, we need a solution to the solve this exposed problem in order to spread the KPU’s successful model overseas along with new model creation, which is in the light of regional characteristics. At this time, the wisdom is needed not to destroy the university traits such as future-orientation, permanence, and serious consideration of tradition and scholarship.
The BK project, as the second level of graduate school promotion and support, has been implemented since the mid-2000s. Now the trend of avoiding a graduate school, even in an engineering university, is greatly serious. Korean engineering education places too extreme stress on job hunting, which is the main reason for deterioration of graduate schools. Since it leads to the deterioration of engineering education and industry-academy collaboration, the situation has been trapped in a vicious circle.
Korean engineering education has gone through turbulent period for recent twenty years. And to conclude, Korean engineering education has changed into industry-academy friendly aspect unlike in the past. However, the recent SCI-focused evaluation system and the new system for linking between annual salary and the evaluation have considerably threatened the industry-academy cooperation. Industry-academy collaboration should be based on cooperative works between the professors, but there is a concern that pure theses evaluation-centered system would collapse research foundation. On the whole, education tasks supervised by universities has expanded the support range not only from selective nurture of a specific major to universal education but also from engineering school to applied knowledge including engineering colleges.
2.3. Korea's automobile industry and education
Table 2-8 below shows the tentative calculations of Korea's car industry in 2013. Korea produced total 4.52 million cars (6% of total global output), and ranked as the fifth producer in the world.
Chapter 2 _ CETAI’s Future Strategy to Develop Human Resources for the Automotive Industry in Queretaro • 107
Performance of automobile industry in 2013(Unit: year-on-year, %)
Category 2011 2012 2013(tentative) Production 4,657,094 9.0 4,561,766 -2.0 4,521,638 -0.9
Export 3,151,708 13.7 3,170,634 0.6 3,086,394 -2.7
Total (billion) 45.31 28.0 47.20 4.2 48.65 3.1
Domestic sales 1,579,674 1.5 1,541,715 -2.4 1,537,590 -0.3
- Domestic cars 1,474,637 0.6 1,410,857 -4.3 1,381,091 -2.1
- Imported cars 105,037 16.0 130,858 24.6 156,497 19.6
Source: Korea Automobile Manufacturers Association, Korea Automobile Importers and Distributors Association.
Government policies and competitiveness of material industry and automobile parts industry has backed up the continuous growth of Korea's car industry. The IMF crisis in the late 90s could reconstruct the automobile industry, in which the economy of scale is of paramount importance. At that moment, Korea's both major car makers, Hyundai Motors and Kia Motors, were reconstructed under the same owner so that they could maximize a synergy effect by expanding joint use of platforms and components.
Government policies are mightily important to the fosterage of material industry and automobile components industry. The present POSCO was designed in the late 60s with 30-year-later plans and established in the early 70s, which deserves to be a role model to all developing countries. The blast furnace of Hyundai-Steel Co., Ltd. in 2010 was in operation to provide specialized material for Hyundai Motors.
Industrial Technology Infrastructure Development Act, enacted in the mid- 90s, greatly contributed to strengthening the R&D capacity of small and medium enterprises and the international competitiveness of car components industry. As Korean government made Components and Materials Support Special Act in the 2000s to foster component and material industry, and as the enacted Special Act on fostering of material and component, which placed emphasis on original technology and on the Promotion and Sophistication of Root Industries for the promotion of parts industry in the 2010s, it is playing a leading role in development of components and materials industry. In addition to such legal and financial aid, government established Korea Institute of Industrial Technology (1989) and Korea Automotive Technology Institute (1990) to encourage research and development of parts and material and automotive element technology. Considering that 70% of machine industry depends on the automobile, it is car companies that have the
108 • 2013 Knowledge Sharing Program with Mexico largest benefit from the government support policies.
Surely, Korean components and materials industry are still vulnerable. The trade deficit with Japan in parts and materials sector was $10.5 billion in the early 2000s, which exceeded the total trade surplus ($9.3 billion). However, positive changes were made in the late 2000s, having thanks to the strong fosterage on parts and materials of government and companies. As of 2013, the trade surplus of more than 100 billion US dollars was recorded in components and materials sector, which exceeded the total trade surplus of $70 billion. Although there is still the trade deficit with Japan, even Japan-related experts pay sharp attention to the development of Korean parts and material industry.
In Korea, the most automobile-related majors were established and separated from mechanical engineering, or have been fostered under the name of mechanical automobile engineering. Therefore, the operation of the majors is too much machine engineering-oriented to go along the current trend that the future automobile industry puts emphasis on electronics, eco-friendliness, high energy efficiency and green manufacture environment. In fact, almost all car engineering has the external appearance of machine automobile engineering, but that aims to recruit the talented students and it is hard to find the place where it aims at focusing on manpower training of future car technology and the development of relative technique. Since the department of car engineering without the term of machine can negatively influence the recruitment of excellent freshmen in accordance with market condition and restrict students' career, the department of mechanical automotive engineering still remains subsistent.
“SAE MINI BAJA, Korea” is regularly held in Korea. Most universities are sending at least one team to the contest. KSAE-Baja & Formula, self-made hybrid car contest, and creative electric automobile contest are held as well. And they often take part in SAE MINI BAJA, USA held in America. To participate in those contests, most departments have circle that aim at making a self-manufactured car. There is an academic adviser in those circles, but they voluntarily operate as the representative of mechanic engineering or mechanic automobile engineering. The activities of those circles must be very helpful in picking up practical technique relevant to automobiles.
2.4. Korea's industry-academy research and industrial technology infrastructure development
Industry-academy collaboration paid attention only to the technical development project by the contract between conglomerates and universities until the early 90s. The industry-academic consortium projects in the early 90s (1992's budget was
Chapter 2 _ CETAI’s Future Strategy to Develop Human Resources for the Automotive Industry in Queretaro • 109 2 billion won and 2014's was 70 times as much as 1992's budget) considerably contributed to activating the industry-academic research and development between regional colleges and local industry. Even now, they are activated as industry- academic collaboration projects on small and medium enterprises.
Especially, because of promotion policies of innovative local industries implemented in the late 90s, the power of local industry policies transferred to municipal government, and industry-academic cooperation capacity of regional universities were greatly expanded. Government has increased the R&D budget and, when it supports R&D, it requires a research institute attached to enterprises or gives additional points concerning whether it is or not. As a result, government leads the reinforcement of company's R&D and industry-academic cooperation. When it is difficult for companies to set up a research institute, government helps to establish a research institute by using the facility and manpower of universities through the industry-academic collaboration projects.
Gradually TP has been set up since the mid-90s, when President Kim Young Sam was in office. At the beginning, universities established incorporated foundation-type TP, but Provincial municipalities has supervised and taken de facto lead in regional development projects since the mid-2000s. Along with TP, Technology Innovation Center (TIC), supported by Ministry of Knowledge Economy, has been created under the supervision of universities since the mid- 90s. TIC aims at constructing industrial infrastructure needed to closely help regional small businesses by government's supporting of the 5-year-budget for the basic equipment infrastructure and by university's investing of its facilities and manpower. The investment in equipment could not help but be diversified due to the nature of a university at the beginning of the support. That is why TIC failed to secure the R&D equipment required by enterprises. So several new TICs that held the equipment of specialized sectors were created to correct those problems and were achieved good outcomes in its degree. But, many TICs failed to stand on their own feet after government's support stopped so that they had the bad evaluation. The TIC projects, which aimed at paving the way towards the industry- academic collaboration of colleges, were appropriate, however the government's requirement, that professors participated in TIC must help regional industry without rewards, did not accord with the zeitgeist and it became a negative factor that depreciated the value of technique. Those policies ultimately lead to the evasion of engineering colleges.
RRC of Ministry of Science and Technology is a regional cooperative research center and has been designated from the 90s to the mid-2000s. This task, unlike TIC, is the project for which R&D and operation budgets are provided, and government has supported the collaborative research of a university and a small company for 9
110 • 2013 Knowledge Sharing Program with Mexico years. While TIC was dismissed by participating manpower because there was no budget for R&D and software, RRC received a good assessment from participating ones because the budget for R&D and relevant equipment was provided. There are some successful cases including Sungkyunkwan University, which invited RRC on the base of the equipment, the TIC team secured and kept obtaining R&D projects of government and businesses. However, it is not easy for one business team of Korean universities, which have inadequate accumulation of capital, to win several projects. There are few similar cases especially in national universities.
As a whole, both TIC and RRC center's projects have the same purpose on helping regional small and medium businesses, but actually there is a large gap between them due to different goals of each budget. The collaboration between two centers was not often made based on internal condition of a university. To improve such problems, RIC, that combines TIC and RRC, has been supported until the late 2000s. Now registered RIC (including existing TIC and RRC) reaches total 99, and builds national network.
ERC, as a national engineering technique research center, has received the support to help the fundamental and applied research mainly about the engineering field since the mid-90s, but in fact no ERC was independent after the end of government's support. Most university-supervised projects, except the collectivization research projects such as TIC, RRC, RIC and ERC, placed emphasis on the education. However, the central university project on industry-academy collaboration was carried out in the mid-2000s for the purpose of industry- academy research and technical assistance, and that task integrated into the present LINC project. So, LINC which was mentioned in the education project is the comprehensive university project focusing on industry-academy cooperation. The LINC project, along with the central university project on industry-academy collaboration, is extremely business-friendly, and its pros and cons were disclosed as stated above.
The support project on start-up business was implemented in the mid-90s at universities throughout the country, and even now it keeps going. It helped venture startup through TBI, the executer of TBI moved into the support center for foundation of a university, and a university assumed a role as a supporting organization. The university industrial technology force was organized, so it provided technique guidance to businesses and performed research on bottleneck technique. It also took full charge of some government-aided industry-academy collaboration including the supporting project on professor's short- and long-term field work.
As stated above, industry-academy collaboration in Korean universities has been
Chapter 2 _ CETAI’s Future Strategy to Develop Human Resources for the Automotive Industry in Queretaro • 111 activated at high speed, so that there is a need to have internal organization that can exclusively watch it. In the past, when Korean national universities bolstered industry-academy cooperation, there were legal problems. Thus, offices of industry- academy cooperation were established to solve the problems and strengthen the system of industry-academy collaboration. National universities cannot conduct profit-making businesses, but the office of industry-academy cooperation is a separate corporation that can create profits. The office of industry-academy cooperation started as a small organization at the beginning, but now it grew to a substantive organization that links a university and businesses by leading all sorts of industry-academy collaboration including LINC. But it is pointed out that LINC was changed into industry-academy collaboration that pursued short-term performance because it aimed for too company-biased policies and limited the participation of professors and students. We need to take the policies in a careful consideration and self-examine ourselves for shaping sustainable industry-academy cooperation foundation. It becomes possible that national universities earn profits through an office of Industry-academy cooperation from the mid-2000s. School- based enterprises could be established as an internal organization of the university for that purpose. And now professors are allowed to startup venture businesses, holding their own professorship.
These days, a large scale of budget is invested in TP and specialized research centers. The evaluation of TIC conducted in the mid-2000s showed that the university projects had poor scores so that the leading role in industry infrastructure foundation moved to government-affiliated TP. Having making the matters worse, the amount of supporting fund for the most major government-funding R&D projects has increased, the development period has extended, and most major R&D projects has received support assuming there is preceding plan research. As a result, local small company's participation in R&D shrank, and industry infrastructure foundation for small businesses greatly decreased, so industry-academy cooperation was weakened by and large. Besides, the projects, including industry infrastructure foundation, cause high cost so that their vitality is in with a shout of somewhat losing its power. And some companies show the tendency to be too dependent on government for R&D budget they should invest. That harms right mind of R&D and industry-academy collaboration and is able to lead to cut off technical innovation potential.
It is apprehended that the projects colleges participate in as a bystander can lead to the high cost R&D system and an insolvent university. When government carried out industry-academy relevant cooperation projects, we should recognize that a close relationship, the malady of Korean society, is serious and that investment in colleges must create the regional industry. In addition, we do not overlook the fact that the result of the tasks takes times to a certain extent.
112 • 2013 Knowledge Sharing Program with Mexico 2.5. Study on TIC and RIC
TIC has the similar aspect to CETAI of USRPJ, and has a connection with FAAB LAB of Chihuahua State. It began in the mid-90s. There are five major projects in TIC: equipment support project, research development project, information distribution project, education training project, and business incubator project. Pioneer main purpose of TIC was the equipment support project to provide businesses with the equipment invested by central and provincial government by using university's facilities. Several contrarieties in TIC, which depended on the equipment support program, emerged in the mid-2000s. Because the program excessively focused on industry development through equipment support of a university, it failed to persuade professors into active participation. Due to the relatively short-term (5 years) supporting program, it was unavoidably trapped in the contrariety that the center was evaluated with equipment rental. In addition, participating professors were granted no incentives, and therefore preposterous business operation regulations to force unilateral sacrifice also brought about bad results. To settle those problems, TIC developed into 10 year support project, RIC, and now total 99 RIC including TIC were created in universities. Although there is no newly-aided business group, many RICs receive governmental support. The RIC project aims at technical innovation and industry-academy collaboration infrastructure foundation that puts emphasis on research development by combining existing RRC and TIC. It is thought that RIC is Korea's relevant experience in accordance with the intent of CETAI.
It is said that TIC benchmarked German Technology Innovation Center, but TIC is essentially different from it. The main purpose of German Technology Innovation Center is regional economic vitalization through business incubation. The Technology Innovation Center provides venture entrepreneurs of relevant industry sectors with the premises and facilities by using the premises and facilities given by EU, the central government and provincial governments. It also sets necessary conditions to activate industry-academy cooperation. On the other hand, the main purpose of Korean TIC is to help regional businesses by receiving high- price shared equipment from governments and using the facilities and premises of universities. Basically, that planning cannot be regarded successful. To settle those problems, RIC was implemented.
Despite of such difficulties, TIC of Gyeongsang National University, TIC of Changwon National University, TIC of Chonbuk National University and RIC of Sungkyunkwan University succeeded in standing on their own feet. TIC of Chonbuk National University was established in the area where machine industry relatively lags behind so that it generated great interest of the provincial government and businesses. As a result, many businesses except TIC received investment
Chapter 2 _ CETAI’s Future Strategy to Develop Human Resources for the Automotive Industry in Queretaro • 113 and set conditions favorable to independence, and although some companies obtained the privilege of using equipment, the business proceeded successfully without formal appeals from the private in consideration of the realities of the lagging region. Of course, self-reliant operation of TIC including Chonbuk National University is on the base of dedicated efforts of TIC's staff. In the case of TIC of Changwon National University, it was set up under the different condition from TIC of Chonbuk National University and it managed to achieve independence by actively meeting needs for processing technique of precision machine companies in Changwon. TIC of Changwon National University has trouble being alleged to grant some corporations special privileges and competing with private companies. TIC of Gyeongsang National University is in the intermediate area between TIC in Changwon National University and TIC of Chonbuk National University, and it was established to innovate the technology of companies in plastic work, located in the area. There are many problems with providing actual equipment with a view to trial production and process development. For those reasons, it specialized in power molding and bevel gear, focused on defense industry and overseas export, and built self-reliant ground which had symbiotic relationship with regional industry.
As stated before, Sungkyunkwan University is a good example to have choice and concentration effects. Korea's TIC is generally divided into two groups: the first TIC implemented in the mid-90s and the second TIC in the late 90s. The former failed in choice and concentration strategy. It works as direct causes of the failure. Government, which recognized such factors, required the latter one to select choice and concentration strategy, to centralize the equipment, and to introduce industry- focusing equipment. As a result, most TIC worked the best. In fact, all of typical succession cases belonged to the second TIC.
Basically, the self-reliance of universities with use of the equipment has its limits. As manpower is more significant than the equipment, companies had an unsolvable problem with securing talented staff who dealt with the equipment and guaranteeing quality and public interest violation. Therefore, we need to take it in deep consideration when we started the equipment center aiming at self-reliance.
114 • 2013 Knowledge Sharing Program with Mexico [Figure 2-16] TIC of Gyeongsang National University - (a) Facilities, (b) Equipment
TIC of Gyeongsang National University was established in 2000, and has received investment of total 9 billion won (5 billion of facility cost, 4 billions of equipment cost) from Ministry of commerce, Industry and Energy, Ministry of Education, universities and local governments. It is a high-cost equipment support center that specialized in plastic working, power metallurgy and metal molding. Competitiveness of Gyeongsang National University, in the plastic working sector and forging companies located in the area, became the foundation ground of TIC of Gyeongsang National University. It is near the industrial complex, 15 minutes away from the campus by car, holding about 3,300m2 of the offices and about 2,600m2 of the equipment buildings. Its main business contents are the equipment support as well as the business start-up fosterage.
TIC of Gyeongsang National University is operated as the form of a corporation body. The president of university is the chairman of the board of directors, which consists of about 20 directors including senior civil servants of local governments, the concerned position holder of the school, the professors concerned and CEO of the corporation. The head of staff and full-time employees of ITC take responsibility
Chapter 2 _ CETAI’s Future Strategy to Develop Human Resources for the Automotive Industry in Queretaro • 115 of the operation. For 5 years from the business start-up(five years of the first stage), central government, regional governments and privates shared seven tenth, two tenth and one tenth of about 10 billion won(including 5 billion of facility cost) respectively. After that, during the period of business (5 years of the second stage) and the entire self-reliance stage, it was run without government's aids. That is, it has charged a fee for using its equipment to pay for operating expenses. During 5 year period of equipment support, it received critical evaluation by government. It also submits business reports to government during 5 year period of performance result from the end of governmental budget support. Now that 10 years flow away from the beginning of government support, it fully stands on its own feet, getting out of governmental management. When it introduces the equipment, it is mandatory for the deliberation committee on equipment investment to review the plan on the base of demand survey of local companies. And government regulates the budget to invest over 80% of the budget in equipment.
[Figure 2-17] Products and analyses by of TIC of Gyeongsang National University
(a) Cold forging
(b) Power metallurgy
(c) Engineering analysis software
116 • 2013 Knowledge Sharing Program with Mexico 2.6. Korea's engineering education accreditation system
Accreditation Board for Engineering Education of Korea (ABEEK) is the engineering education accreditation system of Korea introduced in the late 90s. Its goals are to enrich engineering education and to train creative engineers in accordance with global standards. As showed in Figure 2-18, ABEEK, which is set up in 1998 and became a full member of Washington Accord, WA in 2007, is an accreditation organization on engineering education of Korea established under the cooperation of the Institute of Engineering Education, Engineering University President Conference, Engineering Technology Conference, government (MOTIE, MOE) and Engineering Conference.
[Figure 2-18] Accreditation Board for Engineering Education of Korea
ABEEK
Engineering Engineering university technology president conference conference
MOTIE MOE
Engineering Industry Conference (SAMSUNG, (Architecture, DAEWOO, LG, Polymer, Material, HUNDAI, SK, etc.) Mechanical, etc.)
ABEEK has something to do with the Washington Accord (WA). WA was signed in 1989 as ‘Mutual recognition’ in order that the agencies from six nations such as USA, British, Australia, Canada, New Zealand and Ireland that supervise the accreditation of professional engineering degree program to mutually guarantee ‘Substantial Equivalency’. Now it consists of 15 full members including Hong Kong in 1995, South Africa in 1999, Japan in 2005, Singapore in 2006, Korea and Taiwan in 2007, Malaysia in 2009, Turkey in 2011, and Russia in 2012. And there are 7
Chapter 2 _ CETAI’s Future Strategy to Develop Human Resources for the Automotive Industry in Queretaro • 117 associate members: Bangladesh, Germany, Sri Lanka, India, Pakistan, China and the Philippines. Considering the global trend toward global use of Engineering Certificate, the international mutual recognition of the accreditation system in engineering sectors, which is directly related to national survival in knowledge- based technological society of the 21st century, is an essential requirement. Engineers Mobility Forum (EMF) stated that the first one of engineer's standard of qualification requirements in international engineer system is to receive an education, that WC recognizes, or an education to guarantee the equivalent quality of it. In other words, if engineers win the certificate that WA recognizes regardless of their nationality, they can obtain legal recognitions in USA. Korea also created ABEEK that met the requirements of global standards, which was asked for and was appropriate for reality of Korea to go along with those current global trends.
The universities that introduced the accreditation system of ABEEK established and operated the engineering education accreditation (or innovation) center. ABEEK regularly assesses whether the engineering education accreditation center of each university satisfies the accreditation standard or not. The engineering education accreditation center of each university accesses whether graduates abide by accreditation procedures, grants them certificate, and keeps monitoring whether they achieve the educational goals.
Strength of ABEEK accreditation system is that it pushes both professor and students to proceed into the organized engineering education that follows the international norms. Some Korean students enroll in colleges to literally receive a diploma, which burdened the students. And it is very important to solve the problem, for the students are enthusiastic about acquiring visible requirements, which the large corporations need instead of their majors. So, it is true that it bothers the professors and students. As the ABEEK accreditation system pushes students to complete the primary subjects, professional education subjects, theory subjects and design subjects, professor-focusing theory subjects are somewhat reduced, and the percentage of design subjects, which guarantee students' participation in education, has increased. Of course, it is not mandatory for the students to choose the system, but most universities where this system settled down actively encourage the system.
Major 4-year universities are following the ABEEK engineering accreditation system. This system requires the observance of completion system map. Therefore, it is not easy to have field training during the semester. Because mathematical proficiency of college freshmen does not reach the expectation, they are needed to spend lots of time on studying elementary mathematics. And also because most male students are returned from the 2 year mandatory military service after their first year of school, the percentage of primary education is high during the freshman
118 • 2013 Knowledge Sharing Program with Mexico year. Thus, many difficulties are followed the engineering education where theory education is important when they receive field practices from sophomore to senior. So, one-month field practice is implemented during the semester, which grants 1 or 2 credits. Of course, to complement those problems, they are frequently given on-the-spot study, the workers of industry are invited, or the seminar is held. And the industry-academy cooperation term system, which gives student about 15 credits, is operated. Students work in a company during the whole one semester so that they can maximize their field practice ability. But, as the ABEEK engineering accreditation system becomes common, the industry-academy cooperation term system is not greatly activated. On the other hand, ABEEK requires students to complete more than certain scale of credits among design subjects so that they are induced to learn theory, field application, and the ability to adapt.
Most of Korean university graduates want to get a job in a conglomerate. The reason is that the salary of the big company is higher than that of the other small and medium company and the job of the large company is believed to be much stable. Anyway, the graduates from major 4-year colleges basically have the goal to land a job in the conglomerate. To successfully sum up opinions of technicians in the big company, machinery engineering specialists have to be devoted to fundamental dynamics. Thus, advanced machine technicians do not think that long-term field practice is generally good. Especially, they do not believe the field practice without the supervision of the school. In the case of mechanical engineering, the decree on the establishment of the major requires a factory-type experiment practice building, and the university that set up mechanical engineering has held a factory-type experiment practice building. Some private colleges including Yeungnam University lent private experiment and practice building to produce goods, and instead the companies took responsibility of education support on experiment and practice. In the case of a national university and a public university, the concerned law allows the school to cooperate with industry for R&D in the premises of the school, but do not allow goods production, so the spread of this kind cannot basically occur. School-based enterprises are the similar organization. It runs profit-making businesses by using the facilities, equipment and people of a university. It is virtually impossible that the major car- related engineering attracts profit-making school- based enterprises on the base of the by-product of students' practices.
TIC projects aimed for obtaining synergy effects by using education and research in the process of having the equipment for technical innovation that local businesses jointly need and supporting industry. But, there are some limits when high-cost common equipment is used for the education and generally field trip effects can be obtained.
As a whole, there are only few examples to show that the two-dimensional
Chapter 2 _ CETAI’s Future Strategy to Develop Human Resources for the Automotive Industry in Queretaro • 119 education succeeded in settling down in Korea's 4-year-course colleges. Meanwhile, Korea Polytechnic University, which has the equipment needed for research and education in Engineering House (EH) with the company's laboratory, have professors and students to solve the problems together having inducing the students to have more developing participation in field practices and tasks. Such education style, under the name of industry convergence area project, is proceeding and making a plan in major industrial complexes. This project must be successful, but 50 billion won was spent on building a campus in an industrial complex, and we should not underestimate the fact that many industry-academy collaboration- oriented medium-sized enterprises have to flock together around the campus.
KPU is a special school established for industry-academy cooperation 15 years ago by government. The founder of KPU is the Ministry of Trade, industry and Energy, and the founding philosophy of KPU is summed up as empirical tradition. As shown in Figure 2-19, KPU is located in the core of Sihwa Industrial complex, Banwol Industrial Complex and Namdong Industrial Complex, which represent Korean industrial complex. As of December, 2012, those three industrial complexes have 9708 companies, 8550 companies and 6140 companies respectively. Their annual sales were 36 trillion won, 22 trillion won and 42 trillion won respectively. The number of the employees in the three complexes reaches 107,000, 85,000 and 152,000 respectively. Above this, many other industrial complexes are inside influence area of KPU.
KPU has 13 general majors and special departments in industry-academy collaboration. There are about 14 contracted departments as an undergraduate and graduate course in the department of industry-academy cooperation. The contracted departments are degree courses for employees in industry and educate them out of business hours. As a non-degree course, retraining of field workers are implemented intermittently or regularly. Generally the central government, local government and businesses bear the expenses together.
120 • 2013 Knowledge Sharing Program with Mexico [Figure 2-19] KPU's location and surroundings
Namdong Industrial Park
Sihwa Industrial Park
Banwol Industrial Park
Now around 6.5 thousand students are enrolled in KPU. Among them, there are 254 master-course students and 59 doctoral course students. The number of guest professors is 225, which is a lot compared to 154 full-time professors. That is, active use of industrial workers to the education is the feature of KPU.
Although KPU has short history and is a newly-created university (established in 1998), it is praised as a successful industry-academy model of university that represent Korea having thanks to government’s strong will on fosterage. Its educational goals are to train creative, practical, enterprising manpower. To strengthen industry-academy collaboration, KPU executes the policy of using industrial fields as a campus or a research development laboratory. It oriented the prestigious Polytechnic, which is institute of technology.
To achieve those goals, it plans to enhance global competitiveness of a university by strengthening educational competency, student competency, research and industry-academy cooperation competency, start-up business competency, and administrational and financial support competency. Detailed promoting strategy includes the education process of technology convergence, reinforcement of employment competitiveness, activation of youth knowledge-technology start-up
Chapter 2 _ CETAI’s Future Strategy to Develop Human Resources for the Automotive Industry in Queretaro • 121 business, TIP activation, deepening of EH education, construction of global industry- academy collaboration system.
The KPU education system is basically on the ground of ABEEK system. The Engineering Education Innovation Center as a backup organization was established. Under the ABEEK system, the education is executed according to the completion system map that prescribed the order of the courses, and emphasis is placed on graduation design. KPU requires the students to make their graduation work through comprehensive design I in the first semester of a senior and comprehensive II in the second semester of a senior (in the case of mechanic engineering) and announce the results. Their work becomes important factors in their graduation assessment and education evaluation.
The field practice and on-the-job work are limited under the ABEEK. The graduation compulsory credit concerning the field practice is total 4 credits, and the students can maximally complete 18 credits. The field practice is carried out during winter break of a sophomore, summer and winter vacation of a junior, or the first or second semester and summer break of a senior. The school provides collective insurance in preparation for the field practice, and the excellent in the field practice are given a chance to go to overseas training.
Techno Innovation Park (TIP) is the core and representative of KPU's industry- academy cooperation education and research. There is massive accommodation, in which 1,600 people can stay, for students, professors and researchers who take part in industry-academy cooperation and research. There are also all sort of amenities including a language institute, a guest house, restaurants, sports facilities, amusement facilities, etc. And in-depth education and research are carried out for 24 hours in Engineering House (EH, reference Figure 20) that has the core facilities such as education room, meeting room, research room of a company, equipment room, etc. The students are allowed to participate in R&D in the laboratory of a company.
KPU, like other universities, established business foundation that supported and took full charge of industry-academy cooperation. It also set up the teaching and learning support center so as to help improve professor's teaching methods. Except for those, it has the Job-Seeking Support Center, the Institute for International Exchange (including Korean education Center), the continuing education center (including technology innovation center), the remote technique support center, KPU art center, newspaper, the CEO education institute, a college publisher, volunteer service center, and the annex research institute.
Lots of problems to be improved lay behind KPU's successful industry-academy
122 • 2013 Knowledge Sharing Program with Mexico cooperation. First of all, the employment of the graduates to Joint Corporation or nearby small businesses is not better than expected. And KPU does not obtain successful results in the business that needs the software ground. But, thanks to government's strong financial backup, its unsuccessful experiences were used developmentally in other businesses. For example, despite of the failure of the TIC project, the TIP projects kept going. Of course, it is impossible that the TIP projects intended for general universities are implemented considering the budget. So, the KPU projects should be regarded as a pilot project for the establishment of industry- academy-centered university in major industrial complexes under the choice and concentration strategy of Korean government.
[Figure 2-20] KPU and Engineering House (EH) - (a) Campus (b) Inside of EH
The two-dimension education style this pilot project pursued now has spread into major industrial complexes under the name of industry convergence region project. The main point of the campus-building project in the complexes is that single or associated department of universities located out of the complexes will move inside.
Although KPU must be relatively successful, we should not underestimate the fact that about 50 billion won of the budget is invested into one industrial convergence region project and many industry-academy collaboration-oriented medium-sized enterprises have to flock together around the campus. Because a newly-established university has the poor infrastructure of manpower and software, successful operation of TIC/RIC is not easy. It is true that such inevitable failure cases and KPU model of UPSRJ receive attention, but unless government grants huge financial aid, we will emphasize that the industry-academy cooperation education model would be meaningless.
Chapter 2 _ CETAI’s Future Strategy to Develop Human Resources for the Automotive Industry in Queretaro • 123 2.7. Others
In terms of equipment build-up, although there is no special project except TIC mentioned above, minimal budget is supported for university education.
When mechanical engineering major in engineering college is open, the installment of factory-type experiment practice building is mandatory. Most universities operate the common use of experiment practice building to enhance the efficiency of the equipment in universities. The common use experiment practice building has common equipment other departments require with staff who takes full charge, and supports equipment operation. This equipment is unusually used in the service of corporations. The Center for Research Facilities of Gyeongsang University, which has relatively favorable comments, is now securing 6,200m2 of independent facilities (http://crf.gnu.ac.kr/sub/01_04.jsp). About 20 billion won of budget has been invested since its establishment in 1981, and 11 exclusively responsible staff except professors and graduate students to operate nano-material analysis team, life science analysis team and cell image analysis team. It holds about 150 kinds of common research/education equipment such as a fatigue tester, an electron microscope, magnetic resonance image, a spectroscopic analyzer, an X-ray structure analyzer, etc. and meets the equipment needs of universities as well as local communities.
And in order to improve the field working ability of the students by doing profit- making business on the base of the by-product of students' experiment practice in a university, the school-based enterprise program is carried out. The groups to execute the school-based business are fostered for certain period by government support through competitiveness. The school-based enterprises in food and drinking sector are abundant in principle. They exist as the division of the corresponding university, and their profit should be reinvested in the educational purpose.
3. Policy Recommendation
3.1. Implications of Korea’s development experience
In order for university to be developed from theoretical study centered to Industry-academy cooperation centered, constant investment shall be realized. In the beginning, under the principle of choice and concentration, competiveness shall be effectuated. And then it is necessary to lead the local development under the connectivity and cooperation at the next stage.
124 • 2013 Knowledge Sharing Program with Mexico In terms of production scale, Mexico is 60% higher than Korea but there are not Mexican enterprises and the rate of domestic parts supply is 20~40%. So the gap could be much higher. Therefore, dual education system of Korea and Germany shall be referred but Mexico’s reality such as level of enterprises, students and professors shall be reflected in the education system.
Universities in Korea think that the long-term field placement will cause many side-effects (especially, electronics, mechanical engineering and other similar majors). In order to create high-quality manpower, reinforcement of theory shall precede the long-term field placement.
CETAI, which UPSRJ seeks for, is similar to Korea’s RIC. Evaluation for Korea’s TIC and RIC are not generous so it needs to be seriously considered to perform business successfully. RIC related to Korean cars are focused mainly on mold process, Test and evaluation, 6 root technologies. VNH technology, electronics and bio-fuel technology etc. are desired to be developed under the principle of choice and concentration when the R&D capabilities of professors and local enterprises are matured after the graduate school is founded.
In Korean enterprises, CAE is more seriously considered than experiment. With the shortened cycle of car development, the experiment has to be minimized. These kinds of innovations are transferred to universities and practical courses of utilizing CAE are increasing. There are lots of similar points in the development policy and history of Korea and Mexico except for the parts material industry. In the automobile industry, Mexico’s role in supply chain is not big. It implies that government, university and industry shall cooperate each other to develop parts material industry for Mexico.
3.2. Policy recommendation
3.2.1. Short-term projects
Master plan
Expanding facilities from 2012 to 2028 is the main point of the current master plan. According to the Korea’s experiences, it is desirable that dormitory in the campus, information center including library, innovation center to support students’ self-governing activity and venture activity shall be installed at the initiatory stage. In Korea, there is a method that the private capital is invested and then the enterprise collect the investment by creating margin from operation.
Chapter 2 _ CETAI’s Future Strategy to Develop Human Resources for the Automotive Industry in Queretaro • 125 Available major and curriculum
The currently available majors are focused on the assembly and finished car production since the Mexico’s automobile industry focuses on these fields. But the high value automobile industry requires the professionals from mechanic engineering, electronics/electric engineering, chemical engineering and industry engineering. Therefore, considering the available majors, it is desirable to train manpower of the level between skilled manpower and professionals. Gradually, it is desirable to develop the professionals. Also we would like to advise that the preparation work to become the professional institution which trains the manpower of automobile parts material production shall be executed for 5 years to respond the increasing demand of car parts materials.
According to the survey of UPSRJ, students want to work for the field of design and production. (about 43%) Of course, if the mechanic engineering, material engineering and measurement engineering are included, most of the students want to enter this field. Basic mechanics knowledge and relevant knowledge are emphasized in the design and production. This is also emphasized as CAE technology is developed. Therefore, it is recommended to establish and operate appropriate curriculums. For this, CAD/CAM/CAE center shall be established in connection with CETAI and investment for computer and CAD software shall be prioritized. Structure analysis/design, production engineering shall be equipped with the necessary conditions in operating curriculum.
A two-way education system is the characteristic of UPSRJ. Above all, it is necessary to analyze closely the advantages and disadvantages of this system. In Korea, this system is not emphasized in the university. According to the advancement of industrial structure, high level engineering basic knowledge is required with the advanced technology in the industry.
International cooperation
It is thought that UPSRJ can cooperate with universities and relevant institutions in Korea. Firstly, regarding the two-way education, it is recommended to cooperate internationally with KPU. KPU has an international division. Also other universities in Korea have divisions of international cooperation. It will be a good chance for UPSRJ to cooperate each other since KPU has no university in Mexico to cooperate.
Secondly, it is recommended to cooperate with Gyeongsang National University for the installation of CAD/CAM/CAE and donation of engineering analysis software for the purpose of education. With the mutual cooperation, it is necessary to cooperate constantly in order to transfer manpower and technology to Mexico and
126 • 2013 Knowledge Sharing Program with Mexico try to secure the budget for establishing the environment of software utilization.
In order to utilize the donated software, it is necessary for Mexico to establish Korea-Mexico engineering technology cooperation center. This center shall be operated for the non-profit-purpose such as technology transfer, technology consultation, profit business, information provision and distribution of S/W gradually to establish the framework of self-reliance. But it is required to cooperate in order to secure financial resource in the beginning.
3.2.2. Mid- to long-term projects
Establish licensing system
According to the experiences of R&D of Korea, phenomenon to avoid engineering college was appeared with the increase of GNI after qualitative growth of engineering college. The phenomenon to avoid engineering college was necessarily connected to the weakness of engineering college education. Especially, Mexico’s industry depends on two way education so it is likely to face obstacles in controlling students.
In Korea, Accreditation Board for Engineering Education of Korea (ABEEK) is used in order for students to strengthen finishing majors. Since this system emphasizes on the connectivity with the subjects, it enables students to finish their majors successfully. Currently, this system is not adopted by Mexico. It is necessary to introduce this system at the appropriate moment. In other words, It will be required to improve the education system to focus on the basic education so that the universities can lead in improving the competiveness of engineering and developing the parts material industry. Introducing the Engineering Education Accreditation System requires the national interest and support.
Innovate dual education
Mexico's dual education system has lots of limits. In other words, it is poor in the engineering theory education. In order to resolve the problems, it is advisable to execute the field placement education in connection with the Start-up Company or laboratory which will be brought up in the CETAI’s business incubator center and CETAI.
And by revitalizing car racing which are already executed in Korea, it is desirable to increase the rate of utilization and equipment of CETA in the beginning. Additionally, by creating various start-up societies and executing TBI projects, it is desirable to evaluate and manage students strictly to realize the two-way
Chapter 2 _ CETAI’s Future Strategy to Develop Human Resources for the Automotive Industry in Queretaro • 127 education. By considering KPU’s active two way education system, it is advisable to take possible unit enterprise and advantages however it is not desirable to imitate all of the things since the reality in Mexico is quite different from Korea in terms of conditions.
CETAI plays a role as a center in the industry-academy cooperation
Reality is the most important thing in CETAI since it takes lots of budget but hard to maintain the desired level and respond to various demand. CETAI aims at training the high-quality human resource so it is important for students to participate. Therefore, it is desirable to handle actively the computer application demand by installing CAD/CAM/CAE office for industry. And in order to support for students to realize the creative ideas, it is necessary to be equipped with mechanical working room, electronic electricity practical room, foundation material manufacturing lab, measurement and material analysis room.
Introducing the objectified procedures which satisfy the demand of local enterprises is recommended in establishing these rooms. Some of the expensive equipment has to depend on some enterprises so it is not possible to operate economically and can be connected with the failure of attracting the investment due to the damage of public benefit.
Realistically, the size of PARQUE industrial zone is not enough to function as the equipment supporting center just like RIC which was already executed in Korea (including TIC). Therefore, as mentioned earlier, as a short term alternative, general equipment in connection with education and venture company founded in the campus or self-making automobile society shall be established to manufacture prototype products. And in the long-term, it is thought to establish specialized equipment center for UPSRJ to grow as specialized car research center. It is important to narrow down the scope of equipment, to establish the field for joint cooperation with local enterprises and to equip the facilities in the campus by university.
3.2.3. Summary of research on CETAI's plan
• Purpose of foundation: Train the high quality manpower through the expensive common equipment and promote the Industry-academy cooperation
• Main projects: 4 main projects (Education & Training, R&D, Business incubating, equipment support
• Main body of operation: CETAI operation committee (In Korea, incorporated
128 • 2013 Knowledge Sharing Program with Mexico association or foundation corporation)
• Organization: CETAI operating committee, business team of operating committee
• Constitution of operating committee: Chairman (President of UPSRJ), Chief of CETAI center, Chief of Investment, each chief of team, representative of local government, President of unions from partner enterprises
• Organizational chart
[Figure 2-21] Concept of organizing CETAI
UPSRJ CETAI Government Education Regionanl innovation
Supporting Committee of equipment team and research
Steering committee
Material test and Die making Injection molding Metal forming ...... measurement lad
CAD/CAM/CAE lab company 1 company 1 company 2 ...... company 2 company 2 company 2 ...... Dual education center ......
• Development plan - First stage (5 years): Choice and concentration - Second stage (5 years): Connection and cooperation - Third stage (5 years): Self-reliance and extension
• Development strategy - Phased development strategy - Business incubator project - Achieve self-reliance after 10 years
• Facility investment - Balance between public benefit and profit
Chapter 2 _ CETAI’s Future Strategy to Develop Human Resources for the Automotive Industry in Queretaro • 129 - Focused sector, condensed facilities - Investment decision after establishing the plan of equipment utilization
• Research investment - Necessary to connect with industry -Be concerned with equipment utilization. - Organize an association of element technology research between professors and local professionals from industry.
• Budget - First to second stage: Annually $1,000,000 - Third stage: Annually $500,000, excluding facilities
• Source of fund: 50% by federal government, 35% by state government, 15% by others
• Manpower plan - First stage: 3 to 5 professors participate and 2 to 3 exclusive manpower - Second stage: 5 to 7 professors and 3 to 5 exclusive manpower 3-5 persons - Third stage: 7-10 professors, 5 to 10 exclusive manpower
• Area: 50,000㎡, considering long-term development and business incubator center
• Facility - Office and administration service - Share with business incubator center - Start from 1,500㎡, secure 1,500㎡ additionally every 2 years - Equipment building, starting from 1,500㎡. Secure 2,000㎡ every 2 years
• Equipment (budget) - $500,000 for CAD/CAM/CAE center - $1.5 million for mold manufacture center - $1 million for injection molding center - $1.5 for plastic work center - $1 million for material testing and measurement center - $2 million for powder metallurgy center and reliability center
• Electricity: Start from 500kW and secure another 500kW every 2 years
130 • 2013 Knowledge Sharing Program with Mexico 4. Conclusion
Requests of UPSRJ of Queretaro can be summarized into the plan of CETAI and management plan of CETAI to be installed in the university to revitalize the Industry-academy cooperation through the training high-quality manpower and technology.
Currently, CETAI is at the stage of planning. USRJ is at the early stage of establishment. The graduate school has not been founded yet and human resource is also not sufficient so education centered approach shall be used rather than research-centered. Therefore it is realistic to focus on training field placement centered manpower and to develop high-quality manpower by strengthening the research capability gradually with CETAI.
UPSRJ seeks for the specialization of the future-centered field through CETAI. Considering that the students’ most favored fields are the design and production, it is thought that major enterprises shall pursue supremacy or leading edge nature in the common core field which cooperative enterprises emphasizes on rather than the production design field which major enterprises shall secure by themselves.
In the mid-long term, it is thought that the two way education shall be supplemented extensively. For example, it could be one method that CETAI is in charge of the two way education. And in the long term, it is thought that it is necessary to ensure internal stability of Mexico’s engineering education by joining the WA.
It is recommended to redouble to utilize the technology of CAD/CAM/CAE in the operation of curriculum. By installing CAD/CAM/CAE center in CETAI, CETAI can be developed into the technologically specialized center so the rate of students’ participation will increase and meet the demand of industries. Also the Korea- Mexico’s cooperation through CAE technology will contribute to the development of Mexico’s weak parts material industry. Therefore, it is recommended that the revitalization of mutual cooperation is necessary under the institution.
In case of Korea, the similar centers with CETAI are RIC including TIC, RRC. Looking into the successful operation cases, the participants’ passion and active support by local governments were supported. Therefore, it is recommended to establish and gradually develop CETAI rather than to establish fast and actively.
Chapter 2 _ CETAI’s Future Strategy to Develop Human Resources for the Automotive Industry in Queretaro • 131 References
OICA Correspondents Survey, 2012, World Motor Vehicle Production by Country and Type. Kim, Kihyun, Park, Yoonjoo, Kim, Youngcheol, Lee, Sanghyun, 2012, Research on the characteristics of Middle and South America’s elite group, KIEP. Cho, Heayun, 2012, Mexico’s industry report of June, Mexico city’s office, KOTRA. KDI, 2013, Report of 2012 KSP project for Mexico. INOAC, 2013, Deciding Your Company’s Mexico Strategy. Kim, Jino, Yu, Sungjun, 2013, Mexico’s Main Industries – Automobile, Construction, IT, Resource Development, KIEP- KOTRA. Kim, Jongyul, 2013, Conditions of Automobile Industry of Major Countries, Automotive report. Kim, Philsoo, 2013, Korean Automobile Industry to see the future through past, CarTV News. Kim, Junsung, 2013, 2014 Prospects for Automobile Industry, Meritz Securities. KOTRA, 2014, 2013 Mexico’s Automobile Industry Trend. Ministry of Commerce, Industry and Engergy, Korea Automobile Manufacturers Association, 2014, Prospects for Automobile Industry. Mexico City office of KOTRA, 2013, Trend of Mexico’s automobile industry in 2013. Information Center of the Ministry, 2014, Policy of Ministry of Industry, Resource and Commerce of Korea. http://www.promexico.gob.mx: ProMEXICO. http://www.naver.com: National information of Korea and Mexico. http://www.kaist.ac.kr: Korea Advanced Institute of Science and Technology. http://cafe.naver.com/coreamexico: Mexico. http://www.amia.com.mx: Association Mexicana de la Industrial automatriz. http://www.hyndai.com: History Museum of Hyundai Motors. http://www.kia.com: History Museum of Kia Motors. http://www.kama.or.kr: Korea Automobile Manufacturers Association. http://www.kopo.ac.kr: Korea Polytechnics. http://www.kpu.ac.kr: Korea Polytechnic University. http://www.ric.re.kr: Korea RIC Association.
132 • 2013 Knowledge Sharing Program with Mexico 2013 Knowledge Sharing Program with Mexico: Consultation for Economic Development of Mexico's Four States Chapter 3
Policy Recommendation for the Industrial Park Development in the Altiplano Region
1. Current Situation and Problems of Mexico 2. Plan(Draft) for the Development of the Altiplano Industrial Park(AIP) in Hidalgo. 3. Characteristics of Industrial Location Policy of Korea and its Implications. 4. Implications of Korean Experiences and Recommendations for Mexico. 5. Conclustion and Policy Suggestions. ■ Chapter 03
Policy Recommendation for the Industrial Park Development in the Altiplano Region
Young-Chul Park4) (Sungkyul University)
Summary
The potential of State of Hidalgo is rich. First, Hidalgo is located in the hub of national transportation system. Second, its security is fairly good. Third, basic infrastructure such as water, road and rail road can be provided at reasonable costs. Fourth, there has been no labor strike for last 10 years, representing benefits to employers. Fifth, state government officials have strong passion for the state’s development. Sixth, it is near Mexico City, the capital of Mexico. Hidalgo also faces challenges in pursuing its regional development. Firstly, it is economically lagging compared with other states. Therefore, supports of the federal government and creative strategies are necessary. Secondly, 100 ㎞ away from Mexico City, commute from the city takes as long as two hours and labor supply is not smooth despite of its proximity to the city. Thirdly, spatial inequality exists: major cities of the state are mostly located near the Mexico City, which resulted in spatial imbalance of the State. Fourth, with limited supports of the state government, it seems not easy to attract new companies and to secure competitiveness of the state.
The size of the Altiplano Industrial Park (AIP) is 8㎢, a part of “the greater industrial region” of 35㎢. Basic infrastructure such as electricity, water and transportation is available. Three cities with a population of 170,000 will be labor supply sources. There is good potential for the businesses in the Altiplano Industrial
4) I am grateful to Mr. Lebek Acosta and Bernardo Pena for their excellent cooperation. In this chapter, they contributed most of the works in part 1 and part 2.
134 • 2013 Knowledge Sharing Program with Mexico Park of various collaborations with the nearby industrial areas. Fifth, business types in the industrial zone are varied, so a wise combination with them is necessary. Sixthly, policy support is not enough to become an attractive industrial park.
Industrial location policy of Korea has pursued four purposes. The first was to strengthen the national production capacity. The second was to promote spatially balanced development. The third was effective utilization of land. The fourth was environment management. The policy has adapted or led the industrial development by changing its frame. Institutions to support industrial locations have been effectively established. They are Framework Act on the National Land, National Land Planning and Utilization Act, Industrial Location Act and Industrial Cluster Act. Support for industrial location includes infrastructure, financing and taxation. Active support system and effective operation contributed to improvement of industrial zone’s role. Public side has led the development of industrial zones, while private participation has increase recently. The Central Government and the local government represent the public side. In particular, public corporations have played major roles. They are Korea Land and Housing (LH) Corporation and Korea Industrial Park Corporation (KICOX).
Industrial zones of Korea are categorized into national industrial park, regional industrial park, agricultural industrial park and urban high-tech industrial park. The number of national industrial park is not many but they have played a substantial role in establishing industrial cluster, leading national economic growth and forming regional economy hub. And they also brought condensed use of land, prevention of its unplanned use and effective environment management. In the light of Korean experiences, the Altiplano region is desired to be developed in the direction of strengthening the local industrial competiveness, spatially balanced development of the country and sustainable development.
The characteristics of the development plan for the Altiplano Industrial Park can be described as the followings. First, it is comprehensive but only a conceptual plan. Second, it is an infrastructure-oriented, a physical plan. Third non-physical factors need to be considered additionally. Non-physical plans include financial plan, support plan as well as demand analysis and economic feasibility analysis, implementation plan. The Sukmoon Industrial Park of Korea can be a good example.
Recommendations for the Altiplano Industrial Park follows: 1) to establish a master plan of the industrial Park, 2) to discuss space appropriateness and development period, 3) to suggest how to secure the land, 4) to execute economic analysis, 5) to distinguish roles of the public side and the private side, 6) to establish the effective implementation system 7) to select proper industries 8) to prepare
Chapter 3 _ Policy Recommendation for the Industrial Park Development in the Altiplano Region • 135 aggressive incentives to induce the enterprises 9) to establish attractive supporting system, and 10) to build efficient institution system Implications from the Korean experiences for the Altiplano Industrial Park development are as follows: First of all, it is important to set the proper development period. And secondly, it is need of rational feasibility analysis that includes the development scale and selection of the target industry and etc. Also needed is an effective resources and promotion system that promote rational feasibily analysis is needed that the competitiveness of Altiplano Industrial Park is third one. Lastly, it should be emphasized that the active role of Hidalgo, as a local government, is indispensable.
1. Current Situation and Problems of Mexico and Hidalgo
1.1. Current Situation of Mexico
1.1.1. Economy and Industry of Mexico
Mexican economy is the second largest only after Brazil in Latin America. The area is 1,960,000㎢ (the 14th in the world). Its population is 149,700,000 (the 11th in the world). The expected life span is 27.1 years. And it is the seventh in oil production and the eighth in automobile production. According to the IMF, Mexico ranks the 14th in GDP with $1,208 billion (Korea the 15th) and it accounts for 20% of the GDP of Latin America. Mexico heavily depends on the U.S. economy, and its economy shows a gradual growth.
Mexico formed FTA both in North America and Latin America. Since Mexico is located near the U.S., many global enterprises regard Mexico as the outpost to secure production factories to enter North America. Therefore, the industrial areas near the border and the Mexico City have been developed well. In comparison, other industrial parks are not sufficiently competitive. It caused the problem of international outflow of high-quality manpower and manpower moving the from rural areas to urban area and from small- to medium- sized cities to metropolitan city. Recently, there have been foreign investments in assembly industry. However, it is not easy to secure high-quality manpower for them.
Recently, as China’s wage has increased and business conditions have declined, which benefited Mexico. Average wage of Mexico is $2.2 per hour, lower than China’s $2.4 per hour. And its productivity is higher. Foreign investments are $22.6 billion in 2010, $23.6 billion in 2011, $18.3 billion in 2012 and $23.9 billion in 2013.
136 • 2013 Knowledge Sharing Program with Mexico In 2012, it stagnated a little but increased gradually. However, it is pointed out that the society is unstable. Skilled manpower is lacking and its supply chain is yet to be further structured. Obviously, Mexico has a great potential to develop into the world’s factory as a match for China. Mexico has numerous advantages: a vast territory, a large population, rich natural resources and proximity to the world’s largest market. Therefore, if the country takes proper measures against its labor problems, which are the obstacles to foreign investment, and establishes an adequate policy to support an industrial and economic promotion, an outstanding continuous growth can be attainable.
1.1.2. Problems of Economy in Mexico
Firstly, it depends on the U.S. excessively. A recent trend of investment shows that the U.S. accounts for more than 50% of the investment. For export, it accounts for almost 80%. Secondly, there are not enough linked industries to be benefited from the ripple effect. Mexico has structural problems since Japanese and German enterprises in Mexico import the main parts and equipment from their own countries so the ripple effect is not occurring. Foreign enterprises in Mexico mostly depend on its low wage advantage. Rate of parts self-reliance of EMS (electronic manufacturing service) cluster is only 15%. Thirdly, the gap between rich and poor in Mexico has deepened. Its GDP per capita in 2010 is $9,242. The proportion of the poor population is 51.3%. 62 languages are spoken by various natives and most of minorities belong to the poor class. Fourth, unemployment is another problem, especially with youth. Youth unemployment rate for ages 15 to 29 has increased 15% every year for ten years. About 73,000 were unemployed in 2010. Unemployment rate was only 0.9% in 2000 but it went up to 3.3% in 2010. In terms of gender, man’s number of unemployment increased by 3.1 times and woman’s number of unemployment increase by 3.9 times. Mexico has achieved economic growth for the last 30 years but efforts to resolve problems were not sufficient. Two thirds of employees in informal sectors are those with ages between 15 and 29 since quality of work and wage is lower in the formal sectors.
1.1.3. Characteristics of industrial location and infrastructure
Advantages of its Location
First, there are a billion people as a potential market, and trade agreements with U.S., Canada, and countries of South America were made to access the market. Second, the U.S., the richest country in the world borders Mexico along 3,000㎞, offering attractive proximity to foreign enterprises.
Chapter 3 _ Policy Recommendation for the Industrial Park Development in the Altiplano Region • 137 Industrial Location
In Mexico, development of industrial park started in 1965. Currently, there are 179 industrial parks covering 165.08㎢. In terms of the number, there are 118 light- industry parks (65.9%), 5 heavy-chemical-industry parks (2.8%) and 56 in the rest (31.3%), where the two are mixed.
As to as to infrastructures related to industrial park, there are 179 power supply facilities, 117 water supply facilities, 175 wastewater disposal facilities and 97 natural gas facilities. However, considering the number of industrial parks (179), they are not enough.
Industrial park and related functions- 179, 165.08km2 Industrial Parks - Light-industry park: 118, heavy-chemical industry park: 5, the rest: 56
- Electricity: 179, Water: 117, Sewage 175, Wastewater treatment: Infrastructure 100
$22.6 billion in 2010, $23.6 billion in 2011, $18.3 billion in 2012, Foreign Investment $23.9 billion in 2013
1.1.4. Issues
Mexico has two important tasks to promote industrial parks. Firstly, infrastructure for industrial park needs to be modernized and expanded. Secondly, more efforts need to be made to attract new enterprises and foreign investments. Through such efforts, industrial parks could become the basis for the nation’s competitiveness.
1.2. Overview of Hidalgo5)
1.2.1. Location
Hidalgo is 65㎞ away from Mexico City. The population is 2,600,000, accounting for 2.4% of Mexican population. It accounts for 1.6% of GDP of the country. The illiteracy rate is 13% (for ages over 15) and average monthly wage is 83% of the national average. Therefore, Hidalgo is a relatively underdeveloped state. Its
5) Center for Korean Prosperity & Kyungsang University, Knowledge Sharing Program (KSP): Mexico, 2012
138 • 2013 Knowledge Sharing Program with Mexico population is spread and the SOC (social overhead capital) is poor.
Hidalgo has lots of strengths. Firstly, it is close to Mexico City. Secondly, it is located in the center of Mexico so that it can be developed into a major hub of transportation and industry. Thirdly, according to the state, Hidalgo is the second safe state in Mexico. Fourth, Hidalgo is the fifth biggest state in electric power production, which gives it advantage in terms of energy resource.
[Figure 3-1] Geo-economic location of Mexico and Hidalgo
1.2.2. Regional economy
Industrial structure
The industry of Hidalgo consists of 2% by primary industry, 41% by secondary industry, and 57% by tertiary industry. Since 20% of the population in the area work in the agricultural sector with 2% share of the area industry, income disparity between people in urban areas and rural areas are wide. Hidalgo’s secondary industry is focused on basic science and technology; however, it does not reach the international level. Outflow of labor forces continues, and shortage of high quality labor forces, in particular, is one of the factors which weaken industrial competiveness of the area.
Chapter 3 _ Policy Recommendation for the Industrial Park Development in the Altiplano Region • 139 The area has potential of employment and industrial development owing to its location near Mexico City, where automobile and part industries are well developed. The industry of Hidalgo is concentrated on mechanical part materials, which account for 24 percent of the state’s total industry. Automobile and train parts industries are concentrated in the city of Sahagun, and the products manufactured there are consumed in Mexico City. Recently, the government industrial policy with focus on the middle-high priced automobile market of the U.S. shifted to the low- middle priced market of Latin America, which would expand the market of Mexican industries
Employment Structure
Employment in agriculture accounts for 21.9%, which is 8% higher than national 13.9%. Such employment structure needs to be improved by promoting employment in manufacturing. For such improvement, it is necessary to secure and expand the industrial location.
Industry structure of Hidalgo and Mexico(Unit: Person, %) Proportion Hidalgo (A) Mexico (B) (A/B)x100 Total economically active 1,070,977(100.0) 47,836,056(100.0) 2.2 population Agriculture 234,446 (21.9) 6,668,539 (13.9) 3.5 Electric industry 4,827 368,638 1.3 Manufacturing industry 157,660 (14.7) 7,241,774 (15.1) 2.2 Construction industry 102,560 3,571,783 2.9 Commerce 191,472 9,504,398 2.0 Service 378,418 (35.3) 20,143,149 (42.1) 1.9 Others 1,594 337,775 0.5
Source: Instituto Nacional de Estadistica y Geografia (INEGI), Third Quarter, 2011, Encuesta Nacional de Ocupacion y Empleo.
Main Industry
Hidalgo’s industry is concentrated in mechanical parts and material industry accounting for 24% of the state’s production. Its major industries are oil refining, car and railway manufacturing. Car and railway manufacturing is mostly located in Sahagun city, while cement industry in Tula de Allende and textile business in Tulancingo, respectively.
140 • 2013 Knowledge Sharing Program with Mexico Foreign Investment
Foreign investment in Hidalgo was about 12 million dollars in 2012 and only about 40 million dollars in 2008 which was the largest. It is notable, however, that main investment was in manufacturing, so called green investment.
Foreign investment in Mexico and HidalgoMexico ($ mil) Hidalgo ($ mil) Proportion Year (A) (B) (B/A * 100) 2012 13,430.6 11.7 0.087 2011 21,603.4 -0.3 -0.001 2010 21,864.3 17.6 0.080 2009 16,510.9 0.3 0.002 2008 27,645.7 40.3 0.146 2007 31,534.3 2.3 0.007 2006 20,225.1 11.5 0.057 2005 24,450.7 -3.7 -0.015 2004 24,856.1 0.6 0.002 2003 18,674.6 2.1 0.011
Industrial Park
1) Numbers and area
There are nine operating industrial parks, three under construction and five planned ones.
Chapter 3 _ Policy Recommendation for the Industrial Park Development in the Altiplano Region • 141
Status of industrial park in Hidalgo Area Name of industrial park Type Status (ha) Industrial Park Sahagún 88 Heavy Operating Industrial Park Tizayuca 300 Mixed Operating Industrial Park Tepeji 518 Mixed Operating Industrial Park Tula 97 Mixed Operating Industrial Park Atitalaquia 229 Mixed Operating Industrial Park La Reforma 35 Light Operating Industrial Park Metropolitano 49 Mixed Operating Industrial MicroPark MPyMES Sahagún 9 Mixed Operating Logistic Park Tizayuca (PLOT) 23 Mixed Operating Industrial Condominium Solidaridad de Apan 4 Light In development Industrial Park Tlanalapa 19 Mixed In development Industrial Fractionation El Manantial 6 Mixed In development (ZALH) 200 Mixed Planned HidalPark 160 Mixed Planned QUMA 49 Mixed Planned PLATAH 510 Mixed Planned Specialized Industrial Park 795 Heavy Planned
[Figure 3-2] Industrial location in Hidalgo
In Operation 1.Atitalaquia Industrial Park 2.Tula Industrial Park 3.Tepeji del Río Industrial Park 4.Tizayuca Industrial Park 5.La Reforma Industrial Park 6.Metropolitano Industrial Park 7.Sahagún Industrial Park 8.MPyMES Sahagún Industrial MicroPark
Development
9.Solidaridad de Apan Industrial Condominium 10.Tlanalapa Industrial Park 11.El Manantial Industrial Fractionation 12.Tizayuca Logistic Park (PLOT)
Specialized Industrial Park
142 • 2013 Knowledge Sharing Program with Mexico 2) Price of industrial land
The price of industrial land is about $70-100/㎡. It is cheaper than industrial land in Korea, but cannot be said that the price is low compared with other competing countries
Land price for industrial parks in HidalgoIndustrial Parks in Hidalgo $70/m² Industrial Park Atitalaquia $100/m² Altiplano Industrial Corridor $80/m²
Infrastructure
Infrastructure in Hidalgo- Connected with 10 main states by road Road and railroad - 5th longest railway connection - Nation’s main train network goes through - Underground water is the main resource of water supply Water - Quantity and quality needs to be checked - Production scale is about 2,285 MW Electricity - Good transmission and distribution facilities - Three main gas pipelines go through : Poza Rica-Venta de Carpio (18 " dia) Natural Gas : Cempoala-Salamanca (18" dia) : Venta de Carpio-Tlanchinol (6" dia)
Chapter 3 _ Policy Recommendation for the Industrial Park Development in the Altiplano Region • 143 [Figure 3-3] Major highways in Hidalgo
to San Luis Potosi to Tampico
to Laredo to Querétaro
to Cd Juarez to Tuxpan
Arco Norte to Manzanillo
to Guadalajare Atlacomulco to Lázaro Cárdenas Circuito Mexiquense
México City
Tlaxcala San Martin Texmelucan to Villahermose to Veracruz Puebla
[Figure 3-4] Major railways in Hidalgo
Ferromex Kansas City Southern México Ferrosur Ferrovalle Right of way
144 • 2013 Knowledge Sharing Program with Mexico [Figure 3-5] Natural gas pipelines and electrical power grid
Natural Gas Electrical Power
Business Environment and Supporting System
1) Business environment
Hidalgo has a good business environment and ranks second in security in Mexico. The state has less business regulations than any other states and is known as the area with few labor conflicts.
2) Tax
Hidalgo imposes property tax and acquisition tax. Supporting program through property tax and acquisition tax is too plain. Therefore, additional taxation system should be suggested such as the corporate tax.
1.2.3. Implications from the Characteristics of Hidalgo
Hidalgo is located near Mexico City, the capital of Mexico. There is relatively high demand for development. The main characteristics are:
① Gross Regional Domestic Production (GRDP) is relatively low. Hidalgo’s GDRP only accounts for 1.6% of the nation while its population does 2.4%, and economically active population is 2.2%.
Chapter 3 _ Policy Recommendation for the Industrial Park Development in the Altiplano Region • 145 ② Hidalgo does not have many industrial parks compared with other states. 11 industrial parks were developed, accounting only for 2.0% out of the nation’s 538 parks. The state does not have enough space to attract and accommodate small and medium sized enterprises or light industries
③ Manufacturing industry has relatively secured competiveness. Manufacturing industry accounts for 2.8% of the nation. It implies that the manufacturing industry is relatively active compared to other industries.
④ Possibility of securing human resource is relatively high. Urbanization rate is 52 %. Proportion of economically active population is relatively high and the proportion of the population who is willing to move to the industrial area is 48% when new industrial parks are developed.
⑤ However, it can be pointed out that possibility of securing high-quality manpower is low. Education period (8.1 years) is shorter than the nation’s 8.6 years. The proportion of college graduates is only 1.7% of national total. This implies that the traditional industry has advantage in securing manpower in Hidalgo.
⑥ The Altiplano region, where industrial park is supposed to be developed, has relative competitiveness in Hidalgo, and the area can be a center of regional developments.
The development directions can be summarized as follows. First, the industrial park must contribute to the growth of regional economy. This implies that efficiency-oriented development must be promoted rather than pursuing balanced development among regions.
Second, Industrial parks must be developed in reasonable scales phased development is recommended considering demand. It is necessary to select right location and scale of development so that the development could be a foothold of regional economic growth.
Third, appropriate types of industries need to be identified. Industries, utilizing local resources or industries linked with existing industries (food/beverage, fabric/ clothing, automobile parts, metal and chemical etc.), can be considered. Also, industries that are linked with domestic or foreign enterprises near the capital area need to be considered.
146 • 2013 Knowledge Sharing Program with Mexico 2. Plan(Draft) for the Development of the Altiplano Industrial Park (AIP) in Hidalgo
2.1. Analysis of the Altiplano Region
2.1.1. Location, Area and Population
The Altiplano region consists of Tepeapulco, Apan and Emiliano Zapata. The whole area of these three administrative districts is 621.9㎢. The population of these areas is 107,584 persons. The area for research is 237㎢.
[Figure 3-6] Map of the Altiplano Region
to Tuxpan
PACHUCA
TEPEAPULCO
APAN
EMILIANO ZAPATA
México City
Tlaxcala San Martin Texmelucan to Villahermose to Veracruz Puebla
Chapter 3 _ Policy Recommendation for the Industrial Park Development in the Altiplano Region • 147 [Figure 3-7] Map of Proposed Area for Altiplano Industrial Corridor
TLANALAPA (Municipal Head)
Tepeapulco (Municipal Head)
APAN (Municipal Head)
Emilliano Zapata (Municipal Head)
Currents Situation of the Altiplano Region(Unit: ㎢, Person, %) EMILIANO TEPEAPULCO APAN Total ZAPATA (A) (B) (A+B+C) (C) Area 239 346.9 36 621.9
Population 51,664 42,563 13,357 107,584
Man 24,741 20,359 6,322 51,422
Woman 26,923 22,204 7,035 56,162
Proportion of economically 50.4 49.5 48.4 49.8 active population
Source: INEGI: Panorama sociodemográfico de Hidalgo; Censo de Población y Vivienda 2010. http://www.inegi.org. mx/prod_serv/contenidos/espanol/bvinegi/productos/censos/poblacion/2010/panora_socio/hgo/Panorama_ Hgo.pdf
148 • 2013 Knowledge Sharing Program with Mexico 2.1.2. Structure of Industry and Employment
Industrial Structure
The Altiplano region has advantage in automobile industry (especially, bus manufacturing), steel and paper making industry. The enterprises include:
• Té Lagg’s
• Bombardier Transportation
• ASF Keystone
• Giant Motors
• American Coach
• SCA (Svenka Cellulosa Aktiebolaget)
• Dina camiones
[Figure 3-8] Spatial distribution of enterprises near the proposed area for industrial park
TLANALAPA (Municipal Head)
Cd. Sahagún Industrial Area • Gerdau Corsa Tepeapulco • Gunderson-Concarriil (Municipal Head) • SCA • Bombardier • YSD Doors • ASF-Keyston • Royal Tea • Ochoa
Sahagún Industrial Park • 18 Companies • 100% Occupied
APAN MPyMES Industrial Micropark (Municipal Head) • SCompanies
Industrial Development Altiplano
Emilliano Zapata Emiliano Zapata Industrial Area (Municipal Head) •Grupak Hidalgo
Chapter 3 _ Policy Recommendation for the Industrial Park Development in the Altiplano Region • 149 Employment
Residents in the Altiplano region engage in the manufacturing industry (90.7%) or the tertiary industry (9.3%)
2.1.3. Scale and Structure of Regional Economy
GRDP (Gross Regional Domestic Products) of the region is 7,412 million pesos, accounting for 3.94% of the state GRDP. 90.7% of the Altiplano region GRDP is accounted for by the manufacturing industry.
GRDP of the Altiplano region(Unit: Million Peso, %) Altiplano EMILIANO Industry APAN(A) TEPEAPULCO(C) Region(A+B+C) ZAPATA(B) Primary 0.28 (0.0) 0.05 0.00 0.23 Secondary 6,719.77 (90.7) 297.47 50.80 6,371.50 Tertiary 692.07 (9.3) 274.92 31.18 385.97 Total 7,412.12 (100.0) 572.44 81.98 6,757.70
2.1.4. Infrastructure
Road
The road system of the Altiplano region consists of national roads and local roads. They are connected to the central states of the nation. Arco Norte Highway, west of the planned park is connected with Pachuca-Calpulalpan Highway which goes to the Pacific.
150 • 2013 Knowledge Sharing Program with Mexico
Roads in the Altiplano region● Arco Norte Highway High way ● Mexico- Tampico (Pyramids- Tulancingo) Federal Highway
Road between ● Pachuca-Calpulalpan Federal HighwayApan Calpulalpan State Highway region ● Otumba- Sahagún Interstate Highway
● Apan Acopinalco Road. ● Acopinalco-Pachuca-Calpulalpan Federal Highway junction Road ● Road to Tepetates. ● San José Santa Bárbara Road. Local road ● San José Santa Clara Road. ● Emiliano Zapata Santa Bárbara Road. ● Road to Santa Clara ● Access road to San José.
Railroad
Main railroad which crossing Hidalgo runs from Mexico City to the Veracruz Port. Another railroad is Kansas City Southern of Mexico (orange line) which goes by 1 ㎞ away from the area. This line starts from the northern part of Mexico City to the Veracruz Port.
Electricity
Federal Electricity Commission (FEC) is in charge of electric power supply.
Water Supply System
Water is obtained from underground less than 50m deep. Available capacity is estimated 8.98 million ㎥, or 187 liter per second. The Altiplano Industrial Park will need at least 80 L/sec and water supply will be enough for the AIP.
Natural gas
In the northern part, there are 48-inch pipelines. It is enough to supply to the proposed area.
2.1.5 Supporting system
In Hidalgo, the state government provides incentives of 100% exemption of acquisition tax and registration tax as well as subsidies for new employment. The city government also allows reduction of property tax and acquisition tax. There are subsidies by the government for new employment. Also there are incentives such as
Chapter 3 _ Policy Recommendation for the Industrial Park Development in the Altiplano Region • 151 reductions in asset tax and acquisition tax.
2.1.6. Development potentials: SWOT analysis
2.1.6.1. Strengths (S)
There are some strong factors, for example, existence of manufacturing industries (paper manufacture, bus assembly, steel industry), connection with main Mexican ports and U.S. border, availability of human resources for production, and education institutions (six higher educational institutions, twenty-two technical institutions.).
• 10㎞ from Arco Norte Highway
• 20㎞ from Mexico-Tuxpan Federal Highway
• 90㎞ from Mexico City
2.1.6.2. Weaknesses (W)
Services related with the quality of life lack. But they can be resolved by connecting with the neighboring areas. The infrastructure has not been established yet. This means that a good size of investment is necessary.
2.1.6.3. Opportunities (O)
Firstly, foreign investment in Mexico has increased. Secondly, automobile, logistics and steel industry are in high demand. Thirdly, large assembly factories exist such as Audi and Volkswagen. Fourth, an automobile cluster is likely to be developed in the central and eastern part of Mexico. [Figure 3-9] Major foreign enterprises in Hidalgo
152 • 2013 Knowledge Sharing Program with Mexico [Figure 3-9] Major foreign enterprises in Hidalgo
2.1.6.4. Threats (T)
Other states started developing industrial parks earlier than Hidalgo. Especially, if the constructions by other states are completed, the Altiplano Industrial Park will become less attractive.
2.2. Development Plan of the Altiplano Industrial Park (AIP)
2.2.1. Goals and Objectives
The main objectives of the industrial park development in the Altiplano region are to establish the competitive industrial park and promote the local economy. For this, firstly, global enterprises need to be attracted. Secondly, location factors must be provided for perspective of consumer-oriented strategies.
2.2.2. Development plan
Size of Industrial Park: about 8㎢
• Altiplano Industrial Corridor (A): Total scale 237㎢
Chapter 3 _ Policy Recommendation for the Industrial Park Development in the Altiplano Region • 153 • Altiplano Industrial Region (B): Total scale 35㎢ - There are several industrial parks which is connected functionally, but not connected spatially.
• Altiplano Industrial Park (C): 795ha (7.95㎢) - AIP is one of the industrial parks in the Altiplano industrial region. (B)
※ C is included in B, and B is includede in A The AIP is the core project in B
Methods for Securing Human Resources
Hidalgo has an internationally and nationally competitive education system. Universities in Hidalgo can supply human resources, particularly in mechanics, electric engineering, electronics, robotics and logistics, needed by the industries
There are CIMMATH and CIATEQ near the park. CIMATECH (Hidalgo’s Italian- Mexican Innovation Center of High Technology Manufacturing) is the center of innovation and has advanced technology which can provide related technical services in steel industry of Hidalgo. And CIATEQ (Center of Technological Innovation for Metalworking) is equipped with laboratories of caliber and chemical analysis to support enterprise.
Land Use
The land use for the proposed industrial park area had been restricted to agricultural use. The alteration of use was processed in January of 2013. The land now can be used for industry, commerce and service.
Development by Phases: Not suggested
Infrastructure Plan: road, railroad, water supply system, electricity, natural gas and communication
154 • 2013 Knowledge Sharing Program with Mexico
Infrastructure Plan- Entry roads need to be established - Especially, the land use for the proposed industrial park area had been restricted to agricultural use Road - The road to Ciudad Sahagun must be connected - Arco Norte Highway and the road to Emiliano Zapata must be connected - Internal roads and road lightings are also essential
- About 8 to 12 branch lines need to be provided Railroad - It may be done by FERROSUR and KCSM
- Underground water is to be developed, pipelines (about 15km) are to be installed - Maximum supply capacity of the underground water is 53,000,000 ton Water per year, and currently 7,000,000 ton per year is used - Seven tube wells are under construction which can supply 52 liter per second(For industrial purposes and for drinking)
- Line for transmitting electricity (about 12.5km) is to be provided Electricity - High-voltage substation with capacity of 120 MVA is also to be provided
Natural Gas - Industrial Natural Gas Company, Inc. will supply 8,000Nm³/hr @ 3 bars
Communication - Underground wire (12km) is to be installed
[Figure 3-10] Plan for Road, Natural Gas and Water Supply.
Roads • Excellent Connectivily to Mexico City, Bajio region and Atlantic and Pacific ports Sahagún Industrial Area • 10 kms from Arco Norte Highway • 90 kms from Mexico City Electrical Power Supply • Irolo Electrical Power Subastation at 12.5 km from site • 60 MVA Available • Feasibility to increase capacity to 120 MVA Natural Gas • 48" Natural Gas pipeline in site • Feasbility to install a City Gate in site Optical fiber • Feasibility for redundancy • POP Pachuca • POP Mexico City • 12 km underground optical fiber Railroads E. Zapata • Spurs and intermodal yard Industrial • FERROSUR Area • KCSM Water • Apan Aquifier • Flow rate • 70 lps at 130 m depth • 110 lps at 200 m depth
Chapter 3 _ Policy Recommendation for the Industrial Park Development in the Altiplano Region • 155 Environment Management Plan
In order to apply the concept of sustainable development, environmental aspects need to be considered. Environment impacts need to be evaluated and measures to protect environment must be followed. These measures are to be prepared before facilities are installed.
For environment management plan, Hidalgo is to consult with Ministry of Environment and Ministry of Nature and Resource. And each enterprise is made to primarily disposal the wastewater released by their own enterprises
Feasibility Analysis: Not suggested
1) Cost Estimates and Investment Plan
2) Economic Feasibility Analysis
Implementation Plan
1) Types of Development and Developer: Not suggested
2) Management System: Not suggested
Supporting System:
Utilization of Incentive system of the State (Hidalgo)
3. Characteristics of Industrial Location Policy of Korea and its Implications
3.1. Characteristics of Industrial Location Policy
3.1.1. Trends of Industrial Location Policy
Industrial location policy of Korea has been changing in accordance with its industrial policy. Until 1962, when the first 5-year economic development plan was initiated, the industrial locations had been selected freely by enterprise and most of them were for light industries. They were located near Seoul, Busan and Daegu, large cities where it is easy to obtain raw materials, manpower, electricity and
156 • 2013 Knowledge Sharing Program with Mexico water.
Since the 1960s, planned location development was initiated. According to the Industrial Park for Export Industry Creation Act, export industry parks were developed in the 1960s. In the 1970s, Industrial Location Development Promotion Act and Local Industry Development Act were enacted to promote large industrial location development projects. Many national industrial parks and local industrial parks were created based on these laws. Consequently, about 300 agricultural industrial parks were created according to the Act on the Promotion of Income Source Development for Agricultural and Fishing Villages the1980s. In the 1990s, Industrial Location Act and the Industry Allocation Act were enacted. There were many laws regarding the industrial locations; these acts were integrated into the Industrial Sites and Development Act. And the Industry Allocation Act and the Industrial Park Management Act, Act on the Establishment of Free Export Zones were integrated into the Industry Arrangement and Factory Establishment Act in 1990.
Progress of Industrial Location Policy in Korea1960s 1970s 1980s 1990s 2000s - Increase individual - Supply location demand of -Development -Industrial - Relieving - Supply and industrial attempt of concentration Goal the regional demand of location for planned in the capital unbalance advanced knowledge- location area technology based industrial industry location
- Promote
- Reinforce innovative - Diversify - Control the industrial cluster types of the Capital park - Specialized -Export-driven location Strategy Region agglomerated light industry - Deregulate - Create large - Develop district promotion the location industrial agricultural - Create - Promote parks industrial compact restructuring park industrial park
Chapter 3 _ Policy Recommendation for the Industrial Park Development in the Altiplano Region • 157
Progress of Industrial Location Policy in Korea1960s 1970s 1980s 1990s 2000s - Seoul - Act on Metropolitan - Industrial Comprehensive Area Location Act Plans for Readjustment - Industrial Construction Planning Act - Revised Allocation in the National - Small and Industrial Act Territory - Local Industry Medium Location Act - Revised - Act on Development Enterprises - Culture Act on the Creating Act Promotion Industry Utilization and Developing - Industrial Act Promotion and Related National Base - Act on the Act Management Law Industrial Park Development Promotion - National Land of the - Machinery I Promotion of Income Planning and National ndustry Act Source Utilization Territory Promotion - Industry Development Act - Special Act Allocation act for - Revise Act on - Shipbuilding Agricultural Industrial Supporting Promotion Act and Fishing Cluster Act Industrial - Electronic Villages Technology Industry - Industrial Park Promotion Act Development Act
- Renamed - Urban High- - Local Industry - Large industrial tech Industrial Development Southwestern parks Park Promotion - Ulsan Industrial - Simplified - Strategic District Industrial Park development Industrial Park - Large Results Center - Agricultural procedures - Recycling Southeastern - Export Industrial - Increased industrial Industrial Industry Park Park individual park and Park - Apartment- locations advancement - Free Export type factory - Created of industrial Zone techno parks structure
3.1.2. Types of Industrial Park
Industrial parks of Korea are classified into national industrial park, regional industrial park and agricultural industrial park. The classification if industrial parks are made based on who develop them.
158 • 2013 Knowledge Sharing Program with Mexico
Types of industrial location of KoreaClassification Purpose of development Developer Promotion of Nation’s key industries and Ministry of Land, National industrial park high-tech industries, etc. Infrastructure and Development of lagging regions Transport (MLIT) Regional industrial park Revitalize the local economy City, Province Increase the farming and fishing City, County, Agricultural industrial park community’s earner. Borough Increase the productivity through the “Out of the industrial park” Private enterprise flexible operation of industrial location
Source: Industrial location Act
3.2. Achievements and Problems of Industrial Park Development
3.2.1. Status of Industrial Location Development
Current Situation of Industrial Park Development
As of 2013, 1,018 parks (1,361㎢) have been designated, and industrial land areas is 630.4㎢, of which 453㎢ was sold.
Status of Industrial Parks of Korea (2013)(Unit: Ea, thousand m2) Industrial Land Area Number Designated Type Areas for Area Not of Parks Areas Sub Total Areas Sold Sale Sold Total 1,018 1,360,694 630,419 478,417 453,183 25,234 National 41 789,768 268,256 237,223 232,646 4,577 Regional 517 496,533 295,353 180,283 164,582 615,691 Urban High-tech 11 2,271 1,091 270 270 - Agricultural 449 72,122 65,819 60,651 55,685 4,966
Source: KRIHS and KICOX
Chapter 3 _ Policy Recommendation for the Industrial Park Development in the Altiplano Region • 159 [Figure 3-11] Industrial Parks in Korea
160 • 2013 Knowledge Sharing Program with Mexico Trends of Industrial Park Development
Industrial parks have been developed in accordance with the demand of industrial location and changes of and industrial structure. First, large national industrial parks were developed for the export industry in 1960s; heavy chemical industry in 1970s and technology-intensive industry in 1980s. After 1990s, industrial park development has been implemented with a focus on regional industrial park.
Trends of Industrial Parks by type(Unit: Ea, thousand m2, %)
1960s 1970s 1980s 1990s After 2000s Total Classification # % # % # % # % # % # %
Number 3 23.1 14 42.4 8 4.3 8 3.3 7 2.2 40 5.1
National Area 59,706 81.7 205,788 87.6 156,616 77.6 30,480 19.0 102,380 28.6 554,970 54.0 Industrial 44,793 82.1 122,964 86.0 58,799 62.3 17,242 17.0 22,606 13.4 266,404 47.4 Use Number 10 76.9 19 57.6 10 5.4 107 44.4 207 65.5 353 44.7 Regional and Area 13,378 18.3 28,997 12.4 19,277 9.5 110,589 68.9 237,736 66.5 409,977 39.9 Urban Industrial High-tech 9,757 17.9 20,045 14.0 14,453 15.3 69,070 68.0 133,665 79.1 246,990 43.9 Use
Number - - - - 168 90.3 126 52.3 102 32.3 396 50.2
Area - - - - 25,996 12.9 19,375 12.1 17,375 4.9 62,746 6.1 Agricultural Industrial - - - - 21,192 22.4 15,308 15.1 12,682 7.5 49,182 8.7 Use
Number 13 100.0 33 100.0 186 100.0 241 100.0 316 100.0 789 100.0
Total Area 73,084 100.0 234,785 100.0 201,889 100.0 160,444 100.0 357,491 100.0 1,027,693 100.0 Industrial 54,550 100.0 143,009 100.0 94,444 100.0 101,620 100.0 168,953 100.0 562,576 100.0 Use
Source: KICOX.
Second, Korea’s industrial park was mainly developed by LH Corporation and managed by KICOX which are the public corporations of government. Third, industrial park development has increased rapidly after 2000s because local governments tried to promote their economy through the industrial parks. After
Chapter 3 _ Policy Recommendation for the Industrial Park Development in the Altiplano Region • 161 the “Special Act on Industrial Park Development” is enacted in 2008, Korea faced excessive supply of the industrial park. For example, local governments wanted to develop 140 parks in 2014, but the Central Government accepted only 82 parks (58.6%).
Designation of industrial Park (2014)(Unit: Ea, km2) Application by local Approval by central B/A*100 (%) government (A) government (B) Number 140 82 58.6 Area 55.9 27.4 49.0
Source: MLIT, 2014 Approval Plan of Industrial Park, 2013.12.
Fourth, although regional balance was emphasized on industrial park development, the industrial parks have been concentrated on the “Capital Region” and “the Southeastern Industrial Belt”.
“Planned Location”(including Industrial Parks) and “Out of Industrial Park”
The “out of industrial park” accounts for 44.3% of total area of industrial location in the end 2009. It means that industrial location must be supplied in industrial park-oriented, considering that “out of industrial park” causes problems of land use and environmental issues.
Industrial Location Development by Type (2009)Planned location Total Out of Industrial Free economic Innovative Company Classification (A+B) Subtotal Sejong Industrial 2 Park zone city city (10,000m ) (A) City* Park(B) (815) (6) (10) (6) Area 290,278 215,129 134,992 56,610 4,522 11,714 7,291 75,149 Industrial 75,201 41,910 40,039 307 1,217 347 33,291 (7,951) land (100%) (55.7%) (53.2%) (0.4%) (1.6%) (0.5%) (44.3%)
*Sejong City is the new city which is recently developed for the administration park of central government Source: MLIT.
162 • 2013 Knowledge Sharing Program with Mexico 3.2.2. Positive and Negative Impacts from the Development of the Industrial Parks in Korea
Achievements6)
First, industrial cluster was established. It provided physical “vessel” for manufacturing industry and led economic growth of Korea. Second, it contributed to the spatial balanced development by establishing industrial infrastructure in the poor regions. This was demonstrated by the increase of industrial parks in the southwestern region and the middle (Choongcheong-Do) region. Third, it contributed planed utilization of industrial land and environment-friendly development.
Spread Effects
1) Effects on national economy
There are 1,018 industrial parks in Korea and the scale of area is 1,361㎢ in 2013. The amount of production is US$ 943 billion, and the export is amounted to $430 billion. There are 79,000 enterprises and 1,985,000 employed. 94.7% of the industrial land was sold.
Economic Effects from the Development of Industrial Parks in Korea (2013)Export # of enterprises Area Production Employment # of Park (Billion in industrial % sold (㎢) (Billion dollar) (1,000 people) dollar) Park 1,018 1,361 943 430 1,985 79 94.7
Note: Production and export as of 2012. Source: KICOX.
2) Effects on Regional economy
Generally, once the industrial park has been developed, it leads regional economic growth. And as time goes by, related companies are clustered with the location of anchor enterprise. Also, investment in infrastructure, technology innovation, R&D investment and regional income increased. This will lead to increase of employment and growth of the local economy. Also as a multiplier
6) Park, Youngchul, Industrial Location of Korea: Beyond the poverty and growth, and for the new take-off. Cheil Education, 2012. 8
Chapter 3 _ Policy Recommendation for the Industrial Park Development in the Altiplano Region • 163 effect, it will bring forth additional benefits like inducement of new enterprise and population growth. Effects on the local economy are demonstrated by increase of local employment and increase of income in the process of production activity in the park. Another effect is that related service industries increase.
Problems 7)
First, reactions to socio-economic changes were poor. As the globalization, informatization, technology innovation and increase of knowledge-based economy progress, demand for large industrial park decreased. Current policy focuses on infrastructure development and thus shows limitation in adopting the new trend. It is necessary to establish industrial parks which accommodate the new change.
Second, there are some problems that are caused from supplier-oriented development. By the result of the developer-driven supply, lots of developed industrial land was not sold and the number of “out of industrial park” increased. Therefore, the policy needs to shift to be demand-oriented, and the old industrial parks have to be restructured.
Third, there is lack of recognition for industrial park as public goods. And it caused to weaken the supporting system for industrial park development and high price of land. So the location costs turned to be relatively higher than other competing countries, and it is one of the structural problems.
Fourth, the linkages between related policies and institutions are insufficient. Location policy, urban policy, industrial policy and environmental policy are interconnected inadequately. It shows the limitation of the existing institutions.
3.3. Improvement of Industrial Location Policy
3.3.1. Expected Changes in Policy Background
First, the economy will become more globalized, and the activities of enterprises will be more globally expanded. Second, the demand for restructuring of industry and industrial location will increase. Third, with emergence of low-growth era, the demand for industrial location will decrease. Our economy will face the low- growth due to low birthrate and aging society. Low-growth rate means reduction of the demand for the industrial location. Fourth, technology innovation and knowledge-based industry will be intensified. Recently, we face requirement for
7) Park, Youngchul, Industrial Location of Korea: Beyond the poverty and growth, and for the new take-off. Cheil Education, 2012. 8
164 • 2013 Knowledge Sharing Program with Mexico new growth engines which can lead economic growth and industry growth. Fifth, competition among the local governments will become severe in development and activation of industrial location. It can cause NIMBY (not in my backyard) and PIMFY (please in my front yard). Sixth, environment-friendly industrial location will be more preferred. And the demand for restructuring the existing industrial park will increase due to the environmental factors. Seventh, the increase of outbound foreign investment of Korean companies will cause the decrease of utilization of industrial land. The functions such as R&D and knowledge-related production will remain in Korea. Eighth, industrial location policy has to include preparation for two Korea's unification. It will help to expand the exchanges between two Koreas and to prepare their reunification.
3.3.2. Basic Direction of Policy Improvement8)
In order to activate the regional economy, first, new conceptual model of industrial park needs to be developed. Second, knowledge-based industrial location has to be supplied. Third, small-scaled industrial parks and factories to be rent for SMEs have to be supplied sufficiently. Fourth, the development of industrial parks by local governments need to increase and also the responsibilities of local governments needs to strengthen. Fifth, the supporting system for the industrial park development should be strengthened and enlarged. Sixth, developments of the industrial parks have to be in environment-friendliness. Seventh, the existing industrial parks must be restructured. Eighth, the role and function of the national industrial parks must be redefined. Ninth, the attractive industrial parks need to be supplied for foreign companies.
3.3.2.1. New conceptual model of industrial park
New conceptual model of industrial park is to create the cluster by bringing various functions such as residence, production, research and development, commerce, and logistic so that it can be a multi-functional park.
8) Park Youngchul "Study on shifting the policy on national industrial Park". Korea Real Estate Institute, Real estate research Vol.22 2nd pp.233-262, 2012. 8
Chapter 3 _ Policy Recommendation for the Industrial Park Development in the Altiplano Region • 165
Comparison of new and old Types of Industrial ParkNew type of industrial Park Existing industrial Park Land use Multiple function Single function Development period Long-term Short-term Residence, production, research & Main function Production-oriented development, commerce, logistics Developer private sectors(mostly) public and/or the third sector Role City Production
3.3.2.2. Industrial park for the knowledge-based industries
The location policy for the knowledge-based industry is as follows: effective utilization of urban high-tech industrial park, expansion of supply of location to induce the foreign enterprise in knowledge-based industries, and development of knowledge-based industrial park.
3.3.2.3. Small-scaled industrial parks and the factories to be rent for SMEs
As the “Softening of manufacturing” occurs, the demand for office-type space will be increased. In the space, office work and production can be done simultaneously. And the demand mentioned above would arise in small size and/or rental type, and these demands usually are asked from SMEs. Therefore small-sized industrial space and factories for rent need to be supplied in order to foster the SMEs.
3.3.2.4. Industrial parks by local government and responsibility of the local government
Industrial park development needs to be promoted by local governments since they know well about the conditions of their own regions. But local governments- centered development can cause oversupply. Hence it must be implemented based on accurate demand estimation. It means the responsibility of the local government is important too. Additionally the roles of the central government and local governments need to be redefined.
3.3.2.5. Supporting system for the industrial park development
Various supporting measures can be prepared in accordance with the change of industrial structure. Financial resources need to be diversified, and supporting system needs to be institutionalized. Also the intensive support for industrial parks in lagging regions needs to be provided.
166 • 2013 Knowledge Sharing Program with Mexico 3.3.2.6. Environment-friendly industrial park
Environment-friendly industrial park need to be developed. Especially, industrial policy, location policy and environmental policy need to be interconnected effectively. For establishing the environment-friendly park, the concept of “environment capacity” should be considered, and “eco-industrial park” must be promoted.
3.3.2.7. Restructuring the old industrial parks
The decline of old industrial parks can cause serious economic and social problems. However, since they have physical and human networks, they need to be revitalized through the effective restructuring.
3.3.2.8. Redefinition of the role of national industrial park
National industrial park has been promoted as a large industrial cluster to bring up heavy-chemical industry. However, in these days knowledge-based industry plays a key role in national and regional economy. So the role of the national industrial park should be redefined to accommodate the knowledge-based industry including the national strategic industries.
3.3.2.9. Attractive industrial parks for the foreign enterprises
In the global economy, foreign investment is important to revitalize the regional economy. A plan to induce foreign investment needs to be part of local government policy. The appropriate measures or policies for foreign enterprises should be provided.
3.4. The Case Study: Sukmoon National Industrial Park
3.4.1 Reasons for Selecting the Case
Firstly, Sukmoon Industrial Park is located near Seoul, the Capital of Korea. Considering that Hidalgo and Altiplano region are neighboring to Mexico City, the Capital of Mexico. In this context, it is thought to be a suitable case for benchmarking.
The second reason is the size. The size of Sukmoon Industrial Park is 12.1㎢. Apart from the residential area (1.2㎢), it is 10.9㎢, similar to the size of the Altiplano Industrial Park (8㎢).
Chapter 3 _ Policy Recommendation for the Industrial Park Development in the Altiplano Region • 167 The third reason is the similarity in types of industries to be induced. Sukmoon Industrial Park is going to induce the industries in automobile industry, machine industry, and chemical engineering. The Altiplano Industrial Park (AIP) would induce the car assembly factory, automobile parts industry, and metal-related industries as well.
The fourth reason is the developer. In case of Sukmoon, the provincial government played a major role in the development. The Altiplano Industrial Park (AIP) is going to be implemented by Hidalgo State.
The fifth reason is a similarity in the goals of the project. The goals of Sukmoon Industrial Park are as follows. Firstly, it was the decentralization of populations and industries in the Capital region. Secondly, it was to reinforce the base of regional economy and activate the lagging region. Thirdly, it was to satisfy different and various demand of industrial parks. So the Altiplano Industrial Park (AIP) is to reinforce Hidalgo’s economic base and to achieve the spatial balanced development.
The sixth reason is the support of the central government. Sukmoon Industrial Park was developed as a national industrial Park. In other words, the central government offered lots of supports in infrastructures and other facilities. For the Altiplano Industrial Park (AIP), Hidalgo State seeks the federal government's support as it is located in an economically lagging region.
3.4.2. Frameworks of Master plan for Sukmoon National Industrial Park
The main contents of the master plan of Sukmoon National Industrial Park are as follows: ① Goal definition
② Analysis of development conditions: conditions of the site, related plans, related institutions, obstacles factors and development potential
③ Estimation of land demand and identification of the industries: analysis of role and functions of the industrial park, identification of the industries to be induced, analysis of foreign cases and its implications, estimation of land demand
④ Conceptual development plan: current situation and problems, goals and objectives, strategies, development indicators, frameworks of development
168 • 2013 Knowledge Sharing Program with Mexico ⑤ Plans by sectors: spatial structure, land use, industries and housing, transportation system, green networks, public convenience facilities, utility facilities
⑥ Analysis of profitability and effects of development: Estimation of development cost, feasibility analysis, development effect
⑦ Marketing strategies: action programs to supply infrastructure, marketing execution strategy
⑧ Project implementations: financial resources, sharing of development cost, time schedule of development
3.4.3. Results of Implementation of the “Sukmoon” and its Implications to the Altiplano Industrial Park (AIP)
Development of Sukmoon Industrial Park was started in 2008 after it was designated as industrial park in 1991. But in 2012, only 25.1% of industrial land was sold. It means most of them were not sold. It was mainly because of the 2008 international financial crisis and its impact on Korea, and oversupply of industrial land in the region. These facts mentioned above can give important implications to the AIP.
Firstly, the timing is very important in the success of the development project. “Sukmoon” was designated in 1991 but the start of the implementation of the project was too late. Therefore, in case of the AIP, if neighboring states start to develop similar parks earlier than the AIP, it can face the crucial obstacles for activation of the project. Secondly, feasibility analysis, including the size of area of the AIP and rational identification of industries to be induced, is critically important. Thirdly, strong supporting system for securing competitiveness of the AIP is necessary.
Current Status of Sukmoon National Industrial Park (2012.12.31)Date of Industrial Land Developer Total Area Rate of Sale(B) Designation to be sold(A) Land and 1991.11.31 Housing(LH) 10.9 ㎢ 4.6㎢ 25.1% Cooperation
※Total area is not including the residential area(1.2km2). ※Rate of Sale(B)is counted based on the industrial land(A)
Chapter 3 _ Policy Recommendation for the Industrial Park Development in the Altiplano Region • 169 4. Implications of Korean Experiences and Recommendations for Mexico
4.1. Basic Directions for Sharing the Korean Experiences
4.1.1. Considerations9)
Korean policies on industrial location are evaluated as successful for helping Korea to escape from poverty and to become the tenth largest economy in the world. Korea has many successful cases which can be benchmarked by other countries. However, 'creative benchmarking' is necessary. Not only the positive factors but also the negative factors must be checked by other countries. In particular, following factors should be considered.
First, current situation should be examined exactly. Second, industrial location policy needs to be future-oriented. Third, it is desirable to develop industrial parks step by step. Fourth, concept of the selection and concentration needs to be applied. After choosing competitive locations and industries, it is necessary to make a massive investment and strong supports for them. In means that growth pole theory is applied significantly. Fifth, location policy and industrial policy have to be linked appropriately. Industrial location is the 'vessel' to accommodate industry. The industrial park has to provide competitive space in order to attract enterprises. Sixth, environment friendly location policy, including the concept of green growth, has to be implemented. Seventh, securing financial resources is very important. Additionally, effective investment is required, and if the domestic fund is insufficient, foreign direct investment should be induced properly.
4.1.2. Major Principles for Sharing
Goal Setting
The policy for effective development and management of industrial location is positive, realistic and pragmatic. As such the following basic purposes need to be set up: to contribute to strengthening regional industrial competitiveness, to increase the balanced development of the region and to support sustainable development.
9) Park, Youngchul, Industrial Location of Korea: Beyond the poverty and growth, and for the new take-off. Cheil Education, 2012. 8
170 • 2013 Knowledge Sharing Program with Mexico Basic Directions for Application: 4Ps
Aspects to utilize the industrial location policy of Korea can be summarized into 4Ps. Role of Public is important. Reasonable Plans must be established and implemented. Principles have to be set and followed. Potential has to be fully utilized.
4Ps of Utilization of Industrial Location Policy4Ps Recommendation
By the PUBLIC - Secure government’s leading role : Active role of the public - Enlarge public organization's participation
Through PLANNING - Establish an integrated plan of the industrial location : Development through planning - Connect related policies effectively
In PRINCIPLE - Set reasonable standards : Set, follow principle - Practice guideline
With POTENTIAL - Identify potential of the industrial location : Utilize the potential - Optimize utilization of local resources
4.2. Recommendations for the Effective Development of the Altiplano Industrial Park (AIP)
The current development plan is a conceptual plan on how to supply basic infrastructure or physical factors, which is essential to the industrial park. Following recommendations are based on the real conditions of Mexico, Hidalgo and the Altiplano region, and also the cases of Korea.10)
4.2.1. Establishment of Master Plan
The current development plan is mainly about supplying basic infrastructure, or physical factors. It is important, but it is also necessary to supplement non-physical factors such as “action plan”, which is how to secure financial resources, incentives to attract enterprise. Therefore, establishment of master plan that includes not only the physical factors but also the non-physical factors is indispensable.
10) The recommendations for the AIP are not only from the Sukmoon case, but also from the other cases in Korea for example, venture village in Jincheon, Chungbuk and the high-tech industrial park in Jeju.
Chapter 3 _ Policy Recommendation for the Industrial Park Development in the Altiplano Region • 171
The key factors of Sukmoon national industrial complex are as followed. ① Goals and Objectives ② Analysis of development environment - Analysis of current situation - Analysis of related plan and laws - Analysis of constraint and development potentials: forecasting the changes of domestic and international condition, SWOT analysis etc. ③ Selection of industry and estimation of location demand - Analysis of function of the industrial complex - Selection of industry type - Analysis of development cases from abroad - Estimation of demand for land: Industrial facilities, logistics facilities, support facilities, residential facilities and etc. ④ Concept of Development - Development goals: objectives, strategies ⑤ Development Plan by sectors - Spatial structure - Land Use: industry arrangement and division of industrial land etc. - Industrial plan and residential plan - Transportation system - Parks and green system - Public convenience facilities - Supply treatment facilities - Supporting facilities ⑥ Analysis of feasibility and effects of development - Analysis of feasibility: project cost estimates, financing plan, income statement, projections, and expenses. - Analysis of effects of development: effect on regional economy, increase of employment and income ⑦ Marketing Plan - Marketing Program - Investment Incentives ⑧ Implementation Program - Project Implementation schedules - Development Agency: developer - Management and Operational Structure
4.2.2. Reasonable Scale and Project Period
The scale(8㎢) and project period of the AIP should be examined exactly. The examination of the scale must be based on estimates of the demand, which includes demand for industrial park in Mexico, Hidalgo and the Altiplano region. And these can be achieved by survey with enterprises. The state of Hidalgo, beside the Altiplano Industrial Park(AIP), has to consider the development of the industrial parks in the “Altiplano Industrial Region” that total scale reach to about 35㎢. In addition, the state of Hidalgo has some ideas to
172 • 2013 Knowledge Sharing Program with Mexico develop Altiplano Industrial Corridor(237㎢) that includes new industrial park (AIP) and also “Altiplano Industrial Region”. Hence Hidalgo has to estimate the demand of AIP and the entire demand of Hidalgo. On the other hand, project period is shown to be two years, which is too short. Phased development is desired. Land need to be purchased in advance for the preparation of price increase.
< The characteristics and Implications from the case of Sukmoon: Demand Estimation>
1. Results of demand survey
○ Demand by large companies (excluded from the relevant demand of small-medium sized companies and others) Total Domestic companies Foreign companies Numbers of Company 12 9 3 Area(1,000㎡) 4,735.5 693 4,042.5
2. Results of demand estimates
Sectors Scale (1,000㎡) Industrial land 4,125 - 4,818 Logistics 330 - 396 Tourism 2,277 - 2,772 Special purpose facilities 132 - 198 Commercial and Business 231 - 330 Supporting Facilities 165 - 198 Residential 1,485 - 1,980 Total 8,745 - 10,692
3. Results of evaluation and its implications.
For the case of Sukmoon national industrial complex, similar to the case of above, it was estimated to have demand of 8.7-10.7㎢ entirely, and the industrial land is solely 4.1-4.8 ㎢. Also the demand by large company, including logistics, reaches 4.7㎢. However, the actual area sold is only about 25.1% of the total developed area (4.6㎢), which is 1.2㎢.
Thus, it shows how important is the accurate estimation of the demand. Especially, it should be aware enough that the demand could be adjusted depending on the changes of the related developing conditions, and the reasonable alternatives for adjustment have to be prepared. Therefore, the proper considerations on the demand estimations and project period are required.
Chapter 3 _ Policy Recommendation for the Industrial Park Development in the Altiplano Region • 173 4.2.3. Rational Measures Securing the Land
In case of Mexico, industrial parks are generally developed by real estate developers. It is necessary to suggest how to secure the land rationally. And detailed action programs, which are specifying developer, basis of land expropriation, and etc. are required.
4.2.4. Feasibility Study
Cost estimates and the economic feasibility analysis are needed. It is indispensable to estimate revenues and profits along with cost items. Tax revenues needs to be projected too. Also, it is necessary to specify how to secure financial resources.
1. Estimate of cost and benefit First, it is estimate of the development cost. And it is classified into acquisition cost, compensation cost, design cost, and site development cost. Second, it is estimate of the development revenue. And it can be classified into sale revenues and other benefits including the development effects. For the case of development effects, it is divided by quantitative and qualitative aspects, and the quantitative aspects reflect the spread effect on regional economy and financial increase of local government. Third, it is feasibility analysis. The feasibility of the project is determined based on comprehensive evaluation for the cost and benefits.
1) Spread effect on regional economy
Employment Section Production increase Value-added increase increase(Person) Construction investment 1,342.9 billion won 658.4 billion won 31,617 Production facility 23,308.5 billion won 10,870.5 billion won 243,227 investment Tourism investment 204.8 billion won 111.6 billion won 8,098 24.856.2 billion won 11,640.5 billion won Total 282,943 (22.5 billion US$) (10.6 billion US$)
2) Financial effects
Increase in tax revenue Increase in number of business - Employment inducement 112.7 billion won (102.4 million US$) Increase in land price 13.5 billion won (12.3 million US$) Total 126.2 billion won (114.7 million US$)
174 • 2013 Knowledge Sharing Program with Mexico 2. Characteristics and Implications of feasibility analysis
1) Characteristics The Sukmoon national industrial complex was decide to implement since the project was shown to have feasibility from the result of the feasibility analysis above. However, it missed the opportunity to apply the feasibility, for other competitive industrial parks were developed advanced and some exogenous variable were occurred. Consequently, it failed to sell the industrial land as it was planned.
2) Implications Not only the accurate feasibility analysis but also the selection of development timing is indispensable.
4.2.5. Role Definition of Public-Private Sector and Selection of Relevant Developer
Discussion on selection of developer (public and/or private) is necessary to be included. In case of Mexico, private developers usually have implemented industrial park development. However, it is necessary to reasonably assign the role of public sector such as the federal government and the state government.
In case of the Altiplano Industrial Park (AIP), it is essential for the federal government or the state government to take the lead of the development project. It will be helpful to refer the successful cases of Korea (national industrial parks or regional industrial parks). If it is difficult for the federal government to do the development project, the state government, at least, should do it. It is recommended to review relevant cases of Korea like Wonju regional Industrial Park, Dangjin regional Industrial Park and Ochang regional Industrial Park which were developed by local government. (For the case of Mexico, it means state government)
4.2.6. Establishment of the Effective Implementation System
In Korea, LH Corporation is in charge of developing the national industrial parks, and KICOX is in charge of operations and management for the industrial parks. On the other hand, regional industrial parks are developed and managed by the local government such as province, city, and county. In Mexico, in order to promote the projects effectively, a public corporation or other types of public entity need to be established. For example, Regional Development Agency (RDA)11) can be established by state government, federal government and private enterprise. However, public sector is desired to invest more than 50% to maintain public interest of the park.
11) For the successful RDA, the cases of England can be recommended.
Chapter 3 _ Policy Recommendation for the Industrial Park Development in the Altiplano Region • 175 4.2.7. Identification of the Proper Industry
Hidalgo State is expected to induce automobile enterprise. A more aggressive approach is necessary for this achievement. One of the proper industries for the AIP can be identified in conjunction with the location advantage that AUDI plant locates nearby.
< The Characteristics and Implications from the Case of Sukmoon and Others: Identification of the Industries to be induced>
1. Procedures of Identification of industries to be induced In Sukmoon’s case, after the analysis of industrial clusters, growth potential, and survey from experts, the type of industries was identified finally. First, the industrial cluster analysis was completed through the degree of industrial agglomeration and the location advantages. Second, growth potential was estimated by the development capacity (such as technology innovation capacity), fostering level by government, and etc. Third, the opinions of experts were reflected quantitatively and qualitatively. The type of industries was identified based on the comprehensive examination of three factors above.
2. Implications In the case of the AIP, the types of industries could be identified by the consideration on the industries which are located nearby, but it is not enough. The identification of types of industries should be complemented. National industrial growth, status of regional economy, and expert’s opinion should be considered comprehensively.
4.2.8. Aggressive Incentives to Induce the Enterprises
The AUDI parts factories are desired to be induced. An assembly plant of AUDI's is located 45km away from the Altiplano region. The AIP can be considered as a candidate for the location of Audi’s new plant. However, it will require the state's endeavor to induce the Audi’s new plant.
It is important for the AIP to induce the enterprises effectively. Especially, in order to activate the industrial park, the inducement of an anchor enterprise is very important. Location of an anchor enterprise will induce many related companies. A combination of policies is necessary to induce the enterprises mentioned above. For example, tax incentive will be one of the major benefits that an anchor enterprise wants to have. The current incentive system is not attractive enough. More aggressive programs should be prepared by considering the cases of other countries.
176 • 2013 Knowledge Sharing Program with Mexico < The Characteristics and Implications from the Case of Sukmoon: Systems to Induce Enterprises>
1. Characteristics of Sukmoon and others In the case of Sukmoon, there are some active promoting programs to induce the enterprises through the establishment of counselling and supporting center for FDI, a team for company inducement, and incentive system for successful cases.
2. Implications Also, for the AIP, it is necessary to have the team for company inducement, and effective incentive system.
4.2.9. Building the Strong Supporting System
It is significant for the activation of the AIP to lower the location cost and to utilize the low cost as a location advantage to induce the enterprise. It will be possible when the government provides supports in infrastructure, taxation and finance. However, the current support system is not effective. Differentiated and active systems are required. Especially, taxation support, financial support (provide loan at cheap interest) and manpower supply would be effective. In order to secure the best competiveness, not only physical factors but also non-physical factors have to be provided for the AIP.
If the total support system mentioned above is not prepared, the AIP may not secure the competitiveness and the state face challenges such as insufficient sales for the industrial land and delay in development of the park. Then this would increase the project cost including the opportunity cost.
< The Characteristics and Implications from the Case of Sukmoon and Others: Supporting System>
1. Characteristics of Sukmoon and others First, it is promoting early activation through the inducement of anchor enterprise. Second, it is trying to induce the foreign companies by designating exclusive industrial park in the Sukmoon industrial complex. Third, it is promoting free trade zone, and free land rental system would be applied in the free trade zone. Forth, consequentially, the early activation of industrial complex would be achieved through the aggressive inducement of the companies.
2. Implications The strong supporting system is necessary to activate the AIP through the inducement of enterprises, because the early activation of the park can brings the spread effects on regional economy and the increase of local finance by tax revenue and etc.
Chapter 3 _ Policy Recommendation for the Industrial Park Development in the Altiplano Region • 177 4.2.10. Setting the Rational Institution System
Policy can be effective when it is institutionalized and implemented. It is necessary for Hidalgo to specify how to support the development of the AIP legally. This system should be comprehensively institutionalized, including the implementation system, fund resources and supporting system.
5. Conclusion and Policy Suggestions
To summarize the industrial park policy of Korea and its meaning to the AIP, first it is the selection of proper development timing. It means that if the State of Hidalgo misses the proper development timing and other adjacent regions develop the industrial park advanced, it would bring critical barriers to activate the AIP. Second, the AIP have to do the feasibility analysis including the development scale, identification of industries, and estimation of costs and benefits etc. Third, financial resources and institution system including the supporting policy are indispensable to secure the competitiveness of the AIP. Lastly, above all, the role of the Hidalgo state is the most important and decisive factor for the success of the AIP
178 • 2013 Knowledge Sharing Program with Mexico References
Hong, Sungwoong, 1996, Building the Power House, Korea Research Institute for Human Settlements. Yoo, Younghwee, 1998, Industrial Park of Korea, Korea Research Institute for Human Settlements. KRIHS, Ministry of Construction and Transportation (MOCT), 2000, Industrial Location Policy to attract FDI. KRIHS, MOCT, 2001, Economic Effect of Development of Gaesung Industrial Park. KRIHS, 2001, Restructuring of Regional Industry According to the Growth of IT. Park, Youngchul, etal., 2003, Environment-Friendly Industrial Park Development and Management Policy Guidance in Indonesia, KDI, KRIHS, KOICA, and BAPPENAS(National Development Planning Agency, Indonesia). KRIHS, 2003, Industrial Location Policy for the Knowledge-based Industry. KRIHS, 2004, Improvement of Institution System for the Environment-friendly Industrial Location. Korea Land Corporation, KRIHS, 2004, Master Plan of Sukmoon National Industrial Park. Korea Land Corporation, KRIHS, 2004, Participation of Public Sector in Development Projects of North East Asia. KRIHS, MOCT, 2004, Supporting Standard for the Industrial Park Infrastructure. KICOX, 2005, Master Plan of Innovation Cluster for the Gumi National Industrial Park. Park, Youngchul, 2009, Restructuring the Industrial Parks for green growth, Sungkyul university, Social Science Research, Vol. 22, pp.153-175. Korea Development Institute, 2012, 60 Years History of Korean Economy. Ministry of Knowledge Economy, KICOX, 2012, Experiences of Economy Development Modularization: Development Strategies and Management of Industrial Parks. KICOX, 2011, Industrial Park Development in Korean Economy: A Guideline for Development and Management of Industrial Parks. Park, Youngchul, 2012, Study on shifting the policy on national industrial Park, Korea Real Estate Institute, Real estate research Vol.22 2nd pp.233-262. Park, Youngchul, 2012, Industrial Location of Korea: Beyond the poverty and growth, and for the new take-off. Cheil Education. Center for Korean Prosperity & Gyungsang National University, 2012, Knowledge Sharing Program: Mexico. KICOX, 2013, Industrial Location Brochure.
Chapter 3 _ Policy Recommendation for the Industrial Park Development in the Altiplano Region • 179 References
Cho, Hyeyoung etal, 2014, Industrial Park: Think of the future, KICOX.
180 • 2013 Knowledge Sharing Program with Mexico 2013 Knowledge Sharing Program with Mexico: Consultation for Economic Development of Mexico's Four States Chapter 4
Strengthening Capacity to Reinforce SME’s Innovation in Chihuahua
1. Research on the Subject which Chihuahua State Requested 2. Korea’s Experience in Metal-mechanic SMEs 3. Advisory research results ■ Chapter 04
Strengthening Capacity to Reinforce SME’s Innovation in Chihuahua
Su-Jin Kim12) (Gyeongsang National University)
Summary
The main topic is the establishment of a Design Center and Fabrication Laboratory to enhance the innovation capacity of the metal fabrication small medium firms of the State. Though there is the maquiladora sector with international standards including knowhow and equipment, the majority of the local firms are limitedly able to sell their products within the local markets due to the lack of technology. Chihuahua is one of the main employers in the metal mechanic sector; however the production and value added of the State are small, showing a low productivity in the sector. The metal mechanics industry in Chihuahua consists of approximately 40 employer firms and 640 employees.
The metal manufacturing cluster in the State of Chihuahua seeks to increase the value added of its products by innovating the design capacities (Design Center) and to provide the means for the firms to implement its ideas through a facility, which is capable to produce prototype of the products at real costs (Fabrication Laboratory).
The Design Center is an idea of the metal mechanics firms grouped in the local chamber of industry. Its main objective is to create an institution specialized in designing and developing of the new products. The Center will train and qualify the engineers and technical personal so that they can generate new concepts
12) I am grateful to Mr. Arturo Soto for his excellent cooperation.
182 • 2013 Knowledge Sharing Program with Mexico and products. The professional formation of a group of engineers or specialized technicians will make it possible to generate and design new products and concepts.
The Fabrication Laboratory starts its operation at the end of 2013, and the project has been actually funding. The 5 axis milling, punch press, press brake, and measuring arm equipment have been selected and they will be acquired in 2014. The concept is flexible manufacturing laboratory, which is able to fabricate the small amount of products so the local SMEs will be possible to explore the markets and also possible to decide the viability of the new product. The Laboratory supports the local firms to launch new products by helping to develop the first prototypes and muster. It will fabricate the first production sets, so the SMEs will be able to test their products in the market. It also enables the SMEs to introduce new products reducing the risk and the necessity of buying the equipment.
The desirable types of consultation is how the Design Center can improve its capacities to generate new designs and products and if there is a useful model in Korea for the Center. The Fabrication Laboratory can be achieved from benchmarking from other similar facilities in Korea. The role model of the Design Center in Chihuahua is the Cyber Design Center in Korea and Fabrication Laboratory is Daegu Machinery Institute of Component & Materials and Technology Innovation Center.
Korean metal fabrication industry was led by demand industry; agricultural machinery, automobile, shipbuilding, construction equipment, aircraft, train, electronics and plants. SMEs of Korean metal mechanical industry are supplying 80% of their mechanical parts to large companies, and the profit is about one third and labor salary is half compared to large companies. So Korean and local governments have been supporting SMEs by technology development funding and engineer education programs.
Daegu City government established Daegu Machinery Institute of Component & Materials by Korean government and local governments funding. The material test and evaluation center supports companies testing the products and obtaining the domestic and international certifications (KOLAS); precision measurement, material properties, environment tests, chemical tests. The die and mold technology center assists companies to make prototypes and evaluate their performance.
Korean government established 44 Technology Innovation Center (TIC) from 1995 to 2004 at local universities and supported each center $5 million to buy expensive equipment used by SME. The companies are using TIC’s equipment to develop the technologies and increase sales. The TICs are established and operated by government support in the university, and some of them are closed or difficult to
Chapter 4 _ Strengthening Capacity to Reinforce SME’s Innovation in Chihuahua • 183 be operated when government supporting was stopped. SMEs using TIC equipment in a lower price get more profits and win the market against the other SME that using expensive equipment.
Cyber Design Center developed Cyber Engineer U24 that provides CAE service to support SME manufacturing process on the web site. The casting, heat treatment, plastic injection and metal forging simulation software developed in Korea are used for manufacturing process analysis. The Design Center of Chihuahua is suggested to do manufacturing process simulation & analysis service in short term to improve fabrication technology of SME. The CAE software required the Center to be donated by Korea; Z-cast (casting simulation), AFDX (Forging simulation) etc. The professors and students will learn how to use the donated Z-cast and AFDX and do the simulation service. In the long term, the Center will do engineering design service by CAD/CAE software with CAD/CAE software existing at Technological Park.
The Fabrication Lab needs additional operation costs for related special tools and CAD/CAM software required to use the fabrication equipment. The operator should be trained well and get good salary because the stable running of equipment is important. In case of Korea, the equipment and operation costs are fully supported by the government but Fabrication Lab of Chihuahua should be operated independently at the beginning. In the short term, the private company should use the equipment to make a profit and keep some of the profits for the future operation. After the cost of operation and maintenance is saved enough, the prior way can be transformed into the way of pursuing the public benefits, having providing the service of the production of prototype for small and medium business. The co-work of the Lab and other local SMEs do casting, forging, forming, heat treat, grinding, EDM, coating, die-molding process, and those are essential to fabricate a metal part and supply the international company. If you are succeeded in developing the prototype, the mass production with Die & Mold should be continued to increase productivity and decrease cost. The cooperation of Korean mold companies, who are strong in developing a new mold, and Mexican companies, who are strong in setting up and repairing, will make a successful mass production in the long term.
The Chihuahua government should guarantee the bank space and equipment loan of SME in short term to increase the number of SMEs that will become the infra of metal mechanical industries. The government should prepare master plan and support research funds in the long term to innovate manufacturing technology of companies by the help of research center and university.
184 • 2013 Knowledge Sharing Program with Mexico 1. Research on the Subject which Chihuahua State Requested
1.1. Summary and Analysis of Chihuahua’s Requirements
Chihuahua is one of the leading industrial states in Mexico. Its economy is mostly based on manufacturing with a deep interconnection between the USA through the maquiladora industry which has experimented rapid growth rates in the last decades. However, its local industry has not experienced the same fast development having struggled to enter the international markets.
The metal manufacturing cluster in the State of Chihuahua together with the DESEC, CANACINTRA and the Secretary of the Economy, seek to increase the competitiveness of its products by improving design capacities (Design Center) and providing the means to facilitate innovation and the implementation of new ideas from the local industry (Fabrication Laboratory).
The requirements are:
1. How can the Design Center improve its capacities to create new designs and products? Is there a model in Korea, which is useful to the Center? Which hardware and software is recommended? Is there some institutional model that can be useful: government/industry support, cooperation with business and universities?
2. The Fabrication Laboratory is in an advanced stage. However it also requires support in its launching process. There is need to elaborate an institutional model in order to assure its sustainability in the long term. How does the Korean centers resolve the following issues: a. Institutional governance b. Relation with government, private sector, universities and technical schools c. Financing: sources, participation of private investors d. Pricing: to SME, to entrepreneurs, to students and professors, to big companies
Chapter 4 _ Strengthening Capacity to Reinforce SME’s Innovation in Chihuahua • 185 1.2 Current Circumstance of Chihuahua’s Metal Mechanic Industry
1.2.1 General situation of Chihuahua's industry
The state of Chihuahua, locating at Mexico’s northern border to the United States, is the largest state with 247,455㎢ (larger than the United Kingdom) and has a population of just over 3.40 million inhabitants (3.03 % of country, 85% urban), of which 2.15 million live in the cities of Juarez and Chihuahua.
Chihuahua’s GDP is 3.26% of the national economy, the tenth largest. Its primary sector is the sixth largest nationwide with 5.65% of the national production. However, within the state, the largest sector in terms of GDP is the tertiary (61.28%) followed by the secondary (33.03%) and finally the primary (7.06%). The activities employing most of the population are manufacturing (44%), commerce (22.6%) and services (25.1%). Although the primary sector is nowadays small, Chihuahua has a long mining and livestock tradition which determined much of its early industrialization stages.
In 1965 two federal programs (PRONAF, National Border Program and PIF, Border Industrialization Program) offered legal and fiscal incentives that encouraged the settlement of assembly plants in the state. The PRONAF and PIF programs were mainly a response to the extinction of the “Bracero Program”, an agreement between the United States and Mexico allowing temporary migration of Mexican agricultural workers to the United States. At the end of the program in 1964, 4.6 million Mexican farm laborers have crossed to work in the fields, creating a large supply of potential workers. Therefore the first assembly plants were labor intensive, the initial ones implied simple processes like coupon books classification or basic assembly. The main incentive of the PIF program was tax exemption for all the imported supplies provided for the final product that was exported.
This process of openness to foreign investors continued through the 70s and 80s, and industrial park developers and real estate firms successfully attracted maquiladora industries mainly to Juarez and Chihuahua City. Until the 1980s the State Government did not have any office fostering economic development hence most of the development strategies were dictated by the private sector united around the Economic Development Council for the State of Chihuahua (DESEC) (Ramos, 2006).
In the early 1980s Chihuahua’s government had a more active role and created an effective joint venture with the private sector for foreign direct investment (FDI) attraction. During these years FDI attraction was seen as the main strategy to
186 • 2013 Knowledge Sharing Program with Mexico generate employment. The government also started several programs to promote local suppliers to the maquiladora industry, but with very limited success.
By the late 1990s Chihuahua consolidated itself as an important industrial hub in Mexico. The initial low value added maquiladora plants evolved to include more complex process and in some cases design and customer service activities. There was some clustering around the electronics and auto parts’ large producers; however most of the operations of such large firms remained strongly dependent on the decisions of headquarters located abroad (and represented for them a sort of “cost centers”). In the meantime, the local private developers of parks for foreign investors evolved, offering sophisticated turn-key and shelter solutions increasing the foreign direct investment FDI to the State but not the local content.
[Figure 4-1] Number of maquiladora plants by state
4000
3500
Tamaulipas 3000
Sonora 2500 Nuevo León 2000 Jalisco 1500 Industrial plants Industrial Coahuila 1000 Chihuahua 500 Baja California 0
19901991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004200520062007*2008*2009*2010*2011* Year
Chapter 4 _ Strengthening Capacity to Reinforce SME’s Innovation in Chihuahua • 187 [Figure 4-2] Workers in the maquiladora industry by state
1,400
1,200 Jalisco
1,000 Nuevo León
Sonora 800 Coahuila
600 Tamaulipas Industrial plants Industrial Baja California 400 Chihuahua 200
0
1990 19911992199319941995 1996 1997 1998 199920002001 20022003 2004 2005 20062007*2008*2009*2010*2011*
Year
In recent years, competition to attract investment has increased, not only with other Mexican States but also with other locations outside the Country, mainly in China and Asia. Additionally the rising metal prices have increased the foreign direct investment in the mining sector, though generating minor spillovers with the metal mechanics industry. Nevertheless the commercialization, distribution and sales of machinery and parts have been greatly increased.
The large presence of maquiladoras and the limited extent of local procurement have produced a dualistic structure of the economy, with mainly two types of actors: large maquila assemblers and their first and second tier of providers which have highly competitive and integrated global value added chain, and a second tier of businesses with low production capabilities and/or low technological capabilities that are unable to connect to the international value chains.
The metal mechanic industries in Chihuahua follow the same pattern. There is the maquiladora sector with international standards including knowhow and equipment next to a local sector with some small and medium firms that are able to supply the maquiladoras. The majority of the local firms are only able to sell in the local markets due to the lack of technology. So there is a very low vertical integration in the metal mechanic industry. Compared with the rest of the country, Chihuahua is one of the main employers in the metal mechanic sector; however the production and value added of the State are small, indicating a low productivity in the sector.
188 • 2013 Knowledge Sharing Program with Mexico [Figure 4-3] Comparison by state for metal mechanic industry
Employment Production 16% (% of Total national) 25% (% of Total national) 14% 20% 12% 10% 15% 8% 6% 10% 4% 5% 2% 0% 0% DF DF Jalisco Jalisco Puebla Sonora Coahuila Coahuila Veracruz Querétaro Nuevoleón Nuevoleón Michoacán Chihuahua Chihuahua Guanajuato Guanajuato Tamaulipas Tamaulipas Estado México Estado México Estado Baja California Baja California San Luis Potosi
Value Added 20% (% of Total national)
15%
10%
5%
0% DF Jalisco Puebla Sonora Coahuila Veracruz Nuevoleón Michoacán Chihuahua Tamaulipas Estado México Estado Baja California San Luis Potos
1.2.2. Industrial Policy in Chihuahua
1.2.2.1. The State Development Plan 2010 -2016
The State Development Plan 2010 – 2016, which establishes the main strategies of the government in six year periods, recognizes the polarity of the state economy and its dependence on the manufacturing industries in its economic section (Regional Development and Competitiveness). It acknowledges the difficulty of transferring technology to the small and medium enterprises, and emphasizes the need to increase the productivity of the local firms. The Plan enumerates a series of strategies and objectives to foster the economy, in line with the international best practices like: increasing the local supply to the maquiladora, increasing value added of the local production, and strengthening the existing clusters. Also mentions the
Chapter 4 _ Strengthening Capacity to Reinforce SME’s Innovation in Chihuahua • 189 strategic sectors to foster: Agribusiness, Biotechnology, Auto parts, Nanotechnology, Forestry and furniture, Aeronautics, Tool and die, Mechatronics and Electronics.
1.2.2.2. State Secretary of the Economy
The State Secretary of the Economy (SSE) has traditionally been the Government body in charge of promoting development. Between 1998 and 2010 it was organized with two separate units: the Secretary of Commerce in charge of all topics related to the service sector, and the Secretary of Industry responsible for the secondary sector. However, since the end of 2010 the State Government has engaged in the process of re-unification in a single Secretary, and this has also made the need to rethink its strategies and policies more urgent. One of the main concerns that are currently prevailed is the need to help the small and medium-sized firms to evolve towards a more competitive and international oriented sector.
Many programs have been designed and implemented by the Chihuahua State Government to promote the development of the productive sector, mainly focused on the Light Manufacturing Industry and the Primary sector. The available data distinguishes 45 programs at the Secretary of the Economy covers sectors such as Mining, Manufacturing, Agribusiness, and Tourism. The following analysis organizes this varied group of state programs, taking those which have a relation with the metal mechanic industry:
1.2.2.3. Policies to attract Foreign Direct Investment
The aim of these programs is to attract existing business and industry to the State. The main targets are large companies with strong investment capabilities that can easily create jobs. This has been the prevailing productive development strategy for many years, since the 1960s when the first efforts to attract in-bond assembly operations (“maquiladoras”) to Chihuahua were launched. In its essence, productive development would rely on the investments of foreign companies and their consequences.
Since their conception both the Employment Promotion Decree (1994) and The State Economic Development Act (2007), a State Law, were designed to provide incentives in order to set up favorable conditions for companies to quickly establish the operations in Chihuahua. Despite of the fact that the Act is not restrictive on the origin of capital, historically the companies that have benefited from these incentives are mainly foreign.
The State government offers incentives in relation to payroll taxes, training programs, and assistance in the procedures for meeting requirements at three
190 • 2013 Knowledge Sharing Program with Mexico levels of government (federal, state, and municipal). Additional incentives can be negotiated, depending on the location of the new project, type of manufacturing activity, and the objective of job creation. The incentives subject to be negotiated include: land, infrastructure works, fees with the State Public Registry and construction permits.
1.2.2.4. Job Training Programs
Human resource development policies focused on creating a skilled labor pool dependent strongly on the availability of Federal funds. It is worth noticing that some of these programs like CENALTEC (High-technology Training Center) were originally created to fulfill the needs of the “maquiladora” industry; therefore they also contribute to FDI attraction. The Center depends on the INADET (Institute for Technological Development) dedicated to support the technology transfer to the local industry through educational programs and consulting.
CENALTEC programs seem to be more focused on industrial skills, and it also target the needs of other regions of the State beyond Chihuahua City and Ciudad Juarez, by providing courses and training in mid-sized cities. This increases their reach and impact on the overall state. All these programs reached approximately 1.6% of the economically active population of Chihuahua State in 2010. Recently the INADET has changed its governing law and regulations in order to increase its capabilities to serve the local industry, especially the metal mechanics by helping the transfer of technology, the elaboration of parts and in deep consulting. It will be able to work closely with the FABLAB in the prototype elaboration and human resources training programs.
1.2.2.5. Research, Development and Technology Transfer
The aim of these programs is to provide consultation on product development and production problems that are particularly difficult to solve with existing technology. They also promote stronger collaboration between Universities, National Research Centers, and the industry. The INADET has other programs to foster the acquisition of technology for the local industry with financing (PROATEC and PIADET). More than 80% of the budget in this category is provided by the federal government. The reach of these federal programs is further extended through Chihuahua State’s own regional versions: PIADET and PROATEC. Both have the same characteristics and requirements as the federal funds, but can be allocated much faster as they are managed locally, and applicants are not restricted to a particular time of the year. PIADET, which helps companies to hire university researchers’ services, has a budget of 500,000 pesos per year and therefore can help no more than 10 companies annually. PROATEC, that is focused on providing
Chapter 4 _ Strengthening Capacity to Reinforce SME’s Innovation in Chihuahua • 191 financial assistance to purchase machinery or other fixed assets that can increase the value added for production, has no yearly allocation of resources but depends on the administration of a revolving fund of 15 million pesos. An extra fund of 400,000 pesos named “Technological Capabilities for Industrial Development Grant” has the purpose of matching the resources for technological projects in institutions that demand so.
Finally COVAP (Academy-Industry Liaison Council), is included in the list despite it is a council and not precisely a government program. It plays an important role on promoting collaboration between the public and private sector, and also receives aid from the Secretary of Economy. COVAP’s current achievements include the creation of new careers at local universities and two committees that work on aerospace and plastics issues.
All these states managed the program report, having a tracking system that allows them to: manage the processes for allocating the funds, verify the appropriate use of the resources by the company receiving the funds, and secure the re-payment of the capital.
1.2.2.6. The Role of Federal Programs
The Federal Government has a well-established system to assign yearly grants to promote economic development through different action lines such as R&D, IT business development, SME funding, etc. The State applies to both national and state allocated funds.
1.2.2.7. Technological Park status
The technological park home for the FABLAB belongs to the Monterrey Technological Institute campus Chihuahua (ITESM). It was built with federal, state and local private funds. There is an agreement between DESEC and the ITESM to allow the FABLAB the use of its installations for free of charge. In return, the FABLAB will seek to incorporate students and professors in its projects (the agreement does not limit to ITESM students and professors). The park was financed with federal, state and ITESM funds.
1.2.2.8. Status of engineering college of the University and National laboratory
In Chihuahua City the most important research center in the area is the national laboratory CIMAV (Investigation Center for Advance Materials). With an area of 35,000㎡ and 30,000㎡ of construction, it has 190 Employees: 145 in R&D activities. Its primary funding sources are the CONACyT (Federal Government, 45 %), Chihuahua
192 • 2013 Knowledge Sharing Program with Mexico State Government (5 %), Industry (Contract Research, 50 %). The 2012 Budget was 22 Million in US dollars. During 2013 they have published more than 72 articles in peer reviewed journals. They have joined projects with the industry in projects like: Aluminum Alloys Reinforced by Nano-Particles Dispersion, High Temperature Oxidation of Super Alloys and Intermetallic Compounds, Delamination of Composite Materials Modeling, Development and Characterization of Alternate Electrodes for Flexible Electronics Applications.
The State University (UACH) has an engineering department with 73 full time professors who collaborate periodically with the local industry. At the moment there is no collaboration project with the metal mechanical industry. The Chihuahua Institute of Technology (ITCH) has a metal mechanics department with three majors: Electromechanical, Mechanical and Materials and collaboration with the industry in development projects. At the Technological University there are also majors related to metal mechanics: Mechatronics, Industrial maintenance and Industrial processes. At the moment there are no collaboration projects with the metal mechanics industry, however there is an interest to develop project with the industry.
1.3. Chihuahua’s Metal Mechanic Industry
The metal mechanics industry in Chihuahua has grown in the last few years. There are approximately 40 firms with more than 21,000㎡. The firms employ approx. 640 employees. Their main input is steel (sheet and tubes), aluminum, plastics, gas, oxygen, pneumatic and hydraulic equipment, dies, valves, PVC. Most of them are brought in Mexico and the rest in the USA. Their main processes are:
• Machine shop: automatic CNC/Control, turning, grinding, cylindrical grinding.
• Stamping: progressive stamping, blanking, sheet metal fab, spinning and deep drawing.
The main software they use are: CAD/CAM, AutoCAD, Solid Works, Softcam and Preference. Their main clients are in the manufacturing sector, like metal mechanic, equipment construction, mining, construction, automotive and aeronautic sectors.
Chapter 4 _ Strengthening Capacity to Reinforce SME’s Innovation in Chihuahua • 193 [Figure 4-4] Metal mechanics industry in Chihuahua
12,000,000 30,000
10,000,000 25,000
8,000,000 20,000
6,000,000 15,000 Workers
Thousand pesos 4,000,000 10,000
2,000,000 5,000
0 0 Production Value added Employment (Thousand pesos) (Thousand pesos) (Thousand pesos)
Source: INEGI 2013
[Figure 4-5] Employment structure of the Metal mechanics firms in Chihuahua
Engeneers, 11% Management, 17%
Technicians, 25%
Operations, 47%
Source: SSE 2010
194 • 2013 Knowledge Sharing Program with Mexico 1.4. Chihuahua’s Metal Mechanic Small Medium Enterprise
Since there are about 500 multi-national companies in Chihuahua, located next to the United States of America, the market of parts supply is big. However, the local metal mechanic small–to-medium enterprises (SME) are not able to supply parts due to the problems such as quality, network, cultural difference and insufficient fund.
The most difficult thing for SMEs is the financing. When SMEs in Korea want to have the loan of money from a bank, Korea Guarantee Credit Fund gives an assurance to the bank. There are also same sort of funds in Mexican government. However, this fund partly supports the enterprises which are operated more than two years. Therefore, it is not a great help. Multi-national companies are located in the existing industrial complexes, located nearby the cities. Still there are not industrial complexes for SMEs of metal mechanic industry. Therefore these companies are scattered in the cities.
When referring to SWOT analysis of metal mechanic SMEs, they succeeded in attracting foreign companies with lower salaries. However it shows that metal mechanic SMEs face difficulties in growing up due to lack of infrastructure and insufficient capital.
SWOT analysis for the metal mechanic industry in Chihuahua is as follows:
Strong
• Technicians’ wages are lower than the USA
• Human capital and knowledge as result of the maquiladora
• Universities and Technical Colleges in the region
• Demographic change: more young people incorporates to the workforce
Weak
• Human resources knowledge quality
• Weak infrastructure
• Low cooperation between universities and business
Chapter 4 _ Strengthening Capacity to Reinforce SME’s Innovation in Chihuahua • 195 • Low levels of innovation and generation of knowledge
• Low cooperation among local firms
• Low value added processes
Opportunities
• Growing internal market
• Maquiladora industry represents a potential market
• Technology transfer from the maquiladora to the SME
Threats
• Very difficult to obtain financing
• Financial sector is risk adverse
• Human resources with few practical knowledge
• Low support from the government
• Market diversification. Most of the trade is with the USA
1.5. Design Center’s Establishment and Operation Idea
The Design Center is an idea of the metal mechanics firms grouped in the local Chamber of Industry. Its main objective is to create an institution specialized in the design and develop of new products by enhancing the technical capabilities, training of specialized personal and technology transfer to the regional firms. Its specific main elements are:
• The professional formation of a group of engineers or specialized technicians able to generate and design new products and concepts.
• Basic areas: material analysis, 3D simulation, software capabilities to translate designs and concepts in order to generate prototypes.
• Equipment: hardware, server, working stations, polymer prototype generating
196 • 2013 Knowledge Sharing Program with Mexico tools, design and analysis software (electronic and CAD/CAM).
• Second stage machines: microscopies, metrology equipment, basic casting.
• Expected short term results: - Have the necessary qualified staff to design and develop products using the latest technology CAD/CAM using the ISO 10303 - Obtain the technology in equipment and software necessary to service the end users - Technology transfer to the local firms by generating innovative products and processes - Foster the creation of new firms with focus on design and product creation - Support the creativity among local firms - Until now the design center does not have the following: - Fund sources - Demand analysis - Design Center’s role and operating plans required by SME. - Design Center’s configuration and operation plan - Independence operation plan - Cooperation with University and Technological Park
1.6. Fabrication Lab’s Situation and Operation Plan
The FABLAB initiative starts within the CANACINTRA (Industry Chamber) and the State of Chihuahua Economic Fostering Chamber (DESEC), a business people chamber. DESEC took the leadership of the project, and structured its first draft and work to attain more funding. The funding of the project up to date is as follows:
Funding sources for the FABLABEuropean Unión 10,785,195 55% DESEC 2,300,000 12% Cluster firms 5,000,000 25% CIMAV 1,524,250 8% Total 19,609,445
Source: DESEC.
These resources are for a period of two years including machinery and operative costs. The initial equipment of the FABLAB consists of:
Chapter 4 _ Strengthening Capacity to Reinforce SME’s Innovation in Chihuahua • 197 • Universal milling Machine DMU 50 Ecoline de DMG Mori Seiki
• CNC Hydraulic press break Easy-Form 138/30 de LVD Strippit
• Punch press Pullmax 520 de LVD Strippit
• Romer Absolute Arm de HEXAGON Metrology
1.6.1. Mission
Offer flexible manufacturing services to develop prototypes as a seed for innovation among the SME of the metal mechanics sector
1.6.2. Vision
Become a driving force to diversify the local industry of Chihuahua by innovating in new products, using an open innovation model.
FABLAB objectives are:
Support the local firms to launch new products by helping to develop the first prototypes and muster. It will also be able to fabricate the first production sets, so the SMEs will be able to test their products in the market. This will lower the risk and rationalize new investments in machines and equipment.
It will foster the technology dissemination by becoming a reference center in the State for those who want to innovate. Especially it will have programs and agreements to incorporate the universities and technological schools in its projects.
1.6.3. Survey of the equipment
The SMEs have expressed the need to increase de capabilities of the FABLAB. Among the most common requests are:
• Machinery, Shear, Grinding machine, Thread cutter, Laser cutter, Deep drawing die, Services
• Advise the SME machine buying process
• Advise in the use of the machinery and software
• Prototype design by Solid Works
198 • 2013 Knowledge Sharing Program with Mexico • Help with the development of the production lines and material procurement
1.6.4. Operational plan
Staff plan are director, 1 administrative, 2 technicians. Above the director there is a Board, responsible for the medium and long run direction of the FABLAB, it will be composed of members of the industry and academic fields: 1 Chairman of CANACINTRA (Industry Chamber), 1 Member of the Technical Committee, 1 Member of DESEC, 2 Business people from the metal mechanic sector, 1 Director of DESEC, 1 Director of the FABLAB. As an advisory body there will be a Technical Committee integrated with members of the industry and academic sector specialized in the metal mechanics industry capable of taking strategic decisions.
The laboratory will divide its usage time in three main groups to let many companies use Lab’s equipment. • The first group will get 60% of the time at discounted rates (20% under market value) to all the business people of the metal mechanic sector who contributed to the funding.
• The second group get 30% of the time at market or discounted prices (the Technical Committee will decide which projects receive discount or extra time, based on the innovation of the project)
[Figure 4-6] Equipment of Fabrication Lab in Chihuahua.
Punch Press Milling machine
Press break
Measuring Arm
Chapter 4 _ Strengthening Capacity to Reinforce SME’s Innovation in Chihuahua • 199 1.7. Results of Demand Survey and Pilot Study
The chief items of export in Chihuahua are home appliances, car, aviation parts and metal parts. The items of import are equipment of molding and manufacturing which requires technology improvements of injection and press forming. Chihuahua is very close to the USA. About 500 OEM companies made a foray. Therefore the part supply market is big. However, local metal mechanics SMEs do not supply the parts to the multi-national enterprises due to quality, network, cultural difference and insufficient fund. Thus, design center, which will aid SMEs’ product design and fabrication laboratory (FSC), will aid prototype manufacture. It seems that the counsellor whom local experts belongs to plans and conducts this project and three people in the counselor work in full-time.
Technological Park (TP) is a business incubation center located in the campus which lends office to students, professors, and enterprises and separates them once they make sale. Also, technological park is equipped with laboratory for education purpose. TP has installed equipment of Fabrication laboratory and provided a space for operation. If the design center at an early stage is installed, CAD system and space, which are already equipped, will be provided. If the products which SMEs are planning are designed with a support of design center and manufactured by Fabrication laboratory and assumed to be marketable, mass production by enterprises is considered.
Equipment to be provided to FABLAB is board cutter, board folding machine 5-axis machining center and 3-dimension coordinate measuring machine from EU. EU (50%), DESEC (15%) and Participating Enterprises (25%) shared expense. Enterprise which invested in purchasing equipment will operate it and pay the charge to FABLAB. Representatives of cluster enterprise operate enterprises of sheet metal forming, supply parts to OEM enterprises of home appliances and share partly purchasing cost of equipment. Equipment is supposed to be operated by civil conference and planned to hire professional employee to operate the equipment. Therefore, it is assumed that profitability takes precedence over publicity.
In order to manufacture products, many relevant working processes such as molding, press, heat treatment, welding and surface treatment etc. are necessary. Therefore, it is important that FABLAB and SMES located in Chihuahua to cooperate. It seems that part supply and self-producing to OEM enterprises will be possible if cooperation among SMEs is increased since SMEs in the city are able to arrive within 30 minutes.
For other supporting measures, creating industrial complex and financial support were discussed. Existing industrial complexes where multi-national enterprises are
200 • 2013 Knowledge Sharing Program with Mexico located are close to the cities and industrial complex for metal mechanic SMEs are planned. The most difficult thing for SMEs is the capital. In case of Korea, Credit Guarantee Fund and Technology Credit Guarantee Funds are made to help SMEs to have loans from the banks. There is also a fund operated by Mexican government, and it is only for enterprises of more than 2 years so it needs to be resolved at the level of enterprise.
Local companies have a German 5-axis milling machine, a Japanese machining center and four turning centers, and process simple mechanic and aviation parts. They are going to process the molding by taking discharge machine. However, the worker’s salary is about thirty million won, which is similar to Korea; price of delivery is estimated to be high. On-the-job orientation and intern-ship program are operated with the universities’ support. Research and Development (R&D) and staff training are supported by government. The ultimate objects of Design center and FABLAB are to become partner firm by increasing the competiveness of local metal mechanic SMEs, to design ideas and to manufacture to check the marketability.
The results of a visit are as following. Technology park (TP), as an organization to support experiment and practice and to assist business starters, only provides the space for installing spaces. FABLAB only provides a space for installing equipment. 25% of purchasing cost for equipment was covered by enterprise consortium. Civil committee will operate equipment and focus on profit. If the goods are made by only ideas not by substance in the design center, it seems possible that it could be able to start with CAD system and space in the TP. While Introduction of equipment and utilization cost of TIC depended on government aid.
2. Korea's Experience in Metal-mechanic SMEs
2.1. Korea's SMEs in manufacturing industry
2.1.1. System of SMEs and major enterprises
Korean industry was developed from export of light industry using cheap personnel expenses into heavy chemical industry requiring massive investment under the government’s plan and lead and now the car industry, car and semiconductor industries are currently developed requiring high technologies. In the beginning, core parts were imported so that finished products were made and then, equipment necessary for manufacturing were imported to localize. Currently, equipment, parts and materials are localized and exported to foreign countries.
Chapter 4 _ Strengthening Capacity to Reinforce SME’s Innovation in Chihuahua • 201 Korean SMEs have grown up by delivering components to the major companies. Therefore, they show distinctions with SMEs in Chihwahwa, which local SMEs are isolated since foreign major enterprises entered with partners. For example, SMEs maintain competitiveness with technologies of casting, forging, molding, heat- treatment and surface treatment which are called as major industries. These SMEs make final compartments under the structure which automobile enterprises order module to partners, and partners order many compartments for modules to SMEs. Only metal mechanic SMEs, which have international competitiveness by competing infinitely and establishing in the same filed, could survive by going through the specialization into each field. For example, Samsung Electronics which entered Queretaro and LG electronics which entered Monterey have entered with SMEs that have international competiveness.
However, relation between major enterprise and SME is a subcontract structure of finished product – compartment. Dependence on major companies due to the relation of subcontract is about 80%. Also, dependence on major companies when SMEs entered the foreign market is also high. Therefore, both internal demand and exports of SMEs depend on major enterprises. According to the research on the actual condition regarding the SME’s difficulties of delivering for major enterprises in 2008, number of major enterprises is about one to two (40.4%) and three to five (29.5%). Most of SMEs maintain continuous relation with less than five major enterprises. “The ratio of sale, which is over 50% against the major enterprises among total sales of SMEs, is 75.7% and the ratio, which is below 50% of sale, is 27.3%. This result shows that SMEs generally maintain exclusive business relation in the field of sales for major enterprises.”
Accordingly, some of major enterprises have continuously kept asking to lower the unit price against the component enterprises so the productivity per one person of SMEs is about 1/3 of major enterprise, which is quite low. In the actual research about the delivery transaction between major enterprise and SMEs in 2008, the most difficult thing was to lower a unit price (38.3%). Difference of added value between major and SMEs made a doubled high wage difference to increase the preference for major enterprises, making a manpower shortage of metal mechanic SMEs.
Field of business protection for SMEs was chosen as the most important emphasis to be carried out by government in the research about the perception for mutual growth of major and SMEs in 2011. For the field to be carried out by major enterprises, readjusting the unit price was 78.0% and for the field which SMEs have to do their best was to strengthen the technology competitiveness (65.6%).
Source: 2008 the report of difficulties of SMEs supplying major enterprises
202 • 2013 Knowledge Sharing Program with Mexico 2.2. Present condition of small-medium manufacturing enterprises
In 2010, the number of SMEs (5 to 299 people) in the manufacturing industry was 112,897 (99.5%) and the number of employees was 2,289,000 (77.1%). And the production amount was 651.4 trillion won, and the value added was 215.7 trillion won (47.45%). Number of employees and enterprises were high. However, the production amount and value added was low.
In 2009, machinery and equipment was 21.2%, metal process products was 12.2%, electronic compartment was 12.0%, electronic equipment was 8.2%, plastic product was 7.7% and car was 6.3% in accordance with the dispersion type of business in small medium manufacturing industry.
Market share by three major manufacturers in car and commercial vehicle manufacturing industry was about 90% and 80% in hot rolled and molding products, a monopoly of major enterprises. On the other hand, market shared by three biggest manufacturers in car body components was 15%, 14% in other car components and 30% in steel surface treatment. Metal mechanic parts manufacturing industry belongs in SMEs.
In 2009, according to the descriptive statistics research, to improve performance and quality and to maintain market share were the biggest motivation for SMEs to develop technologies. For the method to develop technologies is self-development (75.8%), joint development (17.45%), consignment development (4.6%) and introduction of domestic/foreign technologies. For the utilization partners of joint development and consignment development, the ratio is as following: university (50.1%), SME (31.3%), national research institute (31.3%), major enterprise (19.05%). Technological cooperation among universities and SMEs mostly make up majority of the research.
In order to supply manpower and increase added value through the SME’s improvement of technologies, government aids various programs of technological manpower cultivation and technical development. According to the satisfaction survey of consumers conducted by small and medium business administration in 2005, satisfaction of R&D projects were as following: SME’s process innovation (81.7%), SME’s technology transfer development project (74.5%), new product development support with an option to purchase (72.0%). This research shows Process technology development was the most interesting part to SMEs.
Chapter 4 _ Strengthening Capacity to Reinforce SME’s Innovation in Chihuahua • 203 2.3. Government policy in parts and material industry
The development of Korean parts and material industry has been towed by the demand industry (car, ship building, construction and machine, agriculture machine, aircraft, railway rolling stock, electric electronic, plant etc.)
Government enacted a law regarding the “Special law enforcement on the creating the specialized enterprises in parts and material”. Specifically, government promoted the training business of professionals, development and commercialization of parts and material technologies and international cooperation in the field of parts and materials. As a result of that, surplus in the trade balance was increased from $2.7 billion to $90 billion, which is 33 times higher than before. In order to maintain the achievement constantly, government extended the time limits into 10 years for “Special law enforcement on the creating the specialized enterprises in parts and material” and announced ‘Future and Vision 2020 of Parts and Material’. The main content of the announcement was that the part-oriented industry would be switched to the material oriented industry.
To put it concretely, development of core material, development of core parts in 100 growth engine type, establishment of material part in pulling growth type were the main contents in this announcement.
Root industry, which metal mechanic industry mainly handles, is the basic process which makes materials into parts and parts into finished products. It is classified into casting, plastic working, mold, welding, heat treatment and surface treatment. Korean government established a ‘Law on promotion and modernization of root Industry’ and decided to support for manpower training, education for Root industry and development and dispersion of Root industry, mutual growth with demand enterprises, international cooperation, and for entrance to the foreign markets. In 2012, the Law on promotion and modernization of Root industry was passed. Supporting business such as product and process development (50,000,000 won per enterprise) and connecting with technical professionals of SMEs have been progressed since 2013.
204 • 2013 Knowledge Sharing Program with Mexico [Figure 4-7] Relation between SME & large enterprise in car manufacturing
Automobile
Module
Parts
Caliper Disc Hub Bearing SME
[Figure 4-8] Contribution of root industry in automobile manufacturing
Chapter 4 _ Strengthening Capacity to Reinforce SME’s Innovation in Chihuahua • 205 2.3.1. Daegu Mechatronics and Materials Institute (DMI)
2.3.1.1. Overview
DMI (Daegu Mechatronics and Materials Institute) was founded in 2001. This foundation was aided by government expense and local government budget to “strengthen international competitiveness of local metal mechanic enterprises and to promote the local economy development by facilitating industrialization of a higher value-added business.” DMI can be the role model of FABLAB in Chihuahua.
This institute possesses 16.9 billion won of real estate such as a building for assessing mold performance and 10.8 billion won of current asset. The institute performs tasks of supporting SMEs, R&D of machine robots, supporting root industry. There are 69 people, and among those people there are 14 people who have their doctor’s degree; 26 people have master’s degree; and 28 people have bachelor’s degree. Most of them are in R&D and technical positions which carry out the project.
As an equipment for supporting enterprises, the institute possesses material analysis, assessment reliability, prototype manufacturing, performance evaluation of machine parts and mold innovation & technical development support. There are 147 kinds and 221 pieces of equipment belonging to the institute, which is worth about 35billion won. For material analysis and assessment reliability, there are X-Ray content analyzer and electromagnetic waves conformity assessment system (22 kinds and 77 pieces of equipment). For manufacturing prototype product and performance evaluation of machine parts, there are 3D printer, 5 axis – milling machine, jig boring machine, 3-dimension measuring machine etc., where the total is 108 kinds and 127 pieces of equipment. For mold innovation and technical development support, there are press of 500 ton, 1,000 ton and 2,000 ton and large injection molding machine. (17 kinds, 17 pieces of equipment)
The Materials Test & Evaluation Center, which started its service in 2003 with the test and evaluation equipment of high accuracy and professional personnel, was certified as an internationally authorized test center by KOLAS. The center tests products and provides test reports for 115 standards of precision measurement, material test, environmental test and chemical analysis. Also the center supports SMEs to deliver their components to the domestic and foreign major enterprises, which require the international standards.
In the Die & Mold Technology Center, which was founded in 2009 with the molding technology, material technology and design & processing technology, high added value molding technology, is developed and transferred to SMEs. The
206 • 2013 Knowledge Sharing Program with Mexico center has large press and injection molding, which SMEs do not have, and use it in manufacturing prototype products with the molding that local molding enterprise developed. Therefore, even the small molding enterprises can deliver the products after receiving large injection mold and manufacturing test molding. For example, local molding enterprise received an order of Side Outer press molding through the evaluation of prototype with the press equipment (2,000 ton), form analysis of large part and molding design in accordance with the technical standard of car finished product manufacturers.
2.3.1.2. Revenue generation
Operating revenue for DMI can largely be divided into two categories. One is fee for test analysis and for using equipment. And the other is for receiving orders of national research project. In 2012, the institute earned 2.1 billion won (about 6% of equipment market price) by enforcing electromagnetic wave compatibility, noise vibration and Try Out mold formulation to local enterprises. The whole number of cases to support test and evaluation is 5,805 for 1,043 enterprises. It is highly evaluated in terms of public interest by providing equipment and test to many enterprises. However, the profitability is low. Therefore, it is not easy to operate the center only with these profits. Fee for using equipment could be the main source of income for FABLAB in Chihuahua, hence it should be considered also that it is possible for the center to fail to achieve the self-reliance.
However, the research projects about the cooperation with local enterprises in 2012 had 139 subjects and received 15.189 billion won. Among them, 77 cases were from Small and Medium Business Administration, 37 were from the Ministry of Trade, Industry and Energy and 6 were from Industrial Complex Corporation. Totally, there were 120 projects and 19 civil consignment projects. The rate of government projects is overwhelmingly high. Main achievements in R&D were 27 cases for patent registration and 3.4 billion won in technology transfer. Compared to the number of subjects and R&D expenses, it was insignificant.
Also, there are supporting projects for innovation of manufacturing process in heat-application root industry (9.5 billion won, 2012 to 2015), IT convergence SMART project of advanced mold technology (20.8 billion won, 2011 to 2014) and project for strengthening global competence for Daegu mold industry(3.3 billion won, 2013 to 2016) for large-scale national research projects. It shows that the institute is operated by receiving research projects from government. Although DMI receives fee for using equipment and for test analysis, it focuses more on public interest. Therefore, the profitability is low. However, high-quality human resources with doctor’s degree receive large research projects supported by government and co-work with SMEs.
Chapter 4 _ Strengthening Capacity to Reinforce SME’s Innovation in Chihuahua • 207 If FABLAB in Chihuahua receives R&D budgets from the Chihuahua government, the effects could be much greater. However, if receiving research fund is not certain, new operation model for FABLAB is necessary. Above all, it is necessary to maximize usage of equipment and create profit for self-reliance. After that, public interest to support many SMEs can be promoted together.
Source: http://www.dmi.re.kr
[Figure 4-9] DMI's history and major equipment
• Establisment with the support of Daegu City and local • 3D Coordinate Measuring Machine, Establishment businesses in 2001 Over Scanning Electron Microscope, • Total Budget, in 2013 : $24 Million / Personnel : 69 $0.1 million 51 Equipments including a Fatigue tester
• To support the local machinery & Metals businesses strengthen competitiveness in the world market Purpose • To aim to develop regional economy by promoting higher • Enviroment Vibration Tester, value added business Spark Plasma Sintering System, Over 5 Equipments including Microfocus X-ray $0.5 million Center • Materials Test & Evaluation Center, Constructed in 2005 • Mechatronics Parts Industrialzation Center, in 2008 History • Die & Mold Technology Center, Constructed in 2009 • 1000ton Press, 2000ton Press, Plastic Injection Machine, Over EMC Test System $1 million
Total 147 kinds and 221 Equipments (about $29 million)
2.3.2. Techno Park (TP)
2.3.2.1. Overview
Techno Park is a main policy instrument that promotes regional innovation by strengthening SME's competiveness and facilitating its innovation. It was created since 1997 with enormous government fund. As a main regional organization, the budget was exercised to support SMEs located near the TP. “The role of TP is to be a platform which helps SMEs in R&D, to facilitate network, to promote and bring up the foundation of venture enterprise based on technology, to develop new product and to enter a new business area.”
2.3.2.2. Support for tenant enterprises
According to the result of survey for 202 SMEs in TP in terms of consumer, services of 9 types (industrial infrastructure, physical facilities, network, technology, finance, commercialization, marketing, strengthening of manpower and business capability) were mostly suitable for requirements and expectations of enterprises. However, deviation in the perception of usefulness was found and services in finance, marketing and business capability were the most necessary and effective.
208 • 2013 Knowledge Sharing Program with Mexico 2.3.2.3. Provision of shared research equipment
For the balanced national development, TP’s 60 affiliated regional specialization centers installed high-priced equipment having supported by governmental expenses, and help manufacture products directly and rent equipment. However, during the time (2010 to 2012), TPs in Korea operated only 51.7%, a low rate. Therefore, through business with shared instrument, the utilization is promoted by additional governmental support. “After 2013, regional TP-affiliated centers face a big challenge as the governmental support has decreased constantly or stopped. But in terms of the non-profit organizations, various alternatives were necessary for making profits.”
Source: http://www.technopark.kr
[Figure 4-10] TPs in Korea
Gyeonggl Daejin Technopark Gangwon Technopark
Songdo Technopark
Seoul Technopark Gangwondo
Gyeonggl Technopark Gyeonggido Chungcheong Daegu Technopark namdo Chunbuk Technopark Gyeonbuk Technopark Chungcheong Chungnam Technopark Gyeongsang bukdo bukdo Pohang Technopark Daejeon Technopark
Jeollabukdo Jeonbuk Technopark Ulsan Technopark Gyeongsang namdo Gwanglu Technopark Jeollanamdo Jeonnam Technopark Busan Technopark
Gyeongnam Technopark Chehu Technopark
Jejudo
Chapter 4 _ Strengthening Capacity to Reinforce SME’s Innovation in Chihuahua • 209 2.3.3. Technology Innovation Center (TIC)
2.3.3.1. Overview
Forty-four Technology Innovation Centers (TICs) were founded. 184 billion won of governmental expenses in total were invested for ten years, 1995 to 2004 in order to increase capability of academic-industrial cooperation by supporting equipment utilization, technology development with the high-priced equipment in universities, located in the area that enterprises can access easily. Project type was matching fund among local government and university. Government supported one billion won in purchasing research equipment annually for 5 years. Totally, Korean government provided five billion won and universities provided sites, facilities and local governments covered operation expenses and research development expenses.
TICs founded by year Year ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 Total # 2 3 1 0 14 1 8 6 4 5 44 Budget (hundred 10 40 50 50 190 200 280 280 370 370 1,840 million won)2.3.3.2. Outcomes
Role of centers was to secure infrastructure and enforce 5 businesses (equipment support, business incubation, education and training, information) for technology innovation of SMEs to strengthen the regional industrial competiveness. In the beginning, universities in Korea did not have sufficient equipment for industrial- academic cooperation so budget for this cooperation had to be distributed at small scale. Due to small sum of budget, universities were not able to acquire R&D equipment which was required from the enterprises. Many TICs which had been solving this problem began to appear and made some achievements. TICs which have been founded so far can be categorized into six fields. Mechanics-automobile area takes up 36% (16 TICs).
TICs in specialty area by yearSpecialty Machinery Automobile Electronics Chemistry Biology Others Total
# 10 6 11 9 5 3 44
210 • 2013 Knowledge Sharing Program with Mexico The enterprises’ purpose of using TIC according to the survey is to ‘improve technology development capability’, standing in the first rank (78.7%). ‘Increasing sales’ is the second highest (45.5%). For other technological achievements, there are improvements of technological standard for SMEs, registration of patents, commercialization of technologies. Regarding economic achievements, ‘increase in sales and exports’ was mentioned. From 1995 to 2003, the key performance indicators were equipment utilization enterprises (6,427 enterprises), joint research development (881 cases), education and training (6,879 enterprises), technology consulting (2,459 enterprises) and business incubation (356 cases).
2.3.3.3. Successful TIC
About nine TICs are evaluated to be successful among forty four. TIC of Gyeongsang National University has focused on metal forging and powder metallurgy, manufactured bevel gear by forging, exported it to Japan and delivered high-intensity weapon parts to Ministry of National Defense. TIC provides press for forging and machining center for manufacturing forging mold, and supports forging mold analysis with CAM software. Press forming machine, injection molding machine and Sintering furnace are used to support with analysis in powder metallurgy. The TIC was founded in 2001 and supported by government for purchasing equipment and operation expenses. From 2006, the TIC at Gyeongsang National University succeeded in self-reliance, having operated without governmental support. The TIC recorded 2.78 billion won in revenues through renting equipment and providing technical service. It could cover personnel cost, material cost, maintenance cost for equipment by itself. The success factor was that professionals in charge constantly performed governmental research projects with local SMEs with use of CAE software and equipment specialized in plastic works necessary for local SMEs located in the industrial complex.
CAM TIC of Chonbuk National University was focused on micro-injection mold to mass-produce SME's design in plastic products. CAM TIC is equipped with machining center, electrical discharge machine, injection molding machine for test molding, CAD for mold design and design division with CAE software for injection mold analysis. Although CAM TIC was founded in a rural area, conditions for self-reliance were created with the investments from relevant governmental projects. Although there was a preferential equipment utilization of some enterprises, it was able to conduct the projects because the conditions of the area were considered. Therefore, there were not many problems presented by private entities. For Chihuahua, it implies that self-reliance can be possible for an area where metal mechanic industry has not grown up yet.
Chapter 4 _ Strengthening Capacity to Reinforce SME’s Innovation in Chihuahua • 211 The fact, that CAD/CAM CAE software and prototype manufacturing equipment are located in the same space in TIC and DMI, implies that Chihuahua design center, as a FABLAB-affiliated organization, is the appropriate model to support technology development that local SMEs require.
2.3.3.4. Failure cases
There was an effect of shared use of equipment on local SMEs and of increasing R&D capability of TIC. “However, there was a limit in increasing R&D capability, and the base for self-reliance was insufficient once government support was stopped. Equipment installation had a strong public interest so there was a limit in generating revenues.” On the other hand TIC, which strengthened equipment rent and increased profitability, received a negative assessment that it competed with enterprises at cheaper prices which had similar equipment. 80% of Korean TIC's are evaluated to have failed.
Nevertheless, when looking into the factors of TIC’s success, successful TICs are located in the industrial complex, purchased the equipment that are required commonly, received constant relevant R&D projects and local government’s support. What FABLAB in Chihuahua was effective in was to have purchased necessary equipment while what FABLAB was not effective was the location - outside of the industrial complex. What is necessary, for the future to become a successful FABLAB, is that professional engineers, who have high level of experience, secure the projects with the enterprises in home appliances and in aviation parts which are interested in developing manufacturing technologies.
Source : TIC-RRC union method, http://iucf.cheju.ac.kr
212 • 2013 Knowledge Sharing Program with Mexico [Figure 4-11] TIC in Chonnam National University
CAD/CAM/CAE softwares
EDM
Maching Plastic Injection Mold Maching < Mold design < Process anailysis < Idea design
2.3.4. Cyber Engineer U 24
2.3.4.1. Overview
Korean SMEs create revenues through manufacturing technologies such as cast, forging, heat treatment and injection molding. If CAE software of manufacturing process analysis is used, technical strength can be improved. Korea Institute of Industrial Technology (KITECH) provides necessary supports to SMEs from cause analysis of faults to new components design at Cyber Engineer U24 since 2009. With the technology of ‘Cyber Engineer U24’ many SMEs can easily utilize technologies anywhere and anytime through the Internet.
2.3.4.2. Development process
The purpose of Cyber Engineer U24 is to provide service of manufacturing process simulation on the Internet to improve productivity such as reducing defect rate and development period. Manufacturing design refers the process to decide size, shape, material and production equipment and production facility for production. The execution organization was KITECH. The business period was from 2009 to 2013. However, the development in the initial stage started by developing and upgrading cast analysis simulation technology. 11.4 billion won was invested for 10 businesses in industry-based technology development and medium-term core business since 1989. Five billion won was invested through specialized research business and top Brand business for three years since 2006 to develop a web-based
Chapter 4 _ Strengthening Capacity to Reinforce SME’s Innovation in Chihuahua • 213 online simulation service. Seventeen billion won was invested to spread cyber manufacturing design simulation technology. After securing the online simulation technology, the web-based analysis technology was progressively expanded in six main manufacturing fields including heat treatment, mold, forging and so on and it assisted the optimization of manufacturing process reducing the defect rate and development period.
Extension of cyber manufacturing design simulation(Unit: Million won)
Year 2009 2010 2011 2012 2013 Total
Heat Surface Field Molding Forging Welding - treatment treatment Budget 2,917 2,100 2,939 2,159 6,500 16,615
Cyber manufacturing design simulation service is provided in the field of cast, which secures online simulation and then extended to six manufacturing infrastructure fields such as heat treatment analysis, forging simulation, plastic injection molding and welding analysis to optimize manufacturing process. In accordance with the process above, the manufacturing productivity has been improved.
2.3.4.3. Structure and utilization procedure
Cyber Engineering U24 consists of hardware infrastructure, and technical support. Hardware infrastructure for Web-based simulation service is available to accept 100 people at the same time by a super computer. And it is equipped with a hundred of servers for calculation, dedicated line at 500 Kbps, security device and back-up device. By establishing web-based contents of six production core technologies, users can utilize simulation technologies through the Internet. Cyber Engineering U24 also provides process design analysis service for SMEs by utilizing CAD engineers in two education centers, Inchon and Seoul.
For the utilization procedure, users have to access to the cyber engineer site (www.etekzon.co.kr) and join the membership. You then log on to the site to be educated by video material hot to use and utilize the manufacturing process analysis simulation. By using supercomputers of KITECH, it is not necessary to purchase the advanced hardware and to purchase high-priced analysis software. Two education centers and visiting training at enterprises are available. Also CAD
214 • 2013 Knowledge Sharing Program with Mexico input for simulation utilization is provided.
2.3.4.4. Successful case
In fostering cast industry consisting of the parts and material industry and advanced high value-added business, optimal design of product and manufacturing method is the core. However, most of domestic casting enterprises face lots of difficulties in manufacturing the products through optimal design due to lack of technology. In order to resolve the difficulties which SMEs face, Cyber Engineering U24 provides the whole process - product design, manufacturing prototype and inspection of products - with the highly skilled professionals and advanced equipment. As a result, it reduces product development period and defect ratio of the process. It becomes a great help in cost reduction.
In case of casting, product drawing is analyzed, and casting method is concluded. And then, the most optimal method is found by using Z-Cast, the casting process analysis program, to complete prototype design. In accordance with the analysis result, core and cast are produced in the rapid prototype to complete the prototype. D enterprise, located in Changwon Industrial Complex, researches actively to replace existing cast iron/cast steel with alumina casting for the weight lightening. Cyber Engineering U24 finished developing high-strengthened as-cast alloy prototype product (D357.0) for speed railway rolling stock by finding the most optimal method through the quantitative evaluation method regarding the effect that variables in process, especially, densener and casting rate influence on forming the various defects. Also, to stabilize the process of mass production, by improving casting method innovatively, large-scaled high quality alumina sand-casting iron (Premium Quality Cast) process and heat treatment process were established. With the technical support of Cyber Engineering U24, D enterprise defeated foreign enterprises which distributed extra-large alumina casting and achieved receiving orders to distribute connection parts of KTX-II of Jeolla Railroad and Honam railroad.
Source: KITECH Cyber Engineer, http://etekzon.co.kr
2.3.4.5. Cooperation between Korea and Mexico
If Chihuahua design center receives process analysis software, which is provided by cyber design center of KITECH, and provides it to SMEs in Chihuahua, Korea’s know-hows in software could be distributed naturally to them. We expect that the design center of Chihuahua, which starts as a center to support process analysis, could increase the SMEs’ parts manufacturing technologies
Chapter 4 _ Strengthening Capacity to Reinforce SME’s Innovation in Chihuahua • 215 [Figure 4-12] KITECH’s Cyber Engineering U 24
Large company Casting SME
Casting Simulation by Cyber Engineer
[Figure 4-13] Manufacturing process simulation
Web CAE service Casting simulation Heat treatment analysis
Plastic injection simulation Metal for ging simulation
216 • 2013 Knowledge Sharing Program with Mexico 3. Advisory research results
3.1. Research topics
In accordance with the results of visiting survey, topics were specified as following: Establish the method of establishment and operation of design center to improve the SMEs’ innovation capability in the metal mechanic industry of Chihuahua State.
3.2. Implications of relevant experience in Korea
3.2.1. Implications of Korea's experience in design center
Korean metal-mechanic part SMEs mainly deal with the design for manufacturing in order to manufacture parts to supply to major enterprise. They do not design for final consumer use. The reason why SMEs focus on design for manufacturing is that major enterprises design products and SMEs manufacture the parts – relation of subcontract. In order to improve SMEs’ manufacturing technologies, KITECH supports casting simulation, heat treatment analysis, forging simulation and injection molding simulation through the Cyber design center. DMI and regional technology innovation center, which can provide equipment, are equipped with CAD/CAM software for CAE technology and utilization of equipment.
Initial concept of Chihuahua design center was to design SMEs’ ideas and manufacture prototype products with FABLAB. However, through the visiting survey, it was agreed that the design center would focus on supporting CAD/CAM/ CAE required by FABLAB.
The fact that the Chihuahua government does not have budget planning regarding the establishment and operation of design center is different from the case of Korea, where government provides hardware and software to design center and covers operation cost for analysis. The budget for the establishment of the Design Center has not been set yet. There is only an idea for the design center. Therefore, if it is not supported by the Chihuahua government, it could be an alternative that students and professors operate it from IT lab of Chihuahua campus, Monterrey Institute of Technology, where FABLAB is located with donation of manufacturing process CAE software from Korea.
3.2.2. Implications of Korea's experience in shared equipment
Purchasing cost and operation cost for DMI and TIC in Korea were supported
Chapter 4 _ Strengthening Capacity to Reinforce SME’s Innovation in Chihuahua • 217 by government for a certain period of time so the revenue was lower. However, as their self-reliance starts and governmental supports were stopped, it could weaken SMEs in case two organizations concentrate on generating revenues from renting equipment. Operation of DMI is done by performing government-supported projects. Only some of TICs succeeded.
Since part of the equipment cost was covered by enterprises and civil committee will operate and maintain the equipment, it seems likely that organizations would focus on profitability rather than public interest. TIC in Korea depended on governmental support for introduction of equipment and operation expense. On the other hand, FABLAB showed more relationship with private community and government support was not clear. Therefore, it must be operated in a direction to increase profitability at first and later in a direction to increase public interest. DMI is operated by receiving government-aided projects. Successful TICs secured projects with help of engineering professionals. It implies that if Chihuahua FABLAB performs government-aided projects and receives equipment usage fee at the same time, it would be more effective.
3.3. Policy recommendation
In order to grow small and medium enterprises in the Chihuahua region there is a need to look at the regional innovation policy that Korea has continuously pushed.
The regional innovation system forms a mutually interactive collaborative relationship between the enterprises, government and universities in the region which invigorates the economy, and furthermore the goal to develop cultural, industrial, scientific technological, small and medium enterprise, educational, and trade policies based on analysis of innovative principal agents and systems and infrastructural sides in order to contribute to the national economy is made. As a way of activating the regional innovation system the “triple helix model” where ‘industries (large conglomerates, small and medium enterprises) - government (central, local) - universities’ collaborate together can be applied. This model determines the network of industry, government, and university that shows up during the innovative process through triple helical movement, and is differentiated in the way that it greatly emphasizes the incompleteness of the innovation system, the knowledge generating mechanism and the role of universities despite the fact that the regional innovation system theory and the theoretical connections are great. The triple helix is usually realized at the regional level, and in order for this there needs to be a 3 level triple helix space system that is made up of knowledge space, agreement space, and innovation space. When these individual triple helix spaces form a mutually interactive system, regional innovation can effectively occur.
218 • 2013 Knowledge Sharing Program with Mexico Daegu Mechatronics and Materials Institute (DMI) and RIC (TIC) that was shown as an example in the report, is a representative case of the regional innovation policy that applied the collaboration and mutually interactive model of industry, government and university. In the policy proposal specific management policy and role of industry, government and university for the design center and the manufacturing support center in order to support the small and medium enterprises of Chihuahua based on the regional innovation system of Korea is proposed.
3.3.1. Establishment of design center and management plan
Principles
It can be an ideal support center for SMEs if the Chihuahua government and the private sector share the cost to establish the design center and perform government projects. In case the Chihuahua cannot provide enough funds, the design center can be opened under FABLAB and operated with a minimal expense structure.
Chihuahua SMEs are advised to concentrate on improving manufacturing technology with use of manufacturing process analysis, in order to reach to international level in manufacturing technology and enter into supply chain of global companies. It is necessary to provide CAD/CAM software for operating FABLAB equipment and CAE software for local SMEs in manufacturing industry. Korea's Cyber Design Center develops software with research support from Korean government and provides a web-based service to SMEs. Chihuahua Design Center can provide support service to local SMEs with analysis software in casting and forging process donated from Korea. Professors and students of Monterrey Institute Technology may learn how to use the programs and support SMEs, so industry- academic cooperation may be promoted as Korea's processing technology brings effect on Chihuahua's SMEs and colleges.
Short-term projects
• Establish FABLAB-affiliated design center
Chihuahua design center may be established in FABLAB and supports CAD/CAM technology in formation of metal sheet and metal-part processing, as Korea's TIC and DMI as FABLAB's models provide equipment service and related software. And because SMEs in metal-mechanic sector can improve their technology with analysis software, the design center must provide service in engineering analysis.
• Use IT facilities of university
Chapter 4 _ Strengthening Capacity to Reinforce SME’s Innovation in Chihuahua • 219 IT equipment for the operation of software can be established by using IT facilities of Monterrey Institute of Technology. It could be done without government support. If it is successful, it is not necessary to purchase IT equipment. And if the design center is built in the building of the FABLAB, then manufacturing equipment and software are arranged together just like the one in Korea.
• Software donation in process analysis
It could be more appropriate to start the center with receiving donated software from Korea rather than purchasing high-priced CAE software since the budget has not been prepared yet. There is famous software of manufacturing field such as AFDEX in plastic processing, Z-CAST in casting, MAPS-3D in injection molding. In process analysis software, Korea has accumulated technologies and experiences. Technology transfer effect is expected.
• Operation using students and professors
In order to provide manufacturing process with the donated software, manpower is necessary. It is suggested to use students/graduate students/professors to learn software and provide service to SMEs. By making students and professors to learn the software, they can be educated and SMEs can receive support service. Also, it will be the opportunity for SMEs and universities to collaborate each other closely.
• Expected effect
The establishment of the design center can be available by cooperation with Korea which will provide manufacturing process analysis software, the local university which is to provide manpower, SMEs which are demand enterprises, and other partner organizations. With the operation of the design center to provide analysis service, improvement of process technology for SMEs, support for manufacturing prototype products and process technology education are expected.
Long-term projects
• R&D support
In the short term, securing CAD/CAM/CAE software and engineers is the role of the design center. In the long-term, the purpose of FABLAB is to grow as an organization to replace existing metal mechanic parts with technologies of regional enterprises.
220 • 2013 Knowledge Sharing Program with Mexico 3.3.2. Operation methods of FABLAB
Principles
FABLAB tries to support SMEs’ manufacturing prototype product by equipping shared equipment. DMI and regional TIC play a similar role in Korea. There are not many demands for SMEs and government support in Chihuahua. However, there were many demands for SMEs in Korea. If the Chihuahua government provides operation expense to FABLAB and covers R&D expenses for SMEs, Chihuahua enterprises can grow like those in Korea.
FABLAB is proposed to consider the case in which the Chihuahua government does not support them. In Korea, when the lots of SMEs are allowed to use equipment evenly, the operation ratio was low. However, if only certain SMEs are able to use the equipment, both operation ratio and profit were high. It could be appropriate that only enterprises which participated in purchasing equipment can use it in a short term. However, FABLAB should be careful to prevent SMEs from using FABLAB’s equipment blocking other SMEs entering the market.
Short term policy
• Secure professional engineers
The 5-axis milling machine is suitable for accessory processing requiring the small quantity batch production. To operate this machine, virtual fictional simulation software is required to protect high-priced CATIA CAD/CAM software (or low priced-Mater CAM). Especially, securing professional engineer who can operate the machines such as CAD/CAM and 5-axis milling machine is the most urgent. If it is impossible, equipment has to be rent to users, or possibility of breakdown gets higher. After securing professional engineers who have capability of operating 5-axis milling machine and CAD/CAM, FABLAB, it will be able to accept the processing request to make prototype product from enterprises which do not have required equipment.
Press break is suitable for small quantity batch production of mechanism case and operated by CNC (Computer Numerical Control). It would only be able to manufacture small quantity production and prototyping. 3-D measuring machine is an arm type. It is easy to move and sufficient enough to measure a big object. Therefore, it can be used in reverse engineering, which designs the products imitating the existing design. It is relatively easy to operate so that CAD engineers in the design center will be able to operate it.
Chapter 4 _ Strengthening Capacity to Reinforce SME’s Innovation in Chihuahua • 221 • Pursuing the profitability for the self-reliance
Much operating expenses are used in purchasing tools, software and wage for workers. However, if there is no support from the Chihuahua government, enterprises have to be independent from the very beginning. Especially, in case of workers, burden of personnel expenses could be high since the personnel have to be well trained and highly educated to operate advanced equipment by CNC. Since it is not able to pursue the public service in the beginning, it is necessary to accumulate certain amount of money from the margin earned from the operation of equipment. After fund is accumulated enough, it would be able to change its direction to provide prototype manufacturing service to other SMEs.
Long-term policy
• Seek non-profit service after achieving self-reliance
Operation of FABLAB, once its foundation has been finished and equipment has been introduced, will make a profit depending on enterprises which will use its equipment. However, two professionals must be hired in order to support SMEs in view of public service. If the Chihuahua government provides expenses for joint research conducted by FABLAB and local SMEs, the support functions can be more strengthened.
• Networking with SMEs
Available processes in the FABLAB are only limited to milling processing, panel cutting and bending. However, in order to manufacture prototype product, various processes such as casting, forging, welding, molding, heat treatment, and surface treatments are necessary. Therefore, it is essential to establish network with SMEs which have various process technologies located in Chihuahua. Components which major enterprises ordered will not be manufactured by the equipment of FABLAB only. Components will have to go through many processes such as casting and molding to make materials, heat treatment to enhance hardness, forging, EDM, surface coating to prevent corrosion and prototype manufacturing for mass production. Therefore, SMEs located in Chihuahua can check the processes and establish a cooperation system. By the time that process technologies of each SME are improved to the global standard, continuous support can be provided. Then, SMEs will be able to deliver the products to major enterprises.
222 • 2013 Knowledge Sharing Program with Mexico [Figure 4-14] Potential technologies by FABLAB and Chihuahua SMEs
Feb. Lab: Design Center :
Machining Sheet metal Inspection CAD/CAM/CAE
SME :
Casting Die & Mold Welding Forging Coating Heat treat
• Mass production and mold technology
If the mass orders are received with the successful small production and delivery, it can be converted into the manufacturing system using a press die. Also, in case of receiving mass production order after success of manufacturing and supplying prototype product by using punch press, it can be converted into a progressive die, which is suitable for mass production. After success with 5-axis milling machine, materials can be made by forging when the mass orders are received. Competitiveness can be achieved only when parts are machined in a small scale after most of the processing is done by forged mold. Developing plastic products means developing technologies of mass production using plastic injection molding.
In Korea, there are about 2,500 mold enterprises. Mold business is a typical category for SMEs. DMI and TIC support the mold companies. Since FABLAB in Chihuahua supports development of prototype product in small quantity, SMEs in Chihuahua are able to compete with foreign metal-mechanic components enterprises only by achieving mass production, which is possible with mold. If metal- mechanic SMEs in Chihuahua introduce Korean press equipment, and local mold maintenance enterprises install the reliable mold, which is made by Korean mold manufacturing enterprises to establish the cooperation system for mass production, they get ready to receive purchase orders of metal-mechanic component from foreign multi-national enterprises.
Chapter 4 _ Strengthening Capacity to Reinforce SME’s Innovation in Chihuahua • 223 3.3.3. Policies on metal-mechanic SME in Chihuahua State
Principles
Major foreign enterprises are cut off from local SMEs in Chihuahua. It is different from Korea, where major enterprises and SMEs grow together. In the case where there is no governmental aid to SMEs, pursuing the short-term profit is preferred rather than developing technologies which requires long-term investments. It is necessary to establish and promote the system which supports local SMEs. Above all, financial aid is required in order to increase number of local SMEs. Industry- academic technology development can be activated by supporting R&D costs to FABLAB and local enterprises in the long-term.
Short-term policy
• Qualitative growth is necessary
Metal-mechanic SME can be considered as an infrastructure which supports various processes. However, number of metal-mechanic SMEs in Chihuahua is not sufficient; therefore, processes such as molding, press, heat treatment, welding and surface treatment etc. are not provided well. This can be the reason why competiveness in supplying components will not be strong enough compared to the foreign countries which have well-conditioned infrastructure for SMEs. Therefore, the Chihuahua government must secure the infrastructure by making metal- mechanic SMEs to open their business. If various manufacturing processes are newly connected, they would be able to establish the foundation to manufacture the necessary components which a major enterprise requires.
• Industrial complex and financial support
It is essential to have financial support which is necessary for constructing new buildings, introducing of equipment and creating an industrial complex. In case of Korea, the government created an industrial complex and sold the property to SMEs at low price. Therefore, SMEs could continue business as the property value increased even though their profit margin was low. Also, the government created credit guarantee fund and technology credit guarantee fund for SMEs, so they may have a loan from bank to construct new buildings or to introduce new equipment. If the Chihuahua government creates an industrial complex, sells it at an affordable price and establishes guarantee systems for SMEs to have a loan from bank easily to construct new buildings and purchase new equipment, size of local SMEs will grow constantly.
224 • 2013 Knowledge Sharing Program with Mexico Long-term policy
• Government’s Master Plan is necessary
At the stage of early development, government’s master plan is important. Korea's industry was developed in the order of light industry, heavy chemical industry and advanced industry in accordance with the central government’s plan. The federal government must establish a macroscopic SME development plan and the Chihuahua government make self-regulating policies suitable, which is for local specialization. If the government wholly depends on the private enterprise, securing the technology could be postponed since assembling with foreign parts could make margins in a short period. The government must make plans of fund support. Especially, fund supporting policies for SMEs and FABLAB which have self- technology development plans are required.
• R&D Support
In case of Korea, manufacturing industry has been developed in the order of finished product, intermediary product and material. The ordering organizations such as domestic major enterprises have been managing quality control constantly. Also, the government has been supporting SMEs' technology development expenses. It is hard to expect technology transfer from multinational enterprises so government’s policies which help FABLAB and SMEs are necessary. Especially, considering that components and materials are applied to various products, R&D expenses which enhance process technologies of SMEs located in Chihuahua are necessary. With the participation of laboratory, professors who have technologies relevant to manufacturing process, carried out by SMEs, and with the support of research funds which improves process technologies, industry-university collaboration will be activated and quality improvements which are made by the benefited SMEs and stable delivery will be made to multi-national enterprises.
Chapter 4 _ Strengthening Capacity to Reinforce SME’s Innovation in Chihuahua • 225 References
Small and Medium Business Administration, 2009, SME Descriptive Statistics Research. KITECH, 2013, 2011·2012 Domestic Root Industry Status. KITECH, 2013, Simulation Technology Support of Cyber Design Center. Kim, Jaegeun, 2013, Evaluating Roles of Techno-Park as a Policy Tool to Support Regional SMEs, Korea Urban Administration Newspaper, Vol. 26-1, pp. 1-28. Daegu Mechatronics and Materials Institute, 2014, Introduction to Daegu Mechatronics and Materials Institute. http://www.dmi.re.kr: Mechatronics and Materials Institute. http://tic.re.kr: Gyeongsang National University Technology Innovation Center. http://camtic.re.kr: Jeonbuck National University Technology Innovation Center. http://www.etekzon.co.kr : Cyber Design Center.
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