FOCUS NATIONAL INDUSTRY TO BE OR NOT TO BE NEIGHBORLY COMPETITION SEMICONDUCTOR CHANGES Is Daewoo Shipbuilding & Marine Korea Ranks 6th while Japan Korea to Become Game Changer in Engineering Too Big to Fail? 4th in Global Exports Global Semiconductor Market 150-010 서울시 영등포구 여의도동 12-1 삼도빌딩 301호 Tel. (02)578-3220 서울시여의도동 12-1 영등포구 삼도빌딩 Tel. 301호 150-010 (02)578-3220

NOVEMBER 2015 / VOL. 32 NO. 367 www.businesskorea.co.kr Fax. (02)578-3224 (월간) 362호 통권 (02)578-3224 Fax.

Small Business Smartening Up Government Korea's Manufacturing Industry Big Business

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ISSN 1016-5304 Contents November 2015 / Vol.32 No.367

COvEr STOrY 16 Smart Factory Innovation in Manufacturing 3.0 Strategy Needs Better Focus with Clearer Direction 18 Global Status of Korean Smart Factory Technologies and Government Strategies 20 LSIS Chengju, Most Advanced Smart Factory in Korea 22 to Promote, Nurture Smart Factory Technologies in Gyeongbuk Region 23 Hyundai to Launch “Smart Factory” Promotion Campaign 16

FOCUS 08 Is Daewoo Shipbuilding & Marine Engineering Too Big to Fail? NATIONAL 10 Korea Ranks 6th While Japan 4th in Global Exports 12 North Korea Announces More Detailed Plan for Rajin-Sunbong Special Economic Zone 13 Conclusion of RCEP Put Of for Another Year WTO Rules in Favor of Korea in Anti-dumping Suit against US 14 Indonesia Invests in KFX Project 10 Tensions Escalating over Labor Reform Bills MONEY 24 Key Rate Holds in November, but Expected to be Cut Next Year Delationary Concerns Spreading in Korea 25 ’s New Normal Policy Afecting Korean Exporters 26 Korea’s Forex Reserves Increased for Two Months in a Row 27 Roles of KDB, IBK to be Adjusted 28 Number of IPO This Year to Reach 150, Largest in 13 Years Courting to Consider the IPO at KOSDAQ 29 Financial Regulations of KRX on Par with Europe 37 Korean Government to Discuss Korean Stock Market’s Incorporation into MSCI World Index 30 7 of 10 Best Performing Stocks in Asia Belong to Corporate Korea 31 KOSPI-listed Companies Show Increase in Proit amid Decrease in Sales 32 Domestic PEF Market Signaling Explosive Growth Korea Exchange Courting Samsung BioLogics to Consider Going for IPO at KOSDAQ 33 Decline in Exports from Korea Reaches 6-year High Korea’s ICT Exports Slide after 3 Months 34 Diferent Growth Strategies Presented by Korea’s Top Two Group Successors 35 Korean Enterprises’ Proitability on Decline Korea’s Export Price Index on Decline 36 ‘Zombie’ Companies Account for 34.9% of Non-inancial Listed Companies 58

04 37 Many Korean Companies to Face INDUSTrY SME & STArTUP Corporate Restructuring 52 LG Electronics Develops Its First Mobile 66 Amore Paciic Opens 2nd Creative Ir & MANAGEMENT Application Processor Economy Innovation Center in Jeju 53 Samsung Unveils Latest Mobile SKT Hosts Startup Demo Day 38 Korea Housing Finance Corporation Application Processor Exynos 8 67 IBK Showcases Crowdfunding at Creative Issued Covered Bond Abroad 54 Korea to Become Game Changer in Global Korea 2015 Woori Bank Partners Tencent to Provide Semiconductor Market Born2Global Center Holds K-Global Demo Fund Settlement Service, Targeting 55 SK Hynix Rejects Tsinghua Unigroup’s Ofer Day at Silicon Valley Chinese Tourists SanDisk Emerging Rapidly in Global Korea Eximbank Finances US$183 Million NAND Flash Market MICE Myanmar Construction Project 56 Samsung Begins Mass Production of 68 ‘The Big 5 Show’ Closes with Great 39 Korea Industrial Complex Corporation Industry’s First 128GB DRAM Modules Success after Setting the Place on Fire Awarded Presidential Citation to Release Biosensor Develops World’s Second for Smartwatches Early Next Year SCIENCE Eco-friendly Integrated Electronic Brake 57 Samsung, LG Focus on Boosting 40 Wonki Sansam to Showcase New Launch Proitability Rather Than Greater TV 70 KIST to Develop Metallic Implant for of Society on Dec. 15 Market Share Tissue Regeneration Orion Keeps Stable Sales Growth in 58 Hyundai Genesis Goes Head to Head with Artiicial Electric Skin That Can Sense Chinese Market in Q3 Mercedes-Benz, BMW in Luxury Car Market Sound 41 Samsung C&T Wins Singapore Rail Project 60 Domestic Car Sales Volume Increased 71 Korean Researchers Develop Tech to 41 LGD Succeeds in Localization of Major 18.6% in Oct. Quickly Find Circulating Tumor Cells Curved OLED Panel Components with Imported Car Sales Plunge Due to Plate-type Nuclear Fuel Developed by Partners ‘Dieselgate’ Korea Undergoing Testing 61 Market of Right Materials for Automobiles ICT Expected to Grow CULTUrE 42 Government Lays Out Blueprint for 62 Restructuring Scenarios Flying Around in 72 New Airport to Open in Jeju Island by Promotion of Cloud Computing Sector Shipbuilding Industry 2025 43 New Powerful Frequencies Secured for 63 POSCO, Compete in 3-4 Glasses of Soju a Day Lower Stroke IoT, 5G Era Expanding CGL Production Lines Risk 44 Mobile Carriers Rushing for Video Content Dongkuk Steel to Invest 25 Billion Won for 73 Paris Baguette Opens First Nevada Café in 45 Korean Mobile Carriers Cooperate for Colored Steel Plate Market Las Vegas FIDO Development 64 Signs Mega Deal CJ 4DX to Break 10 Million Annual Record Final Countdown Begins for World’s First to Export New Diabetes Treatment VoLTE among Mobile Service Carriers 46 Less Expensive Smart Phones Gaining Popularity in Korea Looking for a house, apartment or office? Samsung Electronics to Release ‘Galaxy On’ Series of Low-end Phones Real Estate & Relocation Co, LTD. 47 Samsung Z3 Ranks 4th We look forward to helping you to find your next dream property anywhere in . in Sales Less than 1 Month after Release 48 Samsung Gear S2 Smartwatch Can be 1. Residential or Commercial Property Searching 3. After Service Compatible with Apple iPhone Soon - Ability to explore and reserve a variety of properties - Moving arrangements and furniture set-up - Recommendations of suitable properties - Interior decoration and design Samsung Might Reintroduce MicroSD - Enrollment in fire, theft and other types of insurance Expansion in Galaxy S7 2. Contract 4. Support 49 Samsung Pay Appears to be More - Careful review of all related documents - Registration of residence at the local district office, etc - Negotiation of drafting terms and other conditions - School enrollment for children, etc Successful than Apple Pay So Far - Closing lease agreement in contract - Assistance for opening a bank account, etc 50 Walkie-Talkie Service by All 3 Mobile Service Carriers 51 Government Ofers More Support to Latin America for Cyber Security

www.rentcorea.com [email protected] Korea, China to Take Another Big Step in Head Office 02) 730-0001 email. Cybersecurity Corporate Headquarters : RentCorea B/D 1F~2F, #36-1, Seongbuk-dong, Seongbuk-ku, Seoul, Korea. Registration No.209-06-83139. Permit No.9230000-1709. The President/Realtor. Kiwan, Sung.

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PUBLISHED By : BusinessKorea Co., Ltd. : 301 Samdo Building, The funeral of the former President Kim Young-sam was held in the 12-1 Yeoido-dong, Yeongdeungpo-gu, Seoul, Korea 150-010 Mailing Add.: 301 Samdo Building, National Assembly building in the afternoon of Nov. 26. 12-1 Yeoido-dong, Yeongdeungpo-gu, Seoul, Korea 150-010 Tel: (02)578-3220 Fax: (02)578-3224 Former President Kim Young-samhas passed away. He was a pillar of Government Registration Number: RA-2743 Dated March 18, 1983. Printed by Hwashin Printing Tel: (02)2277-0624 the recent Korean history, which achieved both the democratization and industrialization of a country within the shortest period of time in the history Overseas Representatives Australia of the world. McLean Media Representations Pty., Ltd. P.O.Box 544, Newtown NSW 2042, Australia Like other politicians, he left footprints of both merits and drawbacks. Tel: (612) 519-6455, Fax: (612) 577-1614 Belgium As a real liberal democrat, he was one of the biggest contributors to the Staf Wuyts, AD International Bld. Lambermont 140 B-1030 Brussels, Belgium democracy of Korea. Tel: (02) 216-0730, Fax: (02) 216-4632 Canada His magnanimous temperament, however, worked sometimes as an Globe Media International 444 Front Street West, Toronto, Ontario, Canada M5V 2S9 obstacle when handling sensitive economic issues that need an elaborate Tel: (416) 585-5415, Tlx: 06-219629, Fax: (416) 585-5275 Finland and strategic handling. A good example was the hasty joining of the OECD, Seppo Lehtinen, Seppo Lehtinen Oy Fredrikinkatu 33 B, 00120 Helsinki, Finland which led the nation to the financial crisis of 2007. With “Civilian Gov- Tel: (90) 611471, 647412, Tlx: 12-2814 sigco sf, Fax: (90)609114 Germany ernment” as the slogan, his government excited the public by joining the Franz Brunsing, Industrial Export Services Buttgenweg 18, D 4000 Dusseldorf 11, Federal Republic of Germany OECD.But the Korean economy collapsed upon the breakout of the finan- Tel: (0211) 59 26 22, Tlx: 8587465 SERV D, Fax: 49-211-59-611-43 Hong Kong cial crisis amid the lack of knowledge and expertise as to how to run a small Serina Cheung, Managing Director, Media Services Network 10/F Flat A, Sun Hey Mansion, 72 Hennessy Road, Wanchai, Hong Kong open economy in the battlefield of the global economy. Tel: 529-3677, Fax: 866-2398 Indonesia Now, the Korean economy is suffering from lower levels of profitability, Yoly de Rivera P.T. MEDIANET INTISARANA Kerayoran Baru, Jakarta Selatan 12110, Indonesia employment and growth potentialthan those in the financial crisis 18 years Tel: 7202587, 7202488 Fax: 7202651 Italy ago. Despite the incumbent President’s petition, the opposition is busy look- Carlo E. Calcagno, Studio Calcagno Srl, International Media Representative ing for political advantages ahead of the general elections scheduled for next Via Copernlco, 22-20125, Milano, ltaly Tel: (392) 689-4891 Fax: (392) 607-0773 year, neglecting bills to revive the national economy and pending them in Japan Japan Advertising Communications the National Assembly. Three Star Building, 3-10-3 Kanda Jimbocho Chiyoda-ku, Tokyo 101 Tel: (3) 3261-4591, Fax: (3) 3261-6126 Also, the labor organizations that were engaged in destructive fights sur- Netherlands A.A. Van der Graaf, Office Manager rounding the revision of the Labor Act 18 years ago are doing exactly the Publicitas b.v., Maassluisstraat 414, 1062 GS Amsterdam, Netherlands Tel: 020-178795, Tlx: 11656 PUBAM NL, Fax: 020-174414 same thing now. They held hands with some bellicose politicians to give rise Philippines Mr. Paul Ligones, ASPAC to violent rallies and strikes, impairing the power of the national economy. P.O.Box 7226, Domestic Airport Post Office Tel: 827-3950, 827-4477, Tlx: 64838 LTA BCPN, Fax: (632) 817-5802 The opposition is refraining from criticizing them with the general elections Singapore Hoo Siew Sai around the corner. Major Media Singapore Pte Ltd., 6th Floor, 52 Chin Swee Road Singapore 0316 All the politicianswho visited the former President’s funeral parlortalked Tel: 7380122, Fax: 7382108 Sweden, Norway and Denmark about reconciliation, but they sounded hollow. What they are chasing after Sten Janson, Business Books in Saro AB Gihlsrovagen 19, S-43040 Saro, Sweden now is not a grand plan for the nation’s future, but their own immediate Tel: 46-31936220, Fax: 46-31151333 Switzerland interests. The rise of China and revival of Japan are posing a threat to the Joseph Pollet, Managing Partner IPP International Publications Partners P.O.Box 3329, CH-4002 Basel Tel: 061/35 27 66, Fax: 061/35 24 88 manufacturing sector of Korea, which has been the backbone of the national Taiwan Lewis Int’l Media Services Co., Ltd. economy, and Korean industries are worried again about what the future Floor 11-14, No. 46, Sec. 2, Tun Hua South Road, Taipei, Taiwan, Republic of China holds for them. Tel: 886-2-7075519 or 7087727, Fax: 886-2-7098348 Thailand We have already witnessed how political and economic failures repeat Anthony Sharma, Thai Representation Ltd. Thai Representation-867 58 Sukhunvit 101, Prakanong, bangchak, Bangkok themselves in the middle of irresponsibility and conflicts. Korea’s future 10260. Thaliand Tel: 662-3320503-4, 662-3319690-2 Fax: 3319303 could not but be dark if the nar- United Kingdom Anthony Tumer, Managing Director, The Colin Turner Group row-sighted continue to prevail in City Cloisters, 188-196 Old Street, London EC1V 9BX Tel: 71-490-5551, Tlx: 261140 TURNER G, Cable: TURNERSYND a political arena that is now devoid LONDON ECI Fax: 71-490-2271 of all the giants of industrialization U.S. Park Jung-hwan, Mrs. Clair Chun / U.S. Correspondent and democracy. 390 17th ST NW #4065 Atlanta, GA, 30363 Publisher & editor-in-Chief Tel:770-880-6722 Email:[email protected]

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To Be or Not To Be Is Daewoo Shipbuilding & Marine Engineering Too Big to Fail?

by Michael Herh

the largest shareholder of the company, will directly decide whether or not to receive orders after checking propriety. According to KDB and the financial authorities on Nov. 3, KDB will form a committee and discuss every new order of the DSME in the future. The committee will issue a refund guarantee (RG) only when the estimated cost calculated by DSME is accurate, and profitability in terms of technology, law and accounting is guaranteed. The DSME’s creditors, including KDB, said that the company received new orders beyond its ability, which caused the inef- Daewoo Shipbuilding & Marine Engineering. ficiency of shipbuilding, and the offshore plant market was directly hit by lower oil reditors of Daewoo Shipbuilding and the Korea Eximbank will burden prices. C& Marine Engineering (DSME) 90 percent of refund guarantees (RGs) In particular,DSME will reduce the will inject US$3.68 billion into the ail- newly issued by DSME with Korea offshore plant sector most, which is con- ing shipyard for its normalization. At the Trade Insurance Corporation at the same sidered to be the main cause of massive same time, they decided to push forward rate. The RG is a form of insurance in losses, and focus on special ships, such with its privatization through restructur- which a builder’s bank compensates for as liquefied natural gas (LNG) carriers, ing that slashes its workforce and orga- damages to a purchaser if the builder large container ships and submarines nization. At the same time, they will fails to build a ship as requested. Finan- which are relatively recognized for its look into the anatomy of the company to cial institutions issue the RG, receive the technology. find out who is responsible for DSME’s advance installments of the contract price A senior official from the KDB Bank downfall. and provide it to the builder. said, “In a bid to normalize the manage- The KDB, the largest shareholder DSME still has many hurdles to ment of DSME, the company should stop and a main creditor bank of DSME overcome for its normalization. The receiving unreasonable orders, which are announced a corporate normalization biggest problem is offshore plants. The focused on the expansion in size. New plan with this content in its Board of company should lower risk from its off- orders are expected to be cut by 20 per- Directors meeting on Oct. 29. Accord- shore plant business by paring the off- cent from the existing amount of orders, ing to the plan, the KDB decided to offer shore plants’ current percentage of over and sales will reduce by 20 percent as liquidity to DSME in the form of new 50 percent down to 40-plus percent. well.” By sales of the DSME in the third investment and loans along with the quarter, it will decrease from 3.15 trillion Korea Eximbank, the largest creditor Plan to Reduce Order won (US$2.78 billion) to 2.5 trillion won bank of DSME. Amount by 20% (US$2.21 billion). Moreover, they will expand its capi- tal step by step via a capital increase and For normalization, DSME itself Conflict Settled an equity swap linked to the KDB’s sup- firstis to reduce the amount of orders by port for liquidity in order to improve its 20 percent in the future in order to have A conflict between the KDBand the financial health. Additionally, the KDB substantial management. Also, the KDB, Korea Eximbank over issuing a refund

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Accelerating Asset officially objected to the Korea Devel- Disposal opment Bank’s support for the DSME last month in a meeting of the Council DSME is also in a hurry to dispose of Working Party on Shipbuilding (WP6) of its assets. Still, the disposal of its over- the Organization for Economic Coopera- seas subsidiaries is unlikely to be easy, tion and Development (OECD) held in because foreign governments have shares Paris earlier this month, according to the in them and they are engaged in a series shipbuilding industry and Korean finan- of ongoing projects. cial authorities on Nov. 19. The WTO’s The DSME announced on Nov. 13 regulations limit nations’ subsidiaries for that it completed the sale of its FLC companies, to promote fair competition shares at 45.5 billion won (US$38.8 among companies around the world. DSME Shipyard in Gejae. million). Earlier, it sold all its shares in But Korea refuted that the support Fine Besteel and Daewoo Information was not a subsidy by the Korean gov- guarantee (RG) to DSME has been set- Systems, along with 54 percent of its ernment, now that it was led by gov- tled. Also, the two banks hold the same shares in Doosan Engine. Under the cir- ernment-run banks including the Korea view on actual inspection results for the cumstances, the company is expected to Development Bank which is a major DSME, which were carried out separate- procure approximately 300 billion won creditor of the DSME. The OECD WP6 ly. in cash within this year, about half of the decided to further deal with the agenda in According to financial industry target of 750 billion won (US$6.41 mil- the next meeting that will be held in June sources on Nov. 18, the Korea Exim- lion). The rest is to be prepared by sell- of next year. The Korea Development bank gave the whole advance payment ing its affiliated companies abroad. Bank and Korea Eximbank will make a from the Maersk Line, the world’s larg- DSME’s plan is to sell every over- report to clarify Korea’s position. est shipping company, to DSME earlier seas subsidiary except for those required The Korean shipbuilding indus- this month. The advance payment was for it to maintain its competitiveness in try and the Korean government, among received through the issuance of Maersk the shipbuilding and maritime industry. others, expect that even if the EU and RG. Still, the disposal procedure is unlikely Japan take action, it is highly unlikely Previously, ’s second- to start before the end of this year, since that Korea will lose the case, since Korea largest shipbuilder won an order from those firms are engaged in a number of did not violate any WTO regulations. Maersk to build 11 very large container projects as of now. Analysis says that the EU and Japan aim vessels, and signed the agreements with For example, Daewoo Mangalia to keep Korea, the world’s shipbuild- the KDB and Korea Eximbank in July Heavy Industries in Rumania is slated ing leader, and China, a rising star in the to issue the RGs for five and six ships, to be sold or liquidated after its ship world shipbuilding industry, in check via respectively. However, Korea Eximbank delivery is completed. When it comes this move. paid the DSME only 60 percent of the to DeWind, a wind power firm, only the In the early 2000s, a similar ship- 112 billion won (US$95.64 million) key parts are to be absorbed by the com- building dispute pitted Korea against advance payment from Maersk, while the pany while the rest is liquidated. In the other nations, but Korea finally won. KDB immediately paid the shipbuilder meantime, DSME submitted a self-help However, this time, if the EU and Japan the total 93 billion won (US$79.42 mil- plan worth 1.85 trillion won (US$1.58 really bring the case before the court, it lion) advance installment that it received billion) to its creditors late last month. will cost Korea billions of won in legal from the Danish shipping company. battles against the EU and Japan and a Korea Eximbank did not pay the par- DSME in Check large amount of human resources from tial advance payment to DSME accord- various organizations, putting Korea in a ing to the company bylaws to provide the It has been confirmed that the EU war of attrition. Then it is feared that the advance payment according to the offi- and Japan officially complained about a legal action will have a negative impact cial rate if the credit rating of the build- plan by Korean government-run banks on the Korean shipbuilding industry. In er goes below the level that the com- such as the Korean Development Bank to particular, when Hynix received some pany has set. Regarding this, the KDB give financial support to DSME. support from the outside, the U.S. gov- expressed concerns that it was a measure The Korean government and support- ernment made a strong protest against it, to make DSME face a liquidity crunch. ing banks will cope with their complaints weakening the support. In the event that Korea Eximbank changed its stance by drawing up a report that will explain such a protest continues, it may become largely due to the request of the KDB to that the financial support is not a subsid- difficult for the troubled shipbuilder to strengthen the standards of the RG issu- iary by the Korean government. receive additional support from the out- ance further. The EU, led by Germany, and Japan side.

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Neighborly Competition Korea Ranks 6th While Japan 4th in Global Exports by Michael Herh

and Sharp forced Japan to lose its com- petitiveness in the world manufacturing industry and export market. Analysis says that the manufactur- ing industry triggered the weakening of corporate Japan. According to a report released by the Korea Institute for Industrial Economics and Trade earlier this year, Japan’s proportion based on nominal added value was 20.7 percent in 1995, while that of Korea 2.4 percent. But that of Japan plummeted while that of Korea slightly rose. In 2012, Japan and Korea recorded 9.7 percent and 2.8 percent, respectively, narrowing the gap between the two. Specifically, Japan’s downfall is prominent in the manufacturing industry. A report released by the Korea Institute hile Korea and China are which was 3.1 percent of world exports. for Industrial Economics and Trade ear- Wincreasing their proportions So, the gap between the two was not lier this year, Japan’s proportion based in the world’s economy, Japan is losing wide. on nominal added value, stood at 20.7 ground in the IT sector, one of its major According to data on market share percent, while that of Korea was mere- industries. It is expected that Japan in 50 major countries by the Korea ly 2.4 percent. But Japan’s proportion will continue to suffer from a slump in Trade-Investment Promotion Agency nosedived, while that of Korea inched exports and the manufacturing industry. (KOTRA), Korea enjoyed a market up. Thus, Japan and Korea chalked up Statistical data released by the Inter- share of 3.06 percent in 50 countries 9.7 percent and 2.8 percent, respectively. national Monetary Fund (IMF) on Nov. in the U.S., China and the EU in 2004. In the global manufacturing industry, 5 says that Korea accounted for 3.3 per- This percentage was less than that of China’s chunk expanded 2.5-fold from cent (sixth place) in world exports, while Japan (7.73 percent). 9.0 percent in 2004 to 22.4 percent in Japan accounted for 3.9 percent (fourth But ten years later, in 2014, the 2012. place). Ten years ago, in 2005, Korea market share of Japanese products fell took up 2.7 percent (12th place) while to 4.51 percent by 3.22 percentage Korea’s Exports to China Japan got 5.7 percent (fourth place). The points, but Korea’s market share slightly Affected by Weak Yen gap between the two nations was pared increased to 3.34 percent. This means down to 0.6 points from 3.0 percent for that Korea grew, but Japan faltered in On the other hand, the ongoing ten years. the world market for ten years. weak yen is affecting Korea’s exports to During the same span, China’s share Over the past ten years, Korea China by dropping the prices of products expanded to 13.1 percent. According to elevated the competitiveness of its exported from Japan to China. data by the Korea International Trade manufacturing industry and exports Senior researcher Jo Kyu-rim at the Association, Japan inked US$690.19 bil- with semiconductors, displays, TVs Hyundai Research Institute released lion in exports last year, accounting for and as the center. But the a report on Nov. 8 after analyzing the 3.75 percent of global exports. Korea’s downfall of Japan’s traditional elec- export unit values of 2,498 items for exports added up to US$572.65 billion, tronics giants such as Sony, Panasonic 2011 to 2014. According to the report,

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percent, or US$1,952 (2,222,350 won), from US$36,222 (41.24 million won) to US$38,714 (43.46 million won). Last year, the per capita GDP based on purchasing power parity (PPP) stood at US$35,379 (40.28 million won) for Korea and US$37,519 (42.72 million won) for Japan, showing no significant difference. By 2018, the IMF estimated that Korean numbers are expected to reach US$41,966 (47.78 million won), to surpass Japan’s US$41,428 (47.17 million won) for the first time in his- tory. In 2020, the Korean figure will stand at US$46,612 (53.07 million won), while the Japanese figure will reach US$44,329 (50.47 million won). The difference in the overall eco- nomic scales between the two coun- 313 Korean items’ export unit values Korea’s Per Capita GDP tries is getting smaller. Japan’s nominal were higher than those of the Japanese to Near Japan’s in 2020 GDP last year came to US$4.6 trillion counterparts in 2011, but the number (5,239.83 trillion won), which is 3.3 went up to 459 in 2014, while the num- Meanwhile, a report came in that times higher than Korea’s US$1.41 tril- ber of Korean items with lower export Korea’s per capita gross domestic prod- lion (1,605.74 trillion won). However, unit values decreased from 1,778 to uct (GDP) is expected to reach nearly Korea and Japan’s GDP will amount to 1,540 during the same period. US$37,000 (42.12 million won) within US$1.9 trillion (2,161.78 trillion won) This phenomenon is because of the the next five years in 2020, catching up and US$4.75 trillion (5,404.46 trillion continuation of the weak yen above with Japan. won), respectively, in 2020. According- anything else. The yen-dollar exchange According to the World Economic ly, Japan’s figure will be only 2.4 times rate changed from 83 yen to 120 yen Outlook Database released by the Inter- higher than Korean numbers. per U.S. dollar between January 2013 national Monetary Fund (IMF) on Nov. In 1980, Japan’s GDP stood at and September this year, while the won- 5, Korea’s nominal per capita GDP will US$1.09 trillion (1,237.55 trillion dollar rate moved from 1,065.4 won to reach US$36,750 (41.84 million won) won), which is 16.7 times higher than 1,184.7 won per U.S. dollar. in 2020, up 31.4 percent, or US$8,780 Korea’s US$65.2 billion (74.23 trillion Japan’s export unit values decreased (9,999,600 won), from last year’s won). However, the gap has gradual- in every manufacturing segment. In par- US$27,970 (31.84 million won). ly decreased from 11.1 times in 1990, ticular, the trend was noticeable in the During the same period, Japan’s to 8.4 times in 2000 and 5.1 times in petrochemical and metal sectors, where nominal per capita GDP will grow 6 2005. Korea and Japan are engaged in intense price competition amid the oversup- ply of products having similar levels of quality. In the petrochemical sec- tor, Japan’s export unit value regarding the Chinese market was higher for 322 items in 2011, but the number fell to 282 in 2014. Under the circumstances, Japan’s exports of manufactured goods to China increased by 1.6 percent between 2012 and 2013 and 1.4 percent between 2013 and 2014 whereas Korea’s exports increased by 4.9 percent between 2012 and 2013 and decreased by 0.3 percent between 2013 and 2014.

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General Rajin-Sonbong Economic and Trade Zone Development Plan calls for the development of ten tourist attractions, including the Shinha International Con- ference District and the Bipa Island Eco- system Tourism District. Industrial complexes will include the Rajin Port Logistics District and the Sin- heung Light industry District. Notably, the Rajin Port Logistics District draws much attention, since the district is relat- ed to the Rajin-Hasan project pursued by South Korea as a joint logistics proj- ect among South and North Korea and Russia. What is more, the North Korean government announced that North Korea will receive overseas investment in eight North Korean companies or projects, in the form of joint investment or operation. Some analysts say that North Korea’s decision to apply the market economy of capitalism such as free business activi- ties for foreign capital and guarantees of profits, is to express its will to develop the Rajin-Sonbong Special Economic A North Korean cell phone user. Zone into a Hong Kong-style model based on two systems in one country, and, at the same time, to signal a full- North Korea Opening scale test for openness to the outside. “North Korea has presented blue- North Korea Announces More prints about the Rajin-Sonbong Special Economic Zone. But this is the first time Detailed Plan for Rajin-Sunbong to disclose detailed content that foreign investors want to know,” said Cho Bong- Special Economic Zone hyeon, a senior research fellow at the Economic Research Institute of the IBK by Michael Herh in Seoul. “Particularly surprising are the development of tourism attractions and a list of companies waiting for foreign orth Korea decided to allow for- released about 50 laws and regulations investment.” Neign capital to make investment about investment in the economic and “It seems that North Korea is develop- in North Korean companies that will trade zone, alongside detailed plans in ing the special economic zone with open- conduct business activities in its Rajin- seven sectors – tourist attraction devel- ness on its mind, taking into consideration Sonbong Special Economic Zone, and opment, industrial district development, the fact that North Korea is managing the disclosed the companies and their busi- investment in companies, investment zone as a special zone by fencing it,” he ness projects. Moreover, North Korea projects, tax policies, investment policies added. “I suppose that North Korea has a will intensively push forward with the and enterprise establishment processes. plan to grow the zone into an open trade General Rajin-Sonbong Economic and Prior to this, North Korea announced city like Hong Kong or Singapore in the Trade Zone Development Plan, includ- some regulations regarding the Rajin- mid- to long-term.” Back in 1991, North ing developing the zone into the center of Sonbong Special Economic Zone, such Korea designated the Rajin-Sonbong area its Meeting, Incentive Trip, Convention, as investment policies and taxation. as a free economic and trade zone under Exhibition & Event (MICE) industry. This is the first time for North Korea to the slogan of “building aism bases” in On Nov. 18, “My Country,” an exter- make public a general development plan the area. But poor foreign investment has nal propaganda website of North Korea, that includes tourism and logistics. The stalled the development of the area.

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TPP Influence? Conclusion of RCEP Put Off for Another Year by Jung Suk-yee

he conclusion of the Regional Comprehensive Eco- Tnomic Partnership (RCEP) has been put off for another year until late next year, due to conflict of interest among the 16 participating countries. A Korean government official said on Nov. 17 that the post- RCEP started in 2011, and all of the negotiations were going ponement would be made official at working-level talks prior to to be completed at the end of this year. However, the talks have this year’s ASEAN+3 Summit scheduled in Kuala Lumpur for been slow, as seven of the countries, including Japan, Australia, Nov. 21 and 22. New Zealand, and Malaysia, which are taking part in The RCEP’s members include Korea, China, India, Japan the Trans-Pacific Partnership (TPP) at the same time, have been and 10 ASEAN member countries. The combined number of focusing on the conclusion and subsequent ratification of the the population in the region amounts to 3.4 billion, and the 16 TPP. countriesAn artist's depiction have ofa thetotal KF-X international fighter when it is completed.trade volume of US$10.67 “The one-year postponement might be insufficient, with dif- trillion, equivalent to 29 percent of the global total. ferent countries having different issues at the negotiation table,” The first official negotiation for the establishment of the the official remarked.

Anti-dumping Dump WTO Rules in Favor of Korea in Anti-dumping Suit against US by Cho Jin-young

he Royal Norwegian Embassy in Seoul and the Fram Norway is an arctic nation where more than 40 percent of TMuseum in Oslo invite Koreans to see the ever-chang- its territory lies north of the Arctic Circle. The changing arctic ing face of the high arctic through poster and video shows. landscape gives rise to new opportunities and new challenges. “Explore The Arctic - Past, Present and Future” is going to be “Explore the Arctic” guides us on a journey from the hardships held at the gallery of the Korea Foundation from Oct. 29 to Nov. of the early polar explorers up to the modern high-tech arctic 12. The exhibition aims to break the common perception of the research of today, which inspires visitors to imagine new and Arctic as being a vast, desolate ice-clad region populated almost sustainable solutions for a thriving arctic in the future. exclusively by polar bears. Visitors will see 57 posters and 2 videos. For those who are Visitors will see how Norwegian explorers Fridtjof Nansen interested to learn more, two special lectures will be held at the and Roald Amundsen not only learned how to live and travel in Korea Foundation Gallery on Thursday, Oct. 29 at 19:00. the hostile arctic climate, but also enjoy the stark beauty of the To register for the lecture, please click here. For further inqui- frozen icy deserts and the spectacular northern lights. ries, call the Norwegian Embassy at 02-727-7156 or 7100.

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Good News for KF-X Fighter Experimental (KF-X) project. fighter jets from Korea. A total of 18 tril- According to the contract, Indone- lion won (US$16 billion) is scheduled to Indonesia Invests sia is to bear 20 percent of the system be invested in the KF-X project, and KAI development cost associated with the is looking to sell more than 1,000 fighter in KFX Project KF-X project, which totals 8.67 trillion jets through the project. won (US$7.5 billion), while obtaining In the meantime, KAI announced on by Marie Kim a prototype and technical data in return Nov. 22 that it is working on an autopilot for its participation in aircraft design system required for the fighter jets’ low- and component production. The cost is altitude infiltration and terrain crash pre- to be shared by KAI and the Indonesian vention based on automatic topographi- government and KAI and PTDI, Indone- cal recognition. It added that it designed sia’ state-run defense company, are to be a flight control law so that the fighter jets involved in work sharing. can maintain level flight under any cir- KAI is planning to start the develop- cumstances. ment of the system within this year in According to the KF-X project plan, contract with the Defense Acquisition air-to-air fighter jets are slated to be pro- n Nov. 22, Korea Aerospace Program Administration of Korea. At duced between 2025 and 2028, and air- OIndustries (KAI) signed a pro- present, Indonesia is working on a simi- to-sea and air-to-ground ones are added visional contract with Indonesia for lar program under the project name of from 2028. The autopilot system is to be the country’s investment in the Korean IFX and is planning to import at least 50 tested from the same year, too.

Labor Reform in order to be opposed to anti-labor can- didates during the general elections of Tensions Escalating over Labor next year and the Presidential election scheduled for 2017. Reform Bills In response, the government and the ruling party are to stick to their plan by Jung Suk-yee regarding the five bills. In addition, they are going to move ahead with the legisla- onflicts surrounding five labor warned that it would withdraw from the tion procedure without waiting for the Creform bills are escalating in the committee if the government and the rul- federation’s agreement when it comes to National Assembly with the government ing party continued to insist on the issue. those bills less likely to be agreed by the and the ruling party poised to pass the The FKTU is planning to take a vote FKTU. bills within this year and the Federation of Korean Trade Unions (FKTU) dead set against them. The five bills refer to the Labor Stan- dards Act, Employment Insurance Act, Industrial Accident Compensation Insur- ance Act, Dispatched Worker Protection Act and Temporary Workers Act. Those relating to general dismissal and the guidelines on the rule of employ- ment, which are scheduled to become effective within this year, are becoming more and more intense, too. The FKTU recently criticized Deputy Prime Min- ister Choi Kyung-hwan and the Minis- try of Employment & Labor for trying to implement measures with the mem- bers of the tripartite committee having yet to reach an agreement. The federation

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Smart Factory Innovation in Manufacturing 3.0 Strategy Needs Better Focus with Clearer Direction

by Marie Kim

The policy also aims at dealing with many associated economic and social challenges surrounding the Korean manufacturing industry. Externally, Korea’s major manufacturing sectors of shipbuilding, automotive, electron- ics, chemicals and steel have been faced with challenges such as the rise of China as a manufacturing powerhouse and the weakening of the Japanese yen. Inter- nally, many local Korean manufacturing companies have suffered from low pro- ductivity and efficiency. For such reasons, according to a recent survey released by British finan- cial information provider Markit, the purchase of manufacturing index (PMI) of the Korean manufacturing industry ranks 24 out of the 28 countries sur- veyed, posting PMI scores of 47.6. In President Park Geun-hye visits Pohang creative economic innovation center, a venue for cooperative endeavors among the government, large conglomerates, and SMEs towards upgrading smart factory technologies). fact, the growth rate of the manufactur- ing sector during Q2 2015 was reduced to 0.4 percent, and the size of exports acilitated by a broad economic on the technological challenges faced has decreased by 14.8 percent compared Fpolicy vision informed by the by Korean manufacturing companies. In to the same period last year, record- Manufacturing Industry Innovation 3.0 order to effectively address the techno- ing US$3.933 million in value. This strategy, the concept of a smart fac- logical and economic issues surround- marks the lowest point after the global tory in Korea has a collective meaning ing the manufacturing industry in Korea, financial crisis of August 2008. Prod- embracing automation, data exchange the policy needs a more technologically ucts are stacked on the shelves with the and enhanced manufacturing technolo- and economically focused approach. in-stock rate standing at 129.2 percent, gies. The Manufacturing Industry Inno- Officially launched in June 2014, the the highest in the 2000s. Facing these vation 3.0 strategy is a component of the Manufacturing Industry Innovation 3.0 challenges, the government introduced Creative Economy Industry Engine proj- strategy aims to introduce innovation the Manufacturing Industry Innova- ect, a flagship economic policy of the to the manufacturing process, including tion 3.0 strategy that has a broad reach. Park Geun-hye administration that aims expanding the use of smart factories and The strategy largely consists of three to tackle many challenges surrounding developing core technologies related to sub-strategies that include the creation the Korean manufacturing industry. the Internet of Things (IoT), 3-D print- of new manufacturing featuring indus- It generally refers to the comput- ing and Big Data. Big Data refers to trial convergence, enhancement of the erization of manufacturing. Broad in data processing, data collecting and data major segments, and advancement of focus, the strategy, in general, and smart sharing that can be used for data analysis industrial infrastructure for innova- factories, in particular, tends to miss out and prediction. tion. The policy also aims to raise 1

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sectors, including high-end computer- Manufacturing GDP in USD trillion ized machinery and robotics, aerospace equipment, renewable-energy cars and Indonesia 0.21 medicine. To be clear, smart factories aren’t Mexico 0.22 just the automation of the manufactur- India 0.24 ing process. Rather, it refers to a factory Brazil 0.29 where all components are organically connected to each other with an intel- Italy 0.32 ligent operating system based on the Korea Republic 0.41 Internet of Things. The concept of a smart factory basically refers to a future Germany 0.79 model of factories, which is expected Japan 0.89 to kick into high gear by 2020, with 30 USA 2.17 percent higher productivity than in cur- rent factories. China 2.94 Globally, multinational companies 0 0.5 1 1.5 2 2.5 3 3.5 like Siemens and GE enjoy the most technologically sophisticated levels Manufacturing sector GDP in different countries (Source: World Development Indicators of smart factory systems in the world. Domestically, LS Industrial System trillion won (US$972 million) and set Germany, the U.S., and China launched (LSIS) and POSCO enjoy the most up 10,000 smart factories by 2020 to a policy focusing on transforming and sophisticated levels of smart factory facilitate convergence between software upgrading the manufacturing industry. technologies. With rapidly advancing and hardware technologies. At the same As part of the German government’s ICT, manufacturing environments are time, the government plans to foster the High-Tech Strategy 2020 Action Plan, changing from old, rigid centralized sys- growth of those segments combining the Germen government launched a tems to module-based flexible, decen- manufacturing with information tech- policy in 2012 named Industry 4.0, tralized and automatically controlled nology, examples of which include the which promotes the computerization of systems. This change is also looking incorporation of information technol- manufacturing. The policy specifically for ways to build highly efficient and ogy into the energy management and focuses on the technological advance- intelligent factories that can connect industrial safety sectors. Also, the core ment of Cyber-Physical Systems (CPS), machines and people through Internet material and component development, or well-developed systems of collabo- services in convenient and safe work- engineering, design and software seg- rating computational software that con- places. As such, developing a highly ments receive concentrated policy sup- trols physical entities, the Internet of sophisticated smart factory is possible port. Given the discrepancy in wealth Things and the Internet of Services. In with CPS. Today, a precursor to a CPS and technological development between September 2013, U.S. President Obama can be found in areas like aerospace, large companies and their secondary and introduced the Advanced Manufactur- automotive, energy, healthcare, manu- tertiary subcontractors, the Manufactur- ing Partnership (AMP 2.0) to secure facturing, transportation, entertainment ing Industry Innovation 3.0 strategy puts U.S. leadership in emerging technolo- and consumer appliances. Although the special emphasis on the growth of the gies that will create high-quality manu- level of technological development var- latter to spread wealth, going beyond a facturing jobs and enhance the global ies across sectors and companies, most mere focus on the enhanced automation competitiveness of U.S. manufacturers. SMEs in Korea are in their infant stage of manufacturing. In May this year, China’s State Council and require further technological devel- The Manufacturing Industry Inno- unveiled a 10 year plan to upgrade the opment to reach higher technological vation 3.0 strategy is also a response nation’s manufacturing capacity so that sophistication, especially, the Internet of to the global trend of government-lev- it can catch up with production power- Things and Big Data. Given the much- el initiatives to support upgrading and houses like Germany and the U.S., and needed initial investment for SMEs with transforming traditional manufacturing. fend off competition from other devel- low technological competencies and low In the aftermath of the global financial oping countries. The Ministry of Indus- budgets to be more effective, the cur- crisis of 2008, governments around the try and Telecommunication Technology rent government policy and large cor- world put a renewed emphasis on manu- (MIIT) in China took charge of lead- porate efforts to help SMEs need a more facturing as a way out of the financial ing the creation of the “Made in China focused approach and a specific direc- crisis. Most notably, governments in 2025” plan, which put the focus on 10 tion.

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Uniqueness of Korea’s Industry 4.0 Global Status of Korean Smart Factory Technologies and Government Strategies

by Marie Kim

usiness Korea met with Lee Gyu- Bbong, the Secretary of the Smart Factory Division at the Ministry of Trade, Industry & Energy. In charge of designing policies relating to smart factories, he is a leading figure in Korean government poli- cy on smart factories. During the interview, we discussed Innovation in Manufacturing 3.0, the Korean version of Industry 4.0, and the challenges surrounding creating a new paradigm of manufacturing.

Although Korea is recognized as a manufacturing powerhouse, recent- ly the country ranked 17th out of The headquarters building of the Ministry of Trade, Industry and Energy in Sejong City, South Korea. Inset: Lee Gyu- 24 OECD countries, and its export bong, secretary of the Smart Factory Division at the Ministry of Trade, Industry and Energy ) industries have suffered a dras- tic decline in productivity and effi- expects to enable customization and opti- by-phase approach. ciency. Lately, how do you view the mization of smart factories and enhance international competitiveness of the manufacturing industry’s competitiveness. Under the Innovation in Manufac- Korean manufacturing industry? To this end, the government plans to invest turing 3.0 imitative, the government There is a sense of crisis regarding the 200 billion won [US$172 million] annual- identified four areas for special future of Korean manufacturing in the poli- ly, and build 1,500 smart factories by 2020, attention: platforms, applications, cymaking community these days. Export which amounts to 1 trillion won [US$861 devices and networks, and interop- market conditions have been exacerbated million] in investment and the building of erability and security. Please tell us due to the weakening of the yen, aging 10,000 smart factories by 2020. about the progress of each sector labor market, and structural weakness of The main difference between the Inno- that has been made so far and future the Korean corporations. In seeking to vation in Manufacturing 3.0 and foreign road maps. secure sustainable growth in manufactur- equivalents developed in Germany and the Under Innovation in Manufacturing ing, the government decided that address- U.S. is that the former prioritizes the tech- 3.0, the government has identified two ing fundamentals and structural weak- nological development and standardization broad goals to achieve: one is technologi- nesses in Korean manufacturing is most of indigenous technologies, whereas the cal advancement and the other is the dis- critical. Korean government’s Innovation in Manu- semination of smart factory technologies. facturing 3.0 stresses government provi- It also has both long-term and short-term The current government introduced sion of support for local small and medium plans. For a short term plan, the govern- the Innovation in Manufacturing enterprises (SMEs) with a view to dissemi- ment looks for the immediate application 3.0 initiative in June 2015, intended nating smart factory technologies among of software and hardware. For a long-term to disseminate smart factories. How local SMEs. plan, the government pursues technological does the Innovation in Manufactur- Moreover, already in possession of sophistication. Laying out road maps falls ing 3.0 differ from foreign equiva- highly advanced manufacturing technolo- to the latter. In fact, in September 2015, lents in Germany, the U.S., and gies, the U.S. and German governments’ the government launched road maps for China? strategies prioritize building the technolog- 6 areas for R&D projects. These include The Innovation in Manufacturing 3.0 ically most sophisticated smart factories, flexible design technology; technology to envisions fusing ICT into the entire manu- whereas Korea’s Innovation in Manufac- sort out defective products; software-inte- facturing process, which the government turing 3.0 follows an incremental or phase- grated operating techniques; an open IoT

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platform; smart sensor, data collecting and from the domestic private sector formed Generally speaking, while a major- data processing technologies; and industri- an organization named the Smart Factory ity of large corporations have achieved al standards. Starting in 2016, newly devel- Standard Research Council to effectively the “intermediate” level of technological oped technologies will be applied in the respond to international activities and push sophistication, most SMEs, and especially field. For a long-term technological plan, to standardize locally developed standards. large corporations’ secondary and tertiary the government will take a phase-by-phase The government plans to run a Smart sub-contractors in Korea are in their infan- approach, in accordance with the roadmap Factory Standardization Forum to respond cy. In particular, a majority of SMEs that set out in September this year. more systematically to international stan- engage in casting, tooling, welding, plastic Speaking of progress made in the dardization activities and ensure compat- working, heat treatment, and surface treat- four target areas, it is noteworthy that the ibility with established standards. It is ment are viewed as even below the basic government joins hands with Fraunhofer assumed that the forum will also help the level. Institute and Siemens in Germany and the government to make a more informed deci- Given the much-needed initial invest- CWC institute in the U.S. to work towards sion when planning future road maps. ment for SMEs with low technological the standardization of IoT platforms. As competencies and low budgets, the current for the application area, the government is In order to facilitate exporting and government policy put special emphasis on engaged in developing customized manu- disseminating indigenous smart the growth of the latter and dissemination facturing and quality control technologies. factory technologies, I believe that of wealth, going beyond a mere focus on After on-site applications, companies will studying successful cases both from the enhanced automization of manufactur- be able to disseminate new technologies. home and abroad is critical. Also, ing. In Networks and device and interop- identifying a testbed suite for par- A special smart factory task force is erability and security, the government is ticular conditions in Korea is equally being organized under the Ministry of currently working on the synchronization critical. Tell us about the govern- Commerce, Industry and Energy to handle of the operation of equipment powered by ment’s plans in this regard. investments both from the public and pri- various standards. The government plans to set up an vate sector. The center for creative innova- In addition, the government promotes open-platform-based test bed that com- tion, on the other hand, assesses the quali- flexible production and a variety both in plies with international standards. By set- fications of SMEs and elects potential can- equipment and applications. For R&D ting up a so-called “mother factory,” the didates who will receive government funds. projects, the government also identifies 8 government plans to ensure interoperability While the government works towards wide- target areas including IoT, the cloud, big between locally developed solutions and spread adoption of newly developed smart data, 3D printing, smart sensors, energy- equipment. A mother factory refers to a test factory technologies, especially by provid- saving technologies, CPS, and holograms. bed where one can verify interoperability ing funds, it doesn’t just give them away. and test product performances that are dif- For instance, the smart factory spe- In order to promote the export of ficult to achieve in real-life situations. cial task force and the center for creative indigenous smart factory technolo- At the mother factory, the entire pro- innovation assess the qualifications of the gies, I believe that Korean smart fac- duction process is powered by IoT and likely SME beneficiaries of the public and tories will need standardized plat- Cyber-Physical Systems (CPS). Moreover, private funds collected for the government forms. Are there any local collabo- at the mother factory, one can test produc- smart factory project. Dubbed the “Volun- ration projects at the B2B level or tion processes, the performance of newly tary Participation Principle,” Innovation international projects at the govern- developed software and hardware, and in Manufacturing 3.0 looks for genuine ment level that are currently under- their interoperability sector by sector. By desires from the potential SME benefi- way to this end? Or, does the current closely working with the German and U.S. ciaries to upgrade their factories and thus government have any future plans in equivalents of mother factories, the pres- demand 50 percent of the investment. Gen- relation to standardization efforts? ence of the mother factory will help local erally, the government provides 50 million Government officials are actively par- manufacturers to comply with international won [US$43,115] for each elected SME ticipating in international standardization standards and catch up with smart factories and expects another 50 million won from efforts at IEC and ISO. In addition, given in advanced economies. the respective SME to contribute. Those that countries like the U.S., Germany, and who provide extra credentials, including Japan dominate international standardiza- The discrepancy in wealth and tech- certificates for specialized companies, tion processes, at the government level nological development between large can receive extra funds from the govern- officials seek to secure international oppor- companies and their secondary and ment. For instance, SaeHan Heat Treat- tunities via diplomatic events or economic tertiary subcontractors is large in ment Company received 100 million won cooperation with governments in these Korea. Please tell us about govern- [US$86,230] for its exceptional creden- countries. ment strategy to bring innovation to tials, and the company contributed 45 mil- At the non-governmental level, experts SMEs. lion won [US$38,780] for its part.

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LSIS Chengju, Most Advanced Smart Factory in Korea

by Marie Kim

he G division of LS Industrial TSystems’ (IS) Chengju produc- tion represents one of the most advanced “smart” production facilities in Korea. With all production lines automated – from parts supply to assembling, test- ing and packaging – the Chengju plant represents the domestic heart of smart factory innovations. The G division specializes in the production of low-voltage circuit break- ers and magnetic switches. The produc- tion lines of low voltage circuit break- ers, which are located on the first floor, annually produce 2,600 million indus- serves to configure the network between The packaging line is also fully auto- trial breakers. The supply of material is each plant and the host system and mated. Weight sensors ensure accurate designed to be maintained for a day and orchestrates real-time production man- weight reads. Large packaging robots a half of use. agement and inventory control. package items at regular interval by All production lines in the Chengju Along the passage between produc- product type and size. The automated production center are equipped with Pro- tion lines are blue markers or magnetic line takes the nameplate from Enterprise grammable Logic Controllers (PLCs). guide tape. Automatic guided vehicles resource planning (ERP), and automati- Acting as an alternative to switch (AGVs), or mobile robots, carry finished cally attach to the box. ERP is manage- boxes, PLCs are connected to PCs and goods via the markers or wires in the ment software that facilitates stock and the Manufacturing Execution System floor. inventory tracking. (MES). PCs, on the other hand, serve The AGVs execute programmed The assembly system for the mag- a higher level role in the scope of the instructions and move finished products netic switch is located on the 2nd floor machine, conducting complex calcula- to the packaging line. When a physical of the G division. Annually producing tions, monitoring, measuring, and net- force is exerted on the robot, it stops, 1,200 million switches, facilities on the working the factory together. A MES is makes loud beeping noises and flashes second floor feature complete smart pro- a cloud-based execution solution that its lights. duction lines. Apart from winding coils,

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final process at the Chengju plant con- 20,000. The number of product defects tributes to upgrading the quality of the have also decreased to 8 parts per mil- whole manufacturing process. After fin- lion (PPM). ishing the entire inspection, AGB carries Efficiency has also greatly been the finished products to packaging lines improved. Energy usage has been cut and packaging robots carry out a series down by 60 percent. Labor for each pro- of final packaging processes. duction line is cut in half, and surplus The LSIS Cheongju Smart Plant is labor is relocated to a new business line. powered by an Advanced Planning Sys- Experts evaluate the LSIS Chengju the production lines handle testing and tem (APS). Referred to as a demand production center to be somewhere loading. forecast system, an APS optimally allo- between Intermediate 1 and Intermediate Through the monitor, the opera- cates raw material and produces to meet 2 stages out of 5 developmental stages, tor on the assembly line can check the demand. An APS also allows flexibil- and domestically recognized as a tech- data retrieved from the PLC installed ity throughout the entire manufacturing nologically excellent case. every corner. The data collected in real process, from production planning to To this end, LSIS continues to adopt time is used to improve productivity via material ordering, assembling, testing, CPS, IoT, and Internet of Service (IoS) MES. With every production line gen- and packaging, while delivering unprec- technologies in addition to solu- erating an average 50 million pieces of edented levels of scheduling accuracy tion. Moreover, the LSIS will continue data each day, the information collected and efficiency. to train internal specialists by providing throughout the entire plant contributes The LSIS Chengju plant has been technical training and organizing capac- to improving the company’s “Big data” built in stages since 2010. By incre- ity-building field trips. system. mentally adopting advanced ICT and An LSIS insider said, “Productiv- Each unit also undergoes quality automation, the Chengju plant has real- ity and energy efficiency are greatly control tests by inspection robots that ized a mass production system that can improved through the adoption of smart produce strobe lighting. The process produce diverse products and achieve production lines. Moreover, the new improves quality control, as its bright customization and small quantity batch system turned out not only to enhnace light can detect fine details. production. customer satisfaction but also improve Namely, strobe lighting serves to The wait time has been cut in half the working environment.” He added, minimize the difference in finding and productivity has been improved by “LSIS will continue to upgrade the cur- errors by the human eye. Together with 60 percent. As for low voltage circuit rent system and contribute to bringing a vibration sensor that can quantify the breaker, the productivity of 38 items per more innovation to the manufacturing noises created by a magnet switch, the day has increased to 7,500 and then to industry in Korea.”

he hottest topic about smart factories this year has been a variety of Industrial TEthernet technologies that have been launched in the market. Industrial Ethernet is a digital network technology that enables integrated control of sensors, measuring devices and control devices that are used in industrial automa- tion processes connected through a single communication network. Digital in form, Industrial Ethernet can transmit a large volume of signals over a long distance, while maintaining transmission stability. LS Industrial Systems has its own developed Real-time Automation Protocols for Industrial Ethernet (RAPIEnet) technology. RAPIEnet is a technology used for real- Industrial Ethernet time communication in the area of robot control and manufacturing process automa- and Internationally tion such as semiconductors and automobiles. Compatible with existing industrial Ethernet standards, RAPIEnet also guarantees Standardized real-time data transmissions at a 1GB per second and repairs communication errors RAPIEnet 30 times faster than conventional technology. In May 2008, five RAPIEnet technologies developed by LSIS were approved by the technologies IEC subcommittee on industrial networks (SC 65C). By Kwon Dae-hyun As a developer of RAPIEnet, I’m glad to see that this technological feat will help (Senior Researcher at LSIS Research Institute) Korea gain a foothold in the US$10 billion global market.

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Samsung to Promote, Nurture Smart Factory Technologies in Gyeongbuk Region

by Marie Kim

n September 2015, the Samsung five years, to the 3 government funds content of Gyeongbuk Province. IGroup and the Ministry of Trade, called “R Funds,” “SamsungStrategic- Industry and Energy (MOTIE) signed Fund,” and “C Fund.” R Funds targets Dissemination of smart an MOU to work closely in promoting SMEs aspiring to renovate their facilities factory technologies to 127 and nurturing smart factory technologies in Gumi Industrial Complex, while the SMEs from 2016 to 2017. To this end, Samsung so-called Samsung Strategic Fund targets and the MOTIE will contribute 15 billion well-performing SMEs. The C Fund is a One of the goals that Samsung has won each towards the goal of launch- government organization that aids SMEs pursued for the year with regard to the ing more than 600 smart factories. The transitioning into new businesses. current government’s “Smart Factory” Smart Factory Task Force Team was project is to introduce smart factory tech- organized under the MOTIE to carry out Inside Gyeongbuk Creative nologies to 127 small and medium man- this vision. Economy Innovation ufacturers by the end of this year. In fact, Samsung is one of the Kore- In particular, under the Smart Fac- an conglomerates deeply involved in Inside the 717 m2 space of the tory project, Samsung is focusing on the government project of introducing Gyeongbuk Creative Economy Innova- tailored sponsor programs to introduce so-called smart factory technologies to tion Center is the Factory Lab, Future state-of-the-art manufacturingtechnolo- small and medium domestic manufactur- Lab, and Culture Lab. Occupying 367 gies and know-how to SMEs. These ers. In particular, Samsung was chosen to m2 of space, the Factory Lab literally technologies are production management sponsor small and medium manufactur- features a showroom to peep into future systems or Manufacturing Execution ers in the Gyeongbuk region. To this end, production lines powered by Internet of Systems (MES), Internet of Things(IoT)- the Gyeongbuk Creative Economy Inno- Things technologies, automation, and based production process andautoma- vation Center will provide a venue for robots. The space also provides a venue tion, machines capable ofintelligenthigh- cooperative endeavors among Samsung, for personnel training and consulting ser- precision performance, and production the MOTIE and SMEs in the Gyeongbuk vices. simulationtechniques. region. Occupying 251 m2 of space, the Some of the old manufacturing facili- The Gyeongbuk Creative Econo- Future Lab is designed to provide sup- ties such as Ena Industry, DPM Tech, my Innovation Center was launched in port for 7 new government-sponsored Osung Machinery, Beukjin have already December 2014, with a view to enhanc- businesses. These businesses include showed improvement in management. ing the manufacturing capabilities of those involved in developing medi- For Ena Industry, the quality of prod- small and medium enterprises (SMEs), cal devices and their parts; businesses ucts it produces has improved by 50 per- helping to transition these enterprises to engaged in producing articulated robots- cent, while productivity and efficiency new businesses, and the commercializa- for the manufacturing production line; has been improved by 15 and 23 percent, tion of the traditional agriculture and cul- ventures developing three-dimension- respectively. The productivity of DPM ture sectors. alimaging dental diagnosing software; Tech has been improved by 200 percent, One of the goals that Samsung businesses that produce smartphonesen- while travel distances between processes intends to achieve is to transform old sor that performs integratedtesting; and have been shortened. industrial complexes into a “Creative ventures with technologies that perform Travel distances between production Industrial Park”by utilizing Samsung’s high precisionmolding. processes have been shortened for Osung superior manufacturingtechnologies and Another 99m2 space of the Culture Machinery as well. Osung was also skills topromote new businesses. Lab is a venue where one can find busi- selected for an excellent case of prima- In terms of financing the massive ness support for the commercialization ry site management. Beukjin benefited project, Samsung plans to raise 30 bil- of agricultural sectors and experience from the program by lowering costs and lion won (US$26 million) over the next cases of the digitization of the cultural improving the quality of its products.

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“Industry Innovation Movement,” where the company has been sponsoring sec- ondary and tertiary subcontractors that amount to 450 companies, Hyundai Motor announced that it will provide support for additional 200 companies housed in the Gwangju Creative and Innovation Economy Center. In financ- ing this massive project, Hyundai will contribute 15 billion won, while MOTIE and the Gwangju Creative Economy and Innovation Center contribute 4.5 billion and 4 billion, respectively. An average cost of money that is required for individual small and medi- um enterprise (SME) to participate is 40 million won. To ease that cost burden,

Hyundai Motor Group Senior Vice President Park Gwang-sik, third from left, poses with officials form the Foundation Hyundai Group said it will provide 20 of Korea Automotive Parts Industry Promotion and the Ministry of Trade, Industry and Engery at the Hotel Riveria In million won for each participating com- Daejeon, on Sept. 23 during the launch ceremony for smart factory project. Hyundai said the project is to transform all manufacturing processes from design to retail to a customer-centric direction pany. Moreover, Hyundai Motor Group separately plans to provide financial sup- port for the cost of upgrading of manage- ment process of these companies. Hyundai to Launch In order to tailor support program to specific needs of participating SMEs, Hyundai Motor Group works closely ‘Smart Factory’ with a professional coordinator who would draw up diagnosis. Based on the Promotion Campaign diagnosis, Hyundai Motor Group will apply the “five smart factory system pro- by Marie Kim gram” set by the Group. These five sys- tems are: process inspection automation sys- ith a view to enhancing the factory project refers to a business to tem; fool-proof system; first, middle, Wcompetiveness of the coun- convert the traditional plant into the one final product examination system; lot try’s manufacturing industry, Hyundai capable of customized production by fus- track management system; and mold Motor Group (Chairman Chung Mong- ing ICT technologies into the entire pro- management system. koo) sets out on the campaign to spread duction process from planning, to manu- Lee Young-sub, the Chief Director the presence of smart factories in Korea facturing, and retail sales. Hyundai- of Automotive Parts Industry Promotion “more aggressively.” Members of Hyun- Automotive Group has been promoting Foundation said, “for successful launch- dai-Kia Automotive Group, together the current government’s smart factory ing of smart factories, genuine desires with those of Automotive Parts Indus- project since 2013. Through the compa- of participating SMEs to upgrade their try Promotion Foundation gathered at ny’s involvement with the Gwangju Cre- facilities; active participation on the part the Daejeon Riviera Hotel on Sep. 23 ative Economy and Innovation Center, of ICT companies; and professional sup- to celebrate the launch of smart fac- besides automotive sector, the company port of coordinators are essential,” add- tory promotion campaign. Among 260 plans to expand the scope of the promo- ing, “based on the experience of helping people who attended the ceremony were tion campaign to include the manufactur- companies in automotive parts sector, the Park Gwang-sik, the Vice President of ing sector at large. foundation will provide all the possible Hyundai-Kia Automotive Group and Lee During the ceremony, Hyundai- support it can muster.” Young-sub, the Chief Director of Auto- Kia Automotive Group, and MOTIE Park Gwang-sik, the Vice President motive Parts Industry Promotion Foun- announced that, together, they will raise of the Hyundai-Kia Automotive Group dation, and officials from Ministry of a total of 23.5 billion won to the smart said, "in order to maximize the effect, the Trade, Industry, and Energy (MOTIE). factory project by 2019. In conjunc- Group will provide a concentrated sup- Simply put, the government’s smart tion with the on-going campaign tilted port for specific areas that needs help.”

23 MonEY

Holding Key Rate Key Rate Holds in November, but Expected to be Cut Next Year by Jung Suk-yee

he Bank of Korea (BOK) kept its Tbase interest rate unchanged at 1.5 percent amid sharply increasing household Bank of Korea Governor Lee Ju-yeol bangs the gavel at the Monetary Policy Committee held in the morning on Nov. 12. debt and growing global uncertainty ahead of an expected U.S. rate hike in December. households to take on more debt, pushing to 1.00 percent in June, in response to The Bank of Korea held the Monetary up the country’s overall household debt weaker growth and deflationary risks, said Policy Committee under the chairmanship to over 1.1 quadrillion won (US$946 bil- Nomura Securities analyst Kwon Young- of BOK Governor Lee Ju-yeol and put the lion) at the end of June and exposing some sun. policy rate on hold at a record low of 1.5 households to high risk in the event of rate Yoon Yeo-sam at KDB Daewoo Secu- percent for a fifth consecutive month after hikes. rities also forecasted that the central bank four 25-basis-point rate cuts since August A Fed lift-off will force the BOK to may cut the base rate by 25 basis points in last year. cut key rates by 25 basis points to 1.25 March or April after the uncertainty sur- The record low rates have encouraged percent in February next year, and further rounding U.S. rate hikes is subsided.

Near Zero Inflation Deflationary Concerns Spreading in Korea by Jung Suk-yee

tatistics Korea announced on SNov. 3 that the consumer price index rose by 0.9 percent from a year ago last month. The rate of increase is the highest since November last year, when it reached 1.0 percent, but remained below 1.0 percent for 11 months in a row. In addition, it fell short of the Bank of Korea’s target of 2.5 percent to 3.5 percent for the 40th consecutive month. year’s inflation rate at a record low of increase. For examples, city bus fares rose The actual increment is slightly over 0.7 percent and the Korea Development 9 percent, subway fares increased 15.2 0 percent when the effect of the increase Institute gave an estimate of 0.5 percent. percent, and sewage fees and the prices in the price of cigarettes implemented For reference, Korea recorded its lowest of vegetable, fruit and fish went up by earlier this year, which accounts for 0.58 inflation rate, 0.8 percent, in 1999 since 14.4 percent and 3.7 percent, respectively. percentage points, is taken into account. the beginning of records in 1965. Meanwhile, the price of gasoline fell 15.9 The near-zero inflation is likely to Despite the low inflation rate, public percent and that of diesel declined by 20.9 continue to the end of this year. Last utility charges closely associated with the percent. Electricity, water and gas bills month, the Bank of Korea estimated this people’s daily lives showed an overall showed a decrease of 7.2 percent, too.

24 MonEY

China Shock China’s New Normal Policy Affecting Korean Exporters by Jung Suk-yee

China’s economic growth rate can lower the global economic growth rate by up to 0.5 percentage points and Korea’s by up to 0.62 percentage points. “If the Chinese economy, which is expected to record a growth rate of 7 percent or so this year, posts a 6 per- cent growth next year, Korea’s econom- ic growth rate can fall to slightly over 2 percent in that the current consensus provided by research institutes at home and abroad is approximately 3 percent,” it explained, continuing, “Specifically, private consumption growth is estimated Cars are waiting for shipments to overseas market. to decline by 0.2 percentage points, total investment by 0.4 percentage points, the he Korea Economic Research 39.5 percent for basic petrochemicals consumer price index by 0.1 percent- TInstitute said on Nov. 3 that and 14 percent for equipment compo- age point and the current balance with Korea’s exports to China have been on nents. In the meantime, the imports of respect to the GDP by half of a percent- the decline since the Chinese govern- 10 major items edged up by 1.6 percent. age point in this case.” ment launched the New Normal policy Those of semiconductor and flat panel The institute also pointed out that last year. display & sensor products each went up industrial restructuring is inevitable for The trade balance between Korea by 45.4 percent and 2.8 percent, while China due to its severe overproduction, and China has decreased since 2013. steel sheets posted a decrease of 26.6 and the restructuring is likely to affect Last year, the trade balance totaled percent. Korea’s key industries such as petro- US$52.2 billion, down 12 percent from In short, Korea’s component and chemical, machinery, aviation, elec- a year ago. During the first three quar- material exports to China are being trical and electronics. “Assuming that ters of this year, Korea’s trade surplus affected by the New Normal policy, with the restructuring results in a 10 percent vis-à-vis China declined by approxi- the technological strength of Chinese cut in production in each of the oil and mately 13 percent year-on-year to companies being enhanced and Chi- coal, chemical, metal, construction and US$35.3 billion, too. The ratio of the nese consumers seeking more diverse machinery industries of China, Korea’s surplus to the trade balance decreased and better products. Under the circum- chemical industry output can be low- from 27.4 percent to 23.4 percent stances, some experts point out that the ered by 4.3 percent, and the decrement is between 2013 and last year, and to 20.9 advancement of China’s industrial struc- expected to reach 2.9 percent in each of percent in the three quarters. tures and less processing trade opportu- the oil and coal and aviation sectors and The exports of 10 major items nities resulting from the policy could be 2.6 percent in the electrical and electron- are plummeting with few exceptions. a bigger threat than an interest rate hike ics industry,” the KDI added. Between January and September this by the Fed, in view of Korea’s industrial It also remarked that the industrial year, industrial electronics and petro- structure highly dependent on its exports restructuring in China could limit the leum products recorded a negative to China. growth of the Korean economy for a export growth of 65.8 percent and 35.7 In the meantime, the Korea Devel- while and Korea needs to be prepared percent, respectively. The percentage opment Institute (KDI) said on Nov. 9 for it by means of the enhancement of its was 14.4 percent for synthetic resin, that a one percentage point decline in own financial soundness.

25 MonEY

Foreign Monies Korea’s Forex Reserves Increased for Two Months in a Row

by Jung Suk-yee

orea’s foreign exchange US$1.43 billion and the deposit rose by lion. Kreserves increased for the sec- US$1.26 billion to US$25.34 billion. The The foreign-currency deposits ond consecutive month. The Bank of central bank’s gold reserves remained at include those that are deposited by Kore- Korea announced on Nov. 4 that the US$4.79 billion. ans, foreigners residing in Korea for at amount increased by US$1.49 billion As of the end of September, Korea least six months and foreign enterprises from US$368.11 billion to US$369.6 bil- ranked seventh in the world in terms of doing business in Korea. By currency, lion between the end of September and foreign exchange reserves. China had the U.S. dollar deposits rose by US$5.98 the end of last month. US$3.5141 trillion, followed by Japan billion to US$49.45 billion, an all-time The country’s foreign exchange (US$1.2489 trillion), Saudi Arabia high, as exporting firms deposited more reserves showed an increase of US$180 (US$662.3 billion at the end of August), payments with the won-dollar exchange million in the previous month, too. The Switzerland (US$598.9 billion), Tai- rate falling from 1,194.5 won to 1,142.3 central bank attributed it to an increase wan (US$426.3 billion) and Russia won per U.S. dollar during the period. in foreign currency asset management (US$371.3 billion). On the contrary, the yuan deposits income. Meanwhile, the Bank of Korea showed a decline as matured time depos- By asset type, the marketable securi- announced on November 10 that the bal- its were withdrawn and arbitrage trading ties including government and agency ance of the foreign-currency deposits of lost its appeal. The balance decreased by bonds, corporate bonds and asset-backed residents in Korea in foreign exchange US$2.24 billion to US$7.19 billion, the securities posted a growth of US$260 banks increased by US$4.21 billion to lowest level since the end of December million from a month ago to US$334.6 US$63.4 billion between the end of Sep- of 2013. billion while the Special Drawing Rights tember and the end of last month. The The yen deposits increased by (SDR) at the International Monetary amount showed an increase for the first US$170 million from a month ago to Fund (IMF) decreased by US$30 mil- time in six months and reached a four- US$3.3 billion and the euro deposits lion to US$3.44 billion. In the meantime, month high since the end of June, when increased by US$230 million to US$2.32 the IMF position showed little change to the amount added up to US$64.67 bil- billion.

26 MonEY

Changing Times Roles of KDB, IBK to be Adjusted by Jung Suk-yee

Under the circumstances, the major beneficiaries of the KDB’s support fund are expected to include future growth sectors instead of the six marginal indus- tries of shipbuilding, shipping, con- struction, petrochemicals, automobiles and steel. As of the end of 2014, Kore- an banks recorded total lending of 168 trillion won (US$147 billion) in the six industries, and the KDB and the IBK accounted for 55.4 trillion won (US$48.6 billion) of it. The KDB is planning to reduce its lending to these industries while increas- ing its loans to future growth sectors from 13.5 trillion won (US$11.9 billion) to at least 20 trillion won (US$17.6 bil- lion) between 2014 and 2018. Likewise, the IBK will step up its amount from 29.6 trillion won (US$26.0 billion) to 33 trillion won (US$29 billion). The future growth sectors refer to the 19 govern- ment-designated industries including intelligent robots, wearable smart gad- gets and smart biotechnology. At the same time, the focus of the KDB’s investment banking business will shift toward those segments that the pri- vate sector is unwilling to engaged with due to the high possibility of market failure. These include international bond SohnByung-du, head of the Financial PSohnByung-du, head of the Financial Policy Bureau of the Financial Services issuance, project financing, M&As of Commission, had a press briefing on the reform of government-led financial institutions on Oct. 30. small firms, social overhead capital relat- ing to inter-Korean unification and PEFs he Financial Services Commis- fund will be increased from 9.1 trillion for business restructuring purposes. Tsion (FSC) announced on Nov. won (US$8.0 billion) to 15 trillion won In addition, the FSC is going to drive 1 that it has overhauled the roles of the (US$13.2 billion) between 2014 and the KDB to dispose of companies in its Korea Development Bank (KDB) and 2018. The latter amount is equivalent to possession for three years to come, includ- the (IBK) in 30 percent of the bank’s annual support ing 86 small and venture firms and 11 order to prevent them from infringing fund. In the meantime, the KDB focuses companies currently in restructuring pro- upon the private sector in order to reduce more on mid-sized and smaller enterpris- cesses such as Korea Aerospace Industries, the possibility of moral hazards. es. To this end, its annual support fund GM Korea and Daewoo Shipbuilding According to its plan, the IBK is to will be increased from 35 percent (21.6 & Marine Engineering. This is to expe- provide much more assistance for start- trillion won or US$19.0 billion) to 50 dite the restructuring of these companies, ups and firms in their early growth stage. percent (30 trillion won or US$26.3 bil- which has been delayed due to the prin- Specifically, its annual startup support lion) between this year and 2018. ciple of sale value maximization.

27 MonEY

Largest IPOs Ever Number of IPO This Year to Reach 150, Largest in 13 Years by Jung Suk-yee

he number of initial public offer- on the stock market, almost doubled Tings (IPOs) this year is expected from 7 last year. In the KOSDAQ mar- to reach 150, the largest in the 13 years ket, the number of new IPOs significantly since 2002. This is largely due to the increased, from 66 last year to 78 this year. not even any investments in public offer- fact that the Korea Exchange (KRX) has In addition, there are a total of 95 ings in some industries. Until the previ- actively helped companies to list on the companies listed on the KONEX Mar- ous quarter, a large amount of liquidity stock market, aiming to achieve 220 new ket, after 16 companies were delisted was injected into the public offering mar- IPOs this year, and the barriers for listing through transfers to KOSDAQ listings ket due to ultra-low interest rates. In the are lowered, which has led to more new and M&As. Thirty-two companies have second half of the year, however, capital listings. already been listed on the market this evaded the manufacturing industry and However, some say that institutional year, and about 40 companies are expect- made indiscriminate investments in spe- investors’ demands are focused on only ed to enter the KONEX market by the cific industries, such as pharmaceuticals some industries, such as biotechnology end of the year. and biotechnology. As a capital bottle- and healthcare, increasing the polariza- Unlike the IPO market, which is get- neck phenomenon between industries tion in the market. ting hotter, investments in public offer- stood out, some companies withdrew the This year, 13 companies were listed ings are selectively popular, and there are listing.

Instead of NASDAQ tors to directly enjoy the fruit of the bio- tech industry, which is a new growth Korea Exchange Courting Samsung engine for the Samsung Group. It seems that Samsung BioLogics BioLogics to Consider the IPO at KOSDAQ is favoring the NASDAQ market over the KOSDAQ market. This means that by Jung Min-hee Samsung BioLogics thinks that the KOS- DAQ market will hardly afford the com- he Korea Exchange is making edly considering being listed on the pany’s IPO, expected to reach nearly 2 Tall-out efforts to attract Samsung NASDAQ via an IPO. Samsung BioEpis, trillion won. “An IPO volume of 2 tril- BioLogics to the Korean stock market. an affiliate of Samsung BioLogics, is lion won is less than half of an IPO by But the company is considering being preparing to be listed on the NASDAQ that amounted listed on the NASDAQ in the U.S. by having already appointed Goldman to 4.8881 trillion won [US$4.1717 bil- Samsung BioLogics is a mega com- Sachs as its lead manager. lion],” said a representative at the Korea pany expected to record market capital- The reason why the Korea Exchange Exchange. “We can afford the amount, ization of at least 10 trillion won. More- is making a lot of efforts to attract Sam- since the KOSDAQ’s current market over, the company nicely matches the sung BioLogics is that the company is a capitalization is standing at 189 trillion identity of the KOSDAQ, which pursues large-capital stock that can energize the won [US$161 billion].” becoming a market centered on cutting- stock market a great deal. edge technology and bio engineering. At the moment, Celltrion ranks first It is said that Choi Kyung-soo, the in the KOSDAQ market capitalization chairperson of the Korea Exchange, is standings. In the event that a represen- considering directly persuading the top tative biotech company is listed on the management of Samsung BioLogics. KOSDAQ, many small and mid-sized Samsung BioLogics is planning to raise bio companies are expected to follow funds to expand its fourth factory by in suit. It is a just cause that the listing of the second half of next year and alleg- the company will enable domestic inves-

28 MonEY

Leveled Up Financial Regulations of KRX on Par with Europe by Jung Suk-yee

he Korea Exchange (KRX) said Ton Nov. 17 that the European Commission (EC) recently announced the financial market infrastructure reg- ulations of the five countries including Korea are at a level equivalent to those in effect in Europe. alence is a prerequisite for the certifica- the part of the Korean government agen- The announcement signifies that the tion, and European financial institutions cies, including the KRX and the Financial Korean financial market can benefit from cannot participate in clearings via a non- Services Commission (FSC). They came the qualifying CCP certification of the qualified CCP in a third country, accord- up with guidelines to be applied to infra- European financial authorities with Euro- ing to the European Market Infrastruc- structure organizations while revising pean financial companies’ risks regarding ture Regulation. the Capital Markets Act so that Korea’s business in the Korean market properly The recent determination can be financial risk management systems con- addressed. The examination of the equiv- attributed to the continuous efforts on form to their international counterparts.

ask the Korean government to lift its ban on the offshore trading of the Korean cur- rency and take some measures so that the won’s exchangeability can be improved. The Korean government is looking to respond to the demand by means of the non-deliverable forward (NDF) market, and the Ministry of Strategy & Finance is opposed to the opening of an offshore exchange market due to the possibility of Enrollment in MSCI foreign exchange rate fluctuations. When it comes to Korea’s foreign Korean Government to Discuss investor registration system, the MSCI’s opinion is that it is rather inconvenient, Korean Stock Market’s because it requires registration on an Incorporation into MSCI World Index individual account basis. The Korean government is planning to discuss mea- sures, including registration on a fund by Jung Suk-yee operator basis. he Ministry of Strategy & investors and stock exchanges regard- The MSCI asked the government to TFinance, the Financial Services ing the Korean stock market’s incorpo- facilitate the offshore use of the Korea Commission and the Korea Exchange ration into the MSCI World Index. Off- Exchange’s KOSPI 200 Index as well, so will visit the Asia-Pacific research center shore exchange transactions and foreign that foreign investors do not have to get of Morgan Stanley Capital International investor registration are expected to be approval from the stock exchange when (MSCI) in Hong Kong late this month in discussed in this regard there. using the index abroad for investment order to listen to the opinions of foreign At present, the MSCI is continuing to purposes.

29 MonEY

Performing Stocks 7 of 10 Best Performing Stocks in Asia Belong to Corporate Korea by Michael Herh even of the ten best performing pharmaceutical industry, inking huge export Sstocks in the Asian stock market deals this year alone. The deals will earn this year were those of Korean companies. the company about 6 trillion won (US$5.1 According to Bloomberg, Hanmi Sci- billion). In particular, the stock price of ence and Hanmi Pharmaceutical came in Hanmi Pharmaceutical jumped by about 116 percent. An increase in single-person first and second, respectively, in the growth 300,000 won (US$257) this month alone, households paralleled stronger demand for rate standings among stocks of the Asia as the company struck deals to export new small-sized instant foods, fueling conve- Pacific Index of the Morgan Stanley Capi- drugs and medical technology with global nience stores’ sales a great deal. tal International (MSCI) as of Nov. 11. The pharmaceutical companies such as Sanofi Cosmetics maker Amore Pacific held Asia Pacific Index of the Morgan Stanley and Janssen. seventh place, as its stock price swelled 111 Capital International is comprised of stocks Five other Korean companies, includ- percent. The ninth spot went to Celltrion, of 1,004 companies in 13 major Asian ing the Korea Aerospace Industries (KAI), the stock price of which was given a boost nations such as Korea and Japan. Among ranked in the top ten. The KAI’s stock price by the development of an arthritis drug. them, 107 companies are Korean compa- rose to fourth place by recording 118 per- Furniture specialist Hanssem picked up nies. cent this year. The company exported the tenth place with an increase of 94 percent. The stock prices of Hanmi Science first light fighter FA-50 of Korean’s own Among foreign companies, Japanese and Hanmi Pharmaceutical soared 961%, development and production to the Philip- cosmetics company Kose seized the third 701%, respectively in the same span of pines and Iraq, and enjoyed an increase in spot with an increase of 150 percent, while this year. Hanmi Science has a 41.37 per- aircraft parts sales to Boeing and Airbus. China’s Huishan Dairy Holdings Company cent stake in Hanmi Pharmaceutical as its The two factors empowered its third quar- caught sixth place with an increase of 112 holding company. This is because Hanmi ter operating income to grow 100.8 percent percent. Eighth place landed in the hands Pharmaceutical has been showing the best year-on-year. The fifth ranker was BGF of China’s Evergrande Real Estate Group performance in the history of the Korean Retail, the stock price of which jumped which chalked up a 107 percent increase.

Sweet Treatment anmi Pharmaceutical signed a commercialize the products in Korea and Hcontract on Nov. 5 to export t China. Hanmi technologies on three new materials for In addition, Hanmi Pharmaceutical Pharmaceutical long-acting diabetes treatments to Sanofi, announced on Nov. 9 that it has entered a multinational pharmaceutical firm. The into an exclusive license agreement with Signs 4.4 US$ Billion contract amount reaches 5 trillion won Janssen Pharmaceuticals, Inc. (Janssen) Deal of New Diabetes (US$4.4 billion), the highest-ever amount for the development and commercial- in the history of the Korean pharmaceuti- ization of its new oxyntomodulin-based Treatment cal industry. diabetes-obesity drug, including Hanmi’s Under the terms of the agreement, HM12525A (LAPSGLP/GCG), at the Hanmi will receive an upfront payment price of US$915 million (1 trillion won). of €400 million (US$435 million), and Under the agreement, Hanmi will is eligible for up to €3.5 billion (US$3.8 receive an upfront payment of US$105 billion) in development, registration and million (116 billion won) and is also eligi- sales milestones, as well as double digit ble for US$810 million (930 billion won) royalties on net sales. in development, registration and sales In addition, Sanofi will obtain an milestones, as well as double-digit royal- exclusive worldwide license to develop ties on sales. Beligium-based Janssen will and commercialize drugs based on the obtain exclusive worldwide rights, except Hanmi Pharmaceutical has signed a contract to export a diabetes treatment technology for 5 trillion materials. But Hanmi Pharmaceutical Korea and China, to develop and com- won (US$4.4 billion). will retain an exclusive option to co- mercialize HM12525A.

30 MonEY

Recession Type Surplus KOSPI-listed Companies Show Increase in Profit amid Decrease in Sales by Michael Herh

ompanies listed on the Korea CStock Composite Price Index (KOSPI) failed to free themselves from the yoke of “recession trade surpluses,” where profits grow but sales drop up until the third quarter of this year. KOSDAQ- listed companies, however, many of which are small and mid-sized compa- nies, enjoyed the growth of sales, operat- ing income and net income, performing well in terms of both quality and quantity. The Korea Stock Exchange and the Korea Listed Companies Association analyzed 498 out of KOSPI-listed 588 companies which have to submit consoli- dated financial statements to the Korea Stock Exchange and settle accounts in December. They announced the results ter, their debt ratio sat at 124.26 percent, percent from a year earlier. Their total on Nov. 17. Their total sales in the third down 3.06 percentage points from the operating income and net income in the quarter totaled 1.205 quadrillion won close of 2014. third quarter jumped 10.95 percent and (US$1.027 trillion), down 3.24 percent But the outlook on the stock market is 12.82 percent to 5.0292 trillion won from a year before. During the same still gloomy. This is because an increase (US$4.2884 billion) and 3.5451 trillion period, their total operation income and in their income was more attributable to won (US$3.0225 billion), respectively. net income swelled 12.69 percent and temporary cost-cutting effects than to a Both their operating income to sales ratio 11.31 percent to 77.4781 trillion won business boom. In addition, the effects of and net income to sales ratio increased (US$66.0702 billion) and 78.6740 trillion income increased were reflected in some 0.21 percentage points to 5.48 percent won (US$67.0900 billion), respectively. companies only. So, it is said that the fact and 3.86 percent, respectively, from a A total of 394 companies (79.12 per- still does not come across as positive to year earlier. cent) listed on the KOSPI market inked the overall stock market. In the meantime, the Federation of net income, while 104 companies (20.88 By contrast, companies listed on the Korean Industries recently conducted percent) suffered net losses. Their oper- KOSDAQ performed relatively well. a survey on business environments in ating income to sales ratio edged up by Analysis says that increases in sales, Korea, answered by 285 companies in the 0.91 percentage points to 6.44 percent, operating income and net income indicate group of 600 with higher sales. Fully 52.7 while their net income to sales ratio that they enjoyed both qualitative and percent of the respondents answered that inched down by 0.61 percentage points to quantitative success. they failed to meet their annual sales tar- 4.69 percent. Excluding Samsung Elec- In particular, IT, financial and distri- gets set earlier this year, while only 18.7 tronics, which has a big chunk in their bution companies came up with strong percent said the opposite. total sales, consolidated sales were still business performances, taking the lead Another 48.1 percent of the respon- on the skids, but profitability was clearly in the market. Analysis of 635 out of dents picked a decrease in sales revenue on the uptick. 709 companies that have to submit their attributable to sluggish domestic con- Their sales were down 3.13 percent, third quarter consolidated financial state- sumption and adverse export conditions while their operating income and net ments to the KOSDAQ market and as the biggest hurdle ahead of them. income grew 16.71 percent and 24.31 settle accounts at the end of December, It was followed by intense competition percent, respectively. Their debt ratio shows that they posted 91.9 trillion won abroad (21.1 percent) and an increase in inched down. At the end of the third quar- (US$78.4 billion) in total sales, up 6.68 production costs (10.2 percent).

31 MonEY

Wide Opening for the benefit of securities firms as well. he Korean government will allow The commission is planning to implement Domestic PEF Tnot only asset management and the change late this year after preparing investment consulting firms, but also every guidelines for the prevention of conflict of Market Signaling securities firm to get a license for private interests. Major securities companies are equity fund (PEF) business. already making preparations to set foot in Explosive Growth Under the circumstances, the domes- the industry. tic PEF market is expected to grow from 3 According to the revised bill, a PEF by Jung Suk-yee trillion won or so to at least 5 trillion won requires 49 or less investors’ funds to be in size between this year and 2016, with invested in securities, real estate, special the number of firms allowed to run PEFs assets and the like, and a PEF management skyrocketing from 21 to about 130. firm can be registered when the require- During the revision of the Capital Mar- ments of minimum equity capital of 2 bil- kets Act in July this year, it was predicted lion won (US$1.7 million), at least three that asset management firms and invest- professional operators and a physical sys- ment consultants would be the main enti- tem comparable to that of a public offer- ties to expand their business to cover PEFs. ing fund management firm are satisfied. As However, the Financial Services Commis- of now, 84 asset management firms have sion recently removed the entry barrier completed their reports for switchover.

Instead of NASDAQ Korea Exchange Courting Samsung BioLogics to Consider Going for IPO at KOSDAQ by Jung Min-hee

he Korea Exchange is making It is said that Choi Kyung-soo, the KOSDAQ, many small and mid-sized Tall-out efforts to attract Samsung chairperson of the Korea Exchange, is bio companies are expected to follow BioLogics to the Korean stock market. considering directly persuading the top suit. It is a just cause that the listing of But the company is considering being management of Samsung BioLogics. the company will enable domestic inves- listed on the NASDAQ in the U.S. Samsung BioLogics is planning to raise tors to directly enjoy the fruit of the bio- Samsung BioLogics is a mega com- funds to expand its fourth factory by in tech industry, which is a new growth pany expected to record market capital- the second half of next year and alleg- engine for the Samsung Group. ization of at least 10 trillion won. More- edly considering being listed on the It seems that Samsung BioLogics over, the company nicely matches the NASDAQ via an IPO. Samsung BioEpis, is favoring the NASDAQ market over identity of the KOSDAQ, which pursues an affiliate of Samsung BioLogics, is the KOSDAQ market. This means that becoming a market centered on cutting- preparing to be listed on the NASDAQ Samsung BioLogics thinks that the KOS- edge technology and bio engineering. by having already appointed Goldman DAQ market will hardly afford the com- According to the financial investment Sachs as its lead manager. pany’s IPO, expected to reach nearly 2 industry, Lim Seong-won, an executive The reason why the Korea Exchange trillion won. “An IPO volume of 2 tril- director at the KOSDAQ Market Head- is making a lot of efforts to attract Sam- lion won is less than half of an IPO by quarters at the Korea Exchange, met with sung BioLogics is that the company is a Samsung Life Insurance that amounted Kim Tae-han, the president of Samsung large-capital stock that can energize the to 4.8881 trillion won [US$4.1717 bil- BioLogics and Kim Dong-jung, the stock market a great deal. lion],” said a representative at the Korea CFO of the same company. In the meet- At the moment, Celltrion ranks first Exchange. “We can afford the amount, ing, Lim actively recommended the two in the KOSDAQ market capitalization since the KOSDAQ’s current market Kims to list their company on the KOS- standings. In the event that a represen- capitalization is standing at 189 trillion DAQ market. tative biotech company is listed on the won [US$161 billion].”

32 MonEY

Staying Home Decline in Exports from Korea Reaches 6-year High by Jung Suk-yee

he Ministry of Trade, Industry ucts, which reached a new high last year, T& Energy announced on Nov. 1 fell 7.0 percent due to a drop in memory that Korea’s total exports decreased 15.8 chip prices. The auto parts exports had percent from a year ago to US$43.5 bil- increased by 4.4 percent in September, lion last month. The estimated decre- but dropped by 7.5 percent in the fol- recorded a sharp decline of 29.6 percent. ment is the largest since August 2009, lowing month. Ship exports decreased Those of computers (-0.4 percent), gen- when total exports had declined by by US$2.9 billion year-on-year due to eral machinery (-3.7 percent), flat panel 20.9 percent. The exports continued to a lack of offshore plant delivery sched- displays (-9.7 percent), textiles (-15.0 decline for 10 months in a row, too. Dur- ule and the exports relying on merchant percent) and consumer electronics (-24.2 ing the 10 months of this year, Korea’s ships such as container carriers and gas percent) fell as well. Meanwhile, those of total exports and imports added up to carriers. mobile phone components and wireless US$440.3 billion and US$367.5 billion, Automobile exports fell 1.3 percent communications equipment increased respectively. as emerging market demands decreased 32.0 percent and 8.4 percent, respective- The exports of semiconductor prod- and the exports from the steel sector ly.

Less Communication passed US$16 billion for the first time Korean companies’ launch of flag- this year, recording the highest monthly ship smartphones and strong exports of Korea’s ICT figure. ICT imports grew 10.4 percent to smartphone parts. Exports of computers US$8.770 billion in the month, resulting and computer peripherals inched up 3.8 Exports Slide in an ICT trade surplus of US$7.270 bil- percent to US$660 million, due to strong lion this year. exports of backing storage devices such after 3 Months ICT exports from January to October as solid state drives (SSDs). totaled US$145.560 billion, marinating But a drop in the prices of DRAM by Michael Herh at last year’s level despite a 7.6 percent and NAND flash memory and a trans- decrease in the entire industry’s exports. formation of system semiconductor Big contributors were cell phones and exports in the type of cell phone parts semiconductors. The former recorded lowered semiconductor exports 7.5 per- exports of US$23.920 billion (an 8.6 cent to US$5.5 billion. Weakened global percent increase), while the latter edged demand for displays and a cut in display up 3.6 percent to US$52.940 billion. unit prices sent down display exports From a global perspective, Korea’s 11.7 percent to US$2.7300 billion. By ICT exports are not bad. In the first region, Korea recorded US$8.8800 bil- orea’s ICT exports dropped half of this year, OECD member coun- lion, the highest-ever ICT exports to Kafter three months’ increase, tries’ ICT exports dropped 5.9 percent, China. while its ICT imports hit a record high. but Korea’s ICT exports inched up 0.5 In October, ICT imports rose 10.4 According to ICT export and import percent from a year before. In the same percent year-on-year to US$8.7700 bil- data released by the Ministry of Sci- period, among major countries, Korea’s lion, a record high. Cell phone imports ence, ICT and Future Planning on Nov. ICT surplus hit US$409.30 billion, plac- jumped 60.6 percent to US$1.4400 bil- 12, Korea’s October ICT exports shrank ing second after China, which marked an lion on the strength of imports of for- 1.6 percent year-on-year to US$16.040 ICT surplus of US$127.660 billion. eign-made phones and reverse imports billion. In contrast, its October ICT Observing them by items, exports of cell phone parts. Korea also import- imports expanded 10.4 percent year- of cell phones grew 37.6 percent to ed US$3.5800 billion worth of semi- on-year to US$8.770 billion, a record US$3.3300 billion. They recorded a conductors, up 8.8 percent from a year high. But ICT exports in October sur- double-digit growth rate, thanks to before.

33 MonEY

Chaebol Choice Different Growth Strategies Presented by Korea’s Top Two Group Successors by Jung Suk-yee

s the growth of Korean companies has been at a standstill for Ayears, Samsung Electronics Vice Chairman Lee Jae-yong and Hyundai Motor Vice Chairman Chung Eui-sun have come up with different strategies to end the standstill, attracting attention from industry sources. Accordingly, the future landscape of the Korean economy will be greatly affected by the decisions of the next leaders of the nation’s top two busi- ness groups. Vice Chairman Lee has sold businesses, which were cherished by Chairman Lee Kun-hee, and is concentrating on the group’s major busi- nesses. Through the downsizing, he is placing the focus on qualitative growth rather than quantitative growth. On the other hand, Vice Chairman Chung is preparing to make a new leap through a vertical integration strat- egy, which is led by his father Chairman Chung Mong-koo. Lee has been involved in management and is presenting a selected concentration strategy, targeting the market. This is because he thinks that Samsung has been possessing subsidiaries of diverse businesses through vertical integration so far, but failed to come up with measures to create synergy effects between them. With two Big Deals with Hanwha and Lotte, Samsung completely closed down its chemicals and defense businesses. Accordingly, the company can now focus on the information technology (IT) and electronics, biotechnology and financial businesses through reor- ganization, which has begun from last year, with the completion of M&As with a series of overseas firms at the same time. As this business reorganization has finished, Samsung’s keynote of convergence is expected to gain further momentum. It is shaping up to be a B2B2C strategy, which is Lee’s new business strategy that aims for both business to consumer work (B2C), which Samsung is good at, and business Steel’s advanced high strength steel [AHSS] to business (B2B) projects, which Samsung should be good at in the future, from the planning stage. It has evolved the pre- at once. vious method, which develops cars according to Meanwhile, Chung declared the new leap of Hyundai Motor with the materials, to the new method, which develops launch of the Genesis brand on Nov. 4. In the last decade, critics inside materials according to cars.” and outside of the group have been raising the need of the premium brand An official from the industry said, “Hyun- in order to become one of the global top three automakers. However, the dai Motor is the automaker which uses AHSS management didn’t easily make the decision. the most. The price competitiveness through Until now, Hyundai Motor has been accumulating its internal compe- the vertical integration will play a big role in tence for the new brand in all areas, including materials, planning, testing, Chung’s premium brand strategy as well.” powertrains, electronics and design, in the past 10 years. In the end, the An official from the Korean Academic Soci- group has additionally secured competitiveness in body stiffness, driving ety of Business Administration said, “As the efficiency and design. In particular, the company has become the only one Korean economy faces the crisis, it is interest- with a system that develops and produces automotive steel sheets itself ing to see that Lee and Chung have made differ- among global major automakers. Also, it now has the structure that can ent choices. With the management going from dramatically improve car efficiency from the stage of basic materials. the second to third generation successors, vari- Hyundai Motor has shown its confidence at the Genesis brand launch ous measures are appearing for domestic firms’ event as well. Chung said, “The Genesis is the first car using Hyundai qualitative growth.”

34 MonEY

Corporate Profitability Korean Enterprises’ Profitability on Decline by Jung Suk-yee

n Nov. 16, the Korea Economic facturers in developed countries such as Korea Economic Research Institute Chairman Kwon OResearch Institute hosted a semi- the United States rose from 6.95 percent to Tae-shin delivers an opening speech at the Nov. 16 meeting at the Federation of KoreaKorea Economic nar in Yeouido, Seoul, with the theme of 8.65 percent between 2009 and 2010, and Research Institute Chairman Kwon Tae-shin deliv- Korean manufacturers’ growth potential was maintained at 4.19 percent in 2012, ers an opening speech at the Nov. 16 meeting at the Federation of Korean Industries Conference Center in and profitability since the global financial 3.69 percent in 2013 and 4.16 percent in Seoul. crisis of 2008. 2014,” he continued, adding, “Last year, At the conference, Yonsei University Korea posted a corporate sales growth while that of those in developed countries professor Shin Hyun-han mentioned that rate of 0.52 percent, easily eclipsed by increased from 6.17 percent to 8.01 per- the 200 biggest Korean manufacturers advanced economies’ 4.16 percent, OECD cent during the same period. “The nega- recorded a sales revenue growth rate of member countries’ 3.69 percent and tive trends in Korea can be attributed to 20.99 percent in 2008, immediately after emerging economies’ 5.06 percent.” Korea’s economic growth rate much low- the financial crisis, but the percentage The professor also pointed out that ered in the wake of the global financial dropped to 6.33 percent in 2009 and then Korean companies’ average operat- crisis, and its industrial structure relying to 0.52 percent last year. ing profit ratio fell from 6.79 percent to heavily on exports and highly vulnerable “In contrast, the percentage of manu- 4.23 percent between 2000 and last year, to currency depreciation,” he remarked.

Halved Export Prices Korea’s Export Price Index on Decline by Jung Suk-yee

he Bank of Korea announced Ton Nov. 16 that Korea’s export price index plummeted from 108.37 to 85.35 between the first quarter of 2009 and the third quarter of this year, while A bird's eye view of BusanPort. that pertaining to electrical and electron- ics products almost halved from 123.5 to year-on-year in the first and second quar- third quarter of 2015, 21.9 percent lower 66.9 during the same period. These prod- ters of this year, respectively. The central than the peak of 115.55 recorded in 2011 ucts include semiconductor chips, mobile bank explained that the current situation and very slightly lower than that of the phones and LCD panels, which are the is rooted in global demand contraction first quarter of 2009 at 90.57. main export items of Korea and have the and low oil prices, which are structural Ironically though, the terms-of- highest level of contribution to the index, factors likely to be lingering for a while. trade index rose by 12.5 percent from a 36.7 percent to be exact. Specifically, the demand contrac- year ago to 101.63 in September, as the The rapid decline in the index caused tion had a bigger impact than the other decline in import price (23.9 percent) Korean manufacturers’ sales revenue one. The export price index of chemical exceeded that in export price (14.3 per- to fall by 1.6 percent last year. That of products, which account for 12.7 percent cent). This can be attributed to a drop in 3,046 firms subject to external audits of the index and are directly affected by raw material prices, which is common to dropped by 5.7 percent and 6.3 percent international oil prices, was 90.24 in the many countries around the world.

35 MonEY

Less Profit Than Interest ‘Zombie’ Companies Account for 34.9% of Non-financial Listed Companies

by Michael Herh

f the U.S. raises the benchmark interest rate, many companies with many interest rate is extremely low, 1.5 percent a year. Idebts are expected to go under, since it will be highly likely that Korea But their business environments are not favorable will adjust its standard interest rate. It has been found that there are more than and are not likely to improve, giving rise to voic- 3,000 of these “zombie companies” in Korea. ing concerns. According to the Bank of Korea on Nov. 8, the number of zombie compa- The 2014 Corporate Management Analysis nies that maintain their businesses with debt grew to 3,295 at the end of last Report recently released by the Bank of Korea year, from 2698 in 2009. This means more than 3,000 companies were unable says that the manufacturing industry’s sales to pay back loan interest and borrowed even more money. dropped -1.6 percent last year. Its sales dropped for The LG Economic Institute classified 34.9 percent of 628 non-financial the first time since the bank began to record such listed companies into “zombie companies” as of the first quarter of this year. statistics in 1961. In 2010, such underperforming companies accounted for 24.7 percent of all Sluggish sales are driving an increase in com- companies. Market participants predict that the U.S. will raise its benchmark panies with falling credit ratings. According to interest rate in December. Korea Investors Service, credit ratings of 45 com- In the event that the U.S. raises the standard interest rate, that of Korea is panies (including one bankrupt company) were highly likely to be adjusted within one year, too. The Woori Financial Research lowered from January to October this year. This Institute stated in a recent report that the adjustment gap will be 9.7 months. figure is the most since 61 in 1998, when the This means that if the U.S. elevates its standard interest rate this December, financial crisis hit Korea. Korea is likely to adjust its standard interest rate in October of next year. An increase in companies with lowered credit If the Bank of Korea raises the interest rate, companies’ delinquency rates ratings makes the corporate bond market rigid, nar- will rise, and companies with serious insolvency will have little choice but to rowing corporate fund-raising channels. This can go bankrupt. Experts predict that this will become a big burden on the Korean finally ignite a credit crunch, which can disable economy. even high-flying firms from raising funds. Such In fact, Korean banks’ loans to big companies grew for three consecu- concerns are compelling the Korean government tive months until September, although they fell in the first half of this year. to quickly liquidate faltering companies before the They rose to 500 billion won (US$433 million) in Aug. from 100 billion won U.S. raises its standard interest rate. (US$87 million) in July, and soared to 1.3 trillion won (US$1.12 billion) in The government is planning to restructure September. In actuality, the September delinquency rate of Korean banks’ them on a full scale through UAMCO, a corporate loans to big companies edged down 0.04 percentage points to 1.00 percent restructuring-specialized company. UAMCO will from the end of October, but inched up by 0.10 percentage points year-on-year. select the first company to be restructured within It is not a big problem that loans swelled under the circumstances that the this month, after reshuffling itself.

36 MonEY

Painful Change Many Korean Companies to Face Corporate Restructuring by Jung Suk-yee

he Korean financial authorities put a large number of small and Creditor-led corporate restructuring is going on Tmedium enterprises (SMEs) on the list of companies to be subject in larger companies, too. This year, 41 conglomer- to restructuring through its recent credit risk assessment, so as to cope with ates were categorized into the so-called main debt- the slowdown of the Chinese economy and an interest rate hike by the Fed or group, and 11 of them have been forced to adopt in advance. Another purpose of the move is to protect financial systems from self-help measures such as asset disposal, busi- private-sector debts, with the size of household debts having already topped ness reorganization and recapitalization. Individual 1.100 quadrillion won (US$950 billion). large corporations underwent a regular credit risk According to the Financial Supervisory Service’s announcement on Nov. assessment in June as well, and 35 were picked as 11, a total of 70 SMEs have been given C ratings, and 105 D ratings, in this restructuring targets. Not settling for the result, the year’s assessment. The number increased by 50 from a year ago to reach the financial authorities are going to conduct another highest level since 2009, when the number totaled 512. assessment from this month to next, while plan- This is because stricter criteria were applied this year. Creditor banks ning to come up with its plan for restructuring by looked into 17,594 firms and selected 1,934 with weaker financial structures industry before the end of this month. for a more detailed assessment. The latter increased by 325 from a year earlier. The Korea Development Institute recently said Previously, an in-depth evaluation was applied to those with a negative three- that the ratio of marginal companies recording an year cash flow from operating activities or with an interest coverage ratio of interest coverage ratio of less than 1 for three years less than 1. The length of the period was adjusted to two years at this time. in a row to the total jumped from 6.2 to 10.2 per- A full 60 percent of the firms with C and D ratings are manufacturers. cent between 2010 and 2014, and the percentage According to the Bank of Korea, the number of those with an interest cover- more than doubled from 3.2 to 6.9 percent dur- age ratio of less than 1 rose from 2,698 to 3,295 between 2009 and last year. ing the same period when it comes to large cor- The C-rated companies are to be subject to workout programs, and the D-rated porations. Under the circumstances, the upcom- ones have to return to normal without the aid of creditor financial institutions ing corporate restructuring is characterized by its or apply to the court for rehabilitation. This means that most of the D-rated approach focusing on the competitiveness of the ones cannot avoid court receivership. The C-rated companies not in compli- key industries of Korea, beyond finance, including ance with the procedure are to be faced with debt collections, and cannot take shipbuilding, shipping, petrochemicals, steel and out new loans. construction.

37 iR & ManagEMEnt

Releasing Bond TenpayWeChat Pay Korea Housing Finance Woori Bank Partners Tencent to Corporation Issued Provide Fund Settlement Service, Covered Bond Abroad Targeting Chinese Tourists

by Jung Suk-yee by Jung Suk-yee

he Korea Housing Finance Corporation oori Bank Theld a ceremony in London, UK on Nov. Wsigned 24 after issuing a five-year global covered bond an exclusive busi- of US$500 million on Nov. 19 at a coupon rate of ness agreement with 2.50 percent. China’s Tencent to Various institutions such as asset management provide a fund settle- companies, central banks, sovereign funds, insur- ment service. Accord- ers and banks in the United States, Europe and Asia ingly, the bank will be made a bid for its covered bond. The spread was exclusively paid an 0.90 percentage points higher than the five-year U.S. exchange commission Woori bank headquarter building in Seoul. Treasury rate, the lowest ever for the covered bonds when Chinese tourists the corporation issued abroad. make payments via Tenpay, or WeChat Pay, which is Tencent’s simple pay- “We are planning to continue to issue bonds ment service, in Korea. abroad in the interest of capital procurement diver- Woori Bank announced on Nov. 24 that it will offer domestic fund settle- sification and in view of the high interest in our ment service for Tencent’s international payments. The bank will make profits covered bonds,” the corporation explained, adding, from currency exchange fees when the bank pays local stores in Korean won “These bonds will be able to be utilized as means for after receiving remittance in foreign currencies from Tencent’s transaction. expanding the long-term fixed-rate amortizing mort- Woori Bank is the only bank in Korea to establish partnership with Ten- gage loans the Korean government is working on as cent. The business partnership will run for an indefinite period. In other a part of its measure against household debts.” words, the bank will make monopoly profit on exchange commission when Chinese tourists pay with Tenpay in stores in Korea, including duty free shops. Assuming five percent of 15 trillion won (US$13.11 billion) of the annual amount Chinese tourists consumed in Korea are paid with mobile payment services, such as Tencent and Alipay, the annual foreign currency exchange fees are estimated to be 10 billion won (US$8.74 million). When existing cash and credit card payments are gradually being replaced with such mobile pay- ment services, the relevant market will grow further. In addition, Woori Bank plans to start introducing a similar platform in online purchases made by foreigners from early next year. Based on its exclu- sive partnership with Tenpay, the bank will also receive exchange commission Korea Housing Finance Corporation president Kim Jae-cheon (sec- ond from the left) attended a ceremony on November 24 to com- when Chinese consumers make purchases via Tenpay from Korean online memorate the corporation’s covered bond issue. stores.

EDCF Loans he Export-Import Bank of Korea (Korea Eximbank) announced on TNov. 17 that it will extend US$183 million (214.57 billion won) in Korea Eximbank Economic Development Cooperation Fund (ECDF) loans to the “Korea- Myanmar Friendship Bridge Project and Myanma Railways Modernization Finances US$183 Project” led by the Myanmar government. The EDCF is a bilateral official development assistance (ODA) loan pro- Million Myanmar gram, which was established by the Korean government in 1987. The low-rate Construction Project EDCF loans given to developing countries are to help emerging countries stand on their own feet in terms of industrial development and economic sta- by Marie Kim bilization. It is also to promote economic interchange with Korea.

38 iR & ManagEMEnt

Eximbank Chairman and President Presidential Award Lee Duk-hoon signed the EDCF-based construction deal with Myanmar’s Dep- Korea Industrial Complex Corporation uty Minister of Construction Win Myint and Deputy Minister of Rail Transporta- Awarded Presidential Citation tion MyintThein in Naypyidaw, Myan- by Marie Kim mar, on Nov. 16 (local time) to provide US$138 million (161.81 billion won) to he Korea Industrial Complex Cor- the Korea-Myanmar Friendship Bridge Tporation announced on Nov. 10 that Project and US$45 million (52.76 billion it was awarded a Presidential citation at the won) to the Myanmar Railways Modern- Corporate Partnership Awards Ceremony of ization Project. this year. The railways modernization project The corporation sent 75 business delega- seeks to improve the safety of railroad tions in 2014 in order to help small and medi- transportation and use environment in um enterprises (SMEs) open up overseas Myanmar by replacing 100 old passenger markets. The delegations signed 523 export Kang Nam-hoon, president of the Korea Industrial Complex Corporation, receives a presidential citation at the cars, and supplying equipment and mate- contracts worth US$105 million in total. In 2015 Corporate Partnership Awards Ceremony on Nov. 10. rials to rail yards. addition, the corporation assisted in Korean SME projects for the commercialization of their R&D outcome, helping them to increase their sales revenue by 481.1 billion won (US$416.4 million). It set up seven industry-academia convergence complexes until the end of last year so as to encourage innovation in industrial complexes where SMEs are concentrated. It is also opening 1,400 dorm rooms and seven daycare centers with a combined capacity of 455 kids, so that workers of the firms can enjoy improved residential conditions. Furthermore, the cor- poration brought in new systems so that subcontract payments can be made by the due dates. “The Korea Industrial Complex Corporation is an organization serving to enhance

Minister of Construction KyawLwin (2nd from left), the competitiveness of SMEs in industrial complexes in Korea, and its role will be further Minister of Rail Transportation NyanTunAung (3rd from expanded with time,” said Kang Nam-hoon, head of the board of directors of the corpora- left), and Eximbank Chairman and President Lee Duk- hoon (4th from right), pose for a photo in Naypyidaw, tion, adding, “We will launch a variety of on-site campaigns and programs so that SMEs and Myanmar, on Nov. 16. their larger partners can achieve a higher level of co-prosperity.”

Auto Part King yundai Mobis developed an Integrated Mobis Electronic Brake (iMEB) for eco- Hfriendly vehicles, the second time in the world and first time in Korea. With the Hyundai Mobis latest development, Hyundai Mobis, a late starter in the brake sector, has gained a foothold to jump up to be the leading auto part producer in the world. Develops The company announced on Nov. 22 that it succeeded in developing the advanced brak- ing system called iMEB, which has reduced its production cost and weight by more than 30 World’s Second percent by integrating the pressure supplier and controller in the regenerative braking system Eco-friendly into one electronic system. Through the system, advanced braking functions, such as elec- tronic stability control (ESC), anti-lock brake system (ABS), smart cruise control (SCC) and Integrated autonomous emergency braking (AEB) system can be implemented at the same time. As a key component in green cars, the regenerative braking system converts excess Electronic Brake kinetic energy to generate motor that automatically starts charging the battery when the brake pedal is applied. by Marie Kim In particular, Hyundai Mobis has improved its performance by electrifying the related system. When a driver steps on the brake, its pressure directly goes to the electric motor, which betters braking control performance. During the iMEB development process, the company applied for a total of 109 patents at home and abroad, including 20 patents overseas, securing its advanced technology. Accordingly, Hyundai Mobis is expected to be in an advantageous position in the com- petition for an environmentally-friendly braking system in the future with its iMEB. The integrated regenerative braking system is a blue ocean market, since it has not been applied Hyundai Mobis’ booth. to mass-produced cars yet.

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Wonki World ety when they pay shipping fees. In the Society’s online store, there are currently Wonki Sansam to Showcase New 463 products registered from 73 compa- nies, including Samsung, Sony, SK and Launch of Society on Dec. 15 WonkiSansam. By the end of the year, the company is planning to register 10,000 by Lee Song-hoon products from 500 companies in its online onkiSansam Co., which took ing 70 news reporters, 50 presidents and store. Wover CNB Tec earlier, is final- executives from investment companies, Once the online-to-offline (O2O) com- ly launching its gaming platform called celebrities at home and from abroad and merce marketing strategy, a revolutionary “Society.” An official from the company presidents from partner companies to idea from WonkiSansam CEO Kim Dae- said on Nov. 23 that it will host the Society provide Society products. Developed by young, become a reality through games, launching event on the fifth floor in the WonkiSansam, the Society is a 3D e-com- CNB Tec, or JNU Global, is expected to Grand Ballroom of the JW Marriott Hotel merce platform that provides services gradually expand its sales distribution net- at 6 p.m. on Dec. 15. allowing users to receive actual products work and make massive operating profits The showcase will be participated in through games. in the future. by 20 members from Gag Concert, a popu- Although many advergames suffered lar sketch-comedy TV show in Korea, who a defeat, the Society is said to be different. belongs to JNU Entertainment under JNU This is because of “fruits” which can Group, the parent company of which is be created. In general crop farming simu- WonkiSansam, and 15 Vietnamese models. lations, the fruits only exist in the game. Also, the event will be a great occa- However, users can receive actual fruit sion attended by 500 people, includ- and processed products produced via Soci-

Maintaining Double-digit Growth market. In the snack category, the com- pany recorded sales of 882 million yuan Orion Keeps Stable Sales Growth in (US$137.8 million or 161.54 billion won) in the third quarter, up 16 percent from the Chinese Market in Q3 same period last year, with its potato chip snacks, such as Oh! Gamja, locally named by Lee Joon-dong as Ya! Tudou in China; Yegam, called Shu Yuan; and Swing Chip, called HaoYouchi. In the pie category, Orion’s main prod- ucts – , named Hao Li You Pie, and QT Pie, called Q Di – led sales growth, showing an increase of 15 percent year-on- year. Orion plans to continuously release new potato chip and pie products in the future and expand the market to the Hunan region, including Shanghai and Guangzhou, in order to raise its market share. Orion products sold in the Chinese market. An official from Orion said, “Despite a slowdown in the overall market growth, rion China posted 2.03 billion research firm Wrigley, the number one Orion is recording matchless growth and Oyuan (US$317.15 million or company in the market saw a decline of 6 strengthening its status as the number two 371.79 billion won) in sales in the third percent, while Mondelez International and company in the Chinese confectionery mar- quarter. The sales growth in the second Want Want China, which ranked third and ket. We are planning to maintain the annual quarter slowed down with 1.5 percent from fourth, showed growth of as low as 3 per- growth rate of 10 percent, achieve the sales the same period a year earlier, but the figure cent and 1 percent, respectively, in the past targets of 10 billion yuan [US$1.56 billion bounced back, showing an increase from year. or 1.83 trillion won] in 2018, and become July. Orion’s main items – snacks and pies – the nation’s number one confectionery According to data from prestigious have led the growth recovery in the Chinese company in China in 2021.”

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Connecting Singapore offer the lowest bidding price, the com- pany received high scores in technical Samsung C&T evaluations that comprehensively appraise technical skills, job competency and Wins Singapore safety management, obtaining the order. It is meaningful in that the company has Rail Project secured a quality project which guarantees stable profits. by Jung Min-hee In fact, Samsung C&T got high marks Thomson-Line. amsung C&&T (CEO Choi Chi- in its differentiated proposals, such as the Shoon) announced on Nov. 25 that business plan considering the character- “It is meaningful in that the company won it has won a US$393 million (449.59 bil- istics of construction carried out in the a quality project by raising customer reli- lion won) order to build Thomson subway downtown area, expertise accumulated in ability based on technology and safety in line T307 in Singapore from Singapore’s the previous six rail projects and safety- the price-centered competition. Since our Land Transport Authority (LTA). first strategy. efforts for customer confidence has gained The project calls for constructing an In particular, the company’s manage- recognition from LTA, we will maintain interval in the 43-kilometer Thomson-East ment and executives have consistently the trust by delivering outstanding results Coast Line linking Singapore’s north with participated in the safety programs run for the project.” Changi Airport. It involves building a tun- by LTA in order to boost its confidence in In Singapore alone, Samsung C&T has nel boring machine (TMB) tunnel (2,684 safety. In addition, Samsung won strong completed the C703, C908, and C156 sec- meters), a cut-and-cover tunnel (343 trust through the construction of the top tions within Downtown Line (DTL), while meters), and a subway station with two class safety experience center in Singa- currently working on the C922 and C923 underground levels in Marine Parade in pore and site operation with safety-first sections of the same DTL, as well as a the south-eastern part of Singapore. approach. transfer station in Caldecott and Thomson Although Samsung C&T did not An official from Samsung C&T said, Line’s 213 section spanning 379 meters.

Partnering Up LGD Succeeds in Localization of Major Curved OLED Panel Components with Partners by Cho Jin-young

hrough coexistence with partner panels, LG Display desperately needed this procesLG Display’s process innovation experts visit the Tcompanies, LG Display has suc- metal foil. However, the existing metal foil production site of its partner Poongwon Precision Co. in Ansan, Gyeonggi Province, to inspect products in a bid ceeded in the local production of the main manufacturing method of Poongwon Pre- to improve production yield rate and quality. components for curved organic light-emit- cision cost a lot. Therefore, the company ting diode (OLED) panels, which are con- should lower such a high production cost efforts from the two companies, Poongwon sidered a new growth engine in the future. per unit. In addition, LG Display could Precision finally succeeded in developing a According to LG Display on Nov. 23, face setbacks to mass produce its 55-inch new metal foil production technology last the company suggested Poongwon Preci- curved OLED panel if the company don’t year. Then, LG Display also succeeded in sion Co., a TV component maker in Ansan, improve Poongwon Precision’s metal foil replacing the existing Japanese component Gyeonggi Province, to develop a new pro- yield rate, which fell short of 50 percent. with Poongwon Precision’s metal foil for cess method for metal foil, the core compo- So, LG Display decided to send eight localization. nent for curved OLED TVs, in 2013. process innovation experts to Poongwon An official from LG Display said, Since OLEDs are vulnerable to mois- Precision from September 2013 in a bid to “When we replace the existing Japanese ture and heat, they need strippers to block share its expertise in process improvement component by next year, we will have an the contact with oxygen. Poongwon Pre- and development. Moreover, the company import substitution effect worth 50 billion cision’s metal foil was lighter and thinner supplied its development funds. After LG won [US$43.12 million].” Poongwon Pre- than the one imported from a Japanese Display advisory panels found out that the cision is also expected to see a growth in company earlier, so it was perfect to realize laser machine equipment caused such low sales from 8 billion won (US$6.9 million) a curved display. yield rates, it helped supplementing and last year to 20 billion won (US$17.25 mil- In order to produce curved OLED TV stabilizing the production facilities. With lion) next year.

41 ict

Nurturing Cloud Computing Government Lays Out Blueprint for Promotion of Cloud Computing Sector

by Michael Herh

he government presented a blue- computing use in the private sector, and cent of public organizations use private Tprint for the promotion of the the creation of a growth ecosystem in the cloud computing by applying private cloud computing sector such as elevat- Korean cloud computing industry. cloud computing to less important parts ing the number of cloud companies to First of all, Korea will prepare a of resources of public organizations first. 800 and the cloud use rate to 30 percent turning point in the growth of the cloud To this end, the government will pre- by 2018. The Ministry of Science, ICT computing industry in the first stage that pare institutional mechanisms such as and Future Planning and the Ministry of will proceed until 2018 and take off as quality and performance standards relat- Government Administration and Home a cloud computing leader from 2019 to ed to the introduction of private cloud Affairs finalized and announced the 2021 according to the plan. The Ministry computing. The government will flexibly KCT Cloud Computing Promotion Plan of Science, ICT and Future Planning and apply the rule of banning large compa- to successfully go ahead with the K-ICT the Ministry of Government Administra- nies from taking part in public software strategy and realize a software-oriented tion and Home Affairs will scale up the projects in the case of cloud computing- society along with relevant government current cloud computing use rate of three related public software projects for com- units and the Government 3.0 Committee percent ten-fold to 30 percent or more petition with foreign companies in the in a cabinet meeting on Nov. 10. by 2018 and will create a cloud com- cloud computing sector. This cloud computing promotion puting market amounting to 4.6 trillion Cloud computing R&D will be plan is aimed at nurturing the Korean won (US$4.0 billion) (the public sector expanded as well. The government will cloud computing industry with the pub- amounting to 1.2 trillion won or US$1.0 ramp up cloud computing’s proportion lic sector as a catalyst as part of the first billion) for three years. of its software R&D budget from nine basic legal plan made in compliance with In 2018, the government will turn its percent this year to 20 percent in 2018. the Cloud Computing Development Act IT centers into cloud computing centers, Moreover, the government will run enacted on Sept. 28. The plan consists of and will push forward with the construc- a cloud computing specialist academy three strategies and nine tasks. The three tion of a third center under a feasibility to foster specialists for companies and strategies are the preemptive introduction study by expediting the transformation expand information technology research of cloud computing with the public sec- of G-Cloud, the cloud computing of the centers (ITRCs) at universities and col- tor as a catalyst, the expansion of cloud government. It also aims to have 40 per- leges.

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IoT for 5G Era New Powerful Frequencies Secured for IoT, 5G Era by Michael Herh

he Korean government has begun ly likely to be included in international width can be used in long-distance IoT Tto make all-out efforts to take the standard frequencies for public safety services such as remote meter reading lead in the 5G era by securing an IMT and disaster relief, so Korea’s industries and smart homes. frequency that is 200 MHz or wider at the for equipment and terminals for disas- The 24 GHz bandwidth can work World Radiocommunication Conference ter networks will secure much stronger with small output radar and 5G mobile 2015 held in Geneva, Switzerland for competitiveness,” said a representative at telecommunications repeaters. Ultra-high four weeks from Nov. 2 to 27. The WRC the Ministry of Science, ICT and Future 60 GHz bandwidth will be chosen for is the world’s highest decision-making Planning.(MSIP) uncompressed high-volume video and meeting held by the International Tele- On Nov. 10, the MSIP officially high-resolution short-range radar in the communication Union (ITU) under the announced technological standards on 5G era. The ministry said that in this fre- U.N. every three or four years. the apportionment of 8Hz frequencies of quency apportionment, they are giving The conference revises the Radio the K-ICT free band to help companies priority to services that industries want, Regulations, an international treaty cope with the demand for things like the veering from past systems where they including international frequency distri- IoT and high-speed wireless telecommu- regulated technological systems in accor- bution and cross-border anti-interference nication. dance with corporate purposes. The mini- criteria among others. The Ministry of The K-ICT free band refers to a mum necessary technological standards Science, ICT and Future Planning will frequency band that can be freely used were included to make frequency appor- dispatch a delegation comprised of spe- without permission or reports if the mini- tionment free from specific uses such as cialists in the frequency sector. mum technological standards such as output, occupied bandwidth and interfer- With reference to mobile telecom- power output are met to prevent interfer- ence avoidance measures, the ministry munication frequencies, Korea aims ence between devices. A good example explained. to secure IMT frequencies that are 200 is Wi-Fi devices. Wi-Fi makers do not “We laid a systematic foundation MHz or wider. This is because if Korea obtain rights to using frequencies, but such as the apportionment of frequencies secures that, the nation can secure wide- simply install Wi-Fi modules in devices of the K-ICT free band and technological band mobile telecommunication fre- after having them certified. standards,” said Jin Sung-bae, the head quencies along with bands designated The frequencies of the K-ICT free of the Frequency Policy Department of for IMT. The government’s strategy is to band that the ministry will apportion this the Ministry of Science, ICT and Future secure a bridgehead into the 5G service time are 262-264 MHz (2 MHz band- Planning. “So we expect the creation of that will be commercialized in 2020 by width), 24-27 GHz (3 GHz bandwidth) IoT services with wider coverage in the preemptively responding to technological in the extremely low band and 64-66 short term and the birth of future fre- advancement, such as the TDD System GHz (2 GHz bandwidth), 122-123 GHz quency-based industries such as remote and an increase in data traffic. (1 GHz bandwidth), 244-246 GHz (2 medical diagnoses based on visual tele- “Bands that Korea designated as fre- GHz bandwidth), all of which belong to communication service and security quencies for a disaster network are high- the 8 GHz bandwidth. 200 MHz band- checks.”

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LTE Evolution tion carriers launched the VoLTE service (also known as HD Voice). The launch and full commercialization of the service Mobile Carriers Rushing will make Korea the first nation to do that in the world. According to the telecommunication for Video Content industry on Nov. 9, the Ministry of Sci- by Cho Jin-young ence, ICT and Future Planning and three mobile service carriers began the final countdown of their service launch while holding a joint demonstration on Nov. 10 before the full commercialization of VoLTE. Full commercialization may start as early as this week. VoLTE is a voice call service based on LTE networks. The advanced service features quicker connections and clearer voices. Moreover, VoLTE users can share videos and maps even during voice calls. Even after the completion of prepara- tions, differences in opinions about inter- carrier connection service fees and pay- ment systems have delayed a connection among the three carriers. But in May, the launch of a data-oriented fee system that offers limitless voice calls has begun to expedite connection service among the The two basic ideas behind LTE-TDD are that more data comes in to a phone than goes out from a phone, and that three. transmissions to and from the phone should share the same frequency. The wireless telecommunication industry expects that the full commer- he number of LTE subscrib- more and more people are watching HD cialization of VoLTE will give birth to a Ters topped 40 million in Korea, and full-HD programs and footage on wide array of voice calls and data fusion where the first LTE service started four smartphones instead of their comput- and convergence services. SK Telecom years ago. ers or TVs. They can watch programs announced that they will launch the The technology has allowed users to they missed whenever and wherever by tentatively-named Smart Call Transfer enjoy wireless Internet faster than wired means of VOD, too. Service, which enables users to make or Internet services and boosted the number This has to do with mobile carri- receive a call via laptops and tablet PCs of users who enjoy video content on their ers’ business expansion into the media by way of VoLTE within this year. KT smartphones. Under the circumstances, industry. SK Telecom recently acquired is planning to apply VoLTE to its Giga mobile carriers are vying fiercely for CJ Hello Vision and announced that it LTE, Olleh Pop-up Call and Who Who, such content in an effort to increase their would raise a fund of approximately 100 which blocks spam calls and texts. LG profits. billion won (US$85 million) with the U+ will reinforce its VoLTE service LTE has promoted the use of multi- CJ Group for the purpose of supporting named “Yoowa.” media services, and LTE data traffic in content creators and startups. LG U+, in But the companies are faced with a the country increased about six-fold from the meantime, launched a video portal tough task – a low use rate of VoLTE. 27,687 TB to 152,338 TB between the app along with the Uflix movie service to They began a tentative VoLTE service end of 2012 and the end of September provide a variety of brand new movies at based on connections among them in this year. The LTE data consumption a monthly price of 7,000 won (US$6.05). June, and gradually launched its com- per subscriber jumped from 1.8 GB to The full commercialization of Voice mercial service from Aug. 4. At the more than 4 GB during the same period. over LTE (VoLTE) also is now close at moment, it is estimated that more than 40 More than half of the usage is for video hand. VoLTE is a high-quality call ser- million people are using LTE in Korea content, which is followed by those for vice based on LTE. The service will be and out of them, about 32 million peo- web portals, mobile messengers and fully commercialized in about three years ple own smartphones that can work with social networking services. Nowadays, since the three Korean telecommunica- VoLTE.

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Fast Identity Online Korean Mobile Carriers Cooperate for FIDO Development by Cho Jin-young

he Ministry of Science, ICT & equipped with sensors regardless of the TFuture Planning is working manufacturers and the growth of the together with SK Telecom, KT and LG market and the development of the tech- According to market research firm U+ to introduce biometric identification nology can be accelerated. At present, Acuity Market Intelligence, the FIDO or fast identity online (FIDO) services NTT DoCoMo is providing the world’s market is estimated to reach US$33.3 bil- by March of next year. Examples of such first iris- and fingerprint-based biometric lion in size in 2020. Back in July 2012, services include fingerprint recogni- identification services. about 200 companies around the world, tion coming with smartphones. Personal Experts point out that this technique including Google, Amazon, Samsung identification based on the iris, face or will be able to take the place of the pub- Electronics, ARM and Microsoft, formed arterial pattern have been put to commer- lic key certificate in the near future. the FIDO Alliance to work on technical cial use as well, and are expected to be Then, the IoT industry as a whole as well standardization and ecosystem forma- in popular use on smartphones within a as the financial sector covering mobile tion. In Korea, the three mobile carriers couple of years. payment and fintech faces a sea change organized the FIDO Forum with Sam- Once introduced by the three mobile as the technique is adopted by CCTVs, sung SDS, Raon Secure, CrucialTec and carriers, the biometric identification ser- drones, self-driving vehicles, and other many more for technological develop- vices can be used on most smartphones devices. ment, too.

VoLTE Dominance Final Countdown Begins for World’s First VoLTE among Mobile Service Carriers by Michael Herh

he era of Voice over LTE services can combine voice calls with T(VoLTE) based on LTE data net- various data services, since voice and works will take its first step this month. data can travel in one chunk via the same Up until now, the VoLTE service has been network. available among subscribers of the same Three mobile service carriers are mobile service carriers only. But sooner busy developing new services for the or later, the VoLTE linked to other mobile new era of mobile telecommunication service carriers will be commercialized. before the debut of VoLTE-compatible According to the telecommunications services. Not much is known about the industry, SK Telecom, KT and LU U+ the VoLTE service rides wireless internet new services. But industrial experts pre- will launch the world’s first VoLTE ser- networks based on broadband frequen- dict that Real-Time Mobile Interpretation vice among mobile service carriers after cies. Service and Mobile Doctor Service will holding a demonstration of the new ser- Call delay times will be shortened, be new services in VoLTE’s early stage. vice within this month. VoLTE is a tech- too. Currently, a call is connected to the The former interprets conversations with nology to transfer voice calls via LTE receiver four or five seconds after the foreigners via oral or written methods in data networks. caller presses the call button. But VoLTE real time, while doctors can see patients’ Its notable feature is the fact that makes the delay time obsolete. But the sick areas, ask the patients questions and VoLTE dwarfs current voice call services creation of new services is where VoLTE tell them their professional opinions by in terms of sound quality. This is because is at its strongest. This is because LTE way of the latter.

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Affordable Option Less Expensive Smart Phones Gaining Popularity in Korea by Cho Jin-young

he focus of the mobile market of users to pay attention to cheaper yet TKorea is shifting from high-end high-performance handsets. smart phones priced at around 1 million An increasing number of less expen- Advertising poster of the Luna of SK Telecom. won (US$880) to mid- to low-priced sive phones are being found on the best ones with advanced features. seller list these days. per unit, while not adjusting the subsi- This can be attributed to the imple- Under the circumstances, Korean dies for top-class smartphones such as mentation of the Mobile Device Dis- mobile carriers are focusing on the mar- the iPhone 6S and the Galaxy S6 Edge. tribution Improvement Act that has keting of such phones by raising their This is to win over more customers with blocked top-of-the-line smartphones subsidies for those models up to the the mass-market phones they are look- from being sold at low prices and caused upper limit of 330,000 won (US$290) ing for.

Smaller Galaxy Samsung Electronics to Release ‘Galaxy On’ Series of Low-end Phones by Cho Jin-young

A teaser photo of the Galaxy On. amsung Electronics is releas- Previously, Samsung Electron- Sing low-end smartphones to ics launched the Galaxy J series, which Samsung’s Exynos 3475 quad-core pro- target emerging markets. The company come with a 13 megapixel rear autofocus cessor, and come with 1.5GB of RAM, has launched the Galaxy On series, low- camera and a 5 megapixel front camera, 8GB of internal storage, micro SD card end models priced at some 180,000 to and a specialized “selfie function” called slot and 5-megapixel front camera. 250,000 won (US$158 to $219), to win “wide selfie,” though they are low-end The Galaxy On5 ships with an back the market share in China and India. models. 8-megapixel rear-facing camera, and the According to industry sources on It is Samsung’s effort to introduce Galaxy On sports a 13-megapixel snap- Nov. 2, Samsung Electronics plans to specialized functions by lineup among per on the back. release new low-end devices at the end many low-end smartphones. Samsung Electronics has decided of this year. The company unveiled the Also, the price of the Galaxy On to release the products priced at some Galaxy On5 and Galaxy On7 in China series is attracting attention, which is 100,000 won for price competitiveness last week, and teaser videos of the prod- the lowest among Samsung Android with Chinese and Indian smartphone ucts in India. smartphones, except for Tizen mobile makers. Local manufacturers, such as With a catch phrase of “Get Ready phone. The prices of the Galaxy On5 and Xiaomi and Micromax, have already to Enjoy Exciting Music Experience on Galaxy On7 are 998 yuan (US$157 or launched many models in the same price Nov. 3,” Samsung Electronics announced 180,000 won) and 1398 yuan (US$220 range. An official from the industry said, the release plan of the Galaxy On series or 250,000 won), respectively. “Now, it is impossible to hold a domi- through the teaser in its official twitter While the Galaxy On5 features a nant position in the competition just with profile. The new devices will feature 5-inch (12.7cm) super AMOLED display a brand image of Samsung Electronics Samsung’s music streaming service and a 2600 mAh battery, the Galaxy On7 without releasing models in the same called “Milk Music.” The Galaxy On comes with 5.5-inch (13.97cm) super price range with local companies. When series are smartphones optimized to lis- AMOLED display and a 3000 mAh we have similar price competitiveness, ten to music, including music streaming removable battery. we can defend our market share but prof- service. The two phones are powered by itability will get worse further.”

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Expansion of Tizen The Tizen-powered Z3 smartphone can be opened at SK Telecom and KT. An offi- cial from purchasing agents said, “Just like Samsung Z3 Tizen China’s Xiaomi, inquiries and purchase demand of the Z3 are recently surging.” As the demand for unlocked phones, Smartphone Ranks 4th in which are not purchased through mobile carriers, is recently increasing in the Sales Less than 1 Month domestic smartphone terminal market, this raised hopes that the Z3 can be released in Korea as well. The second Tizen smart- after Release phone is also compatible with the Galaxy by Marie Kim J5 battery, which is already on the domestic market. In addition, the Z3 is aiming for ccording to industry sources on it is urgent to immediately increase the the global market, unlike the Z1, so it will ANov. 16, the Samsung Z3 Tizen number of applications that are available be released in additional countries. The Z1 smartphone ranked fourth in the world’s in Tizen-powered smartphones, in a bid was launched only in India, Bangladesh top 10 trending phones chart of week 46, to expand the Tizen ecosystem. There are and Sri Lanka, but the Z3 will be released or the second week of November. The only 1,000 apps registered in the Tizen app in Russia, Europe and the Middle East. An ranking is released by foreign presses, store. The figure falls far short of the 1.4 official from Samsung Electronics said, every week. The announcement came million apps on Google and 1.2 million “We don’t have a plan to launch the Z3 in three weeks after Samsung started selling apps on Apple. Therefore, the company the domestic market yet.” the Z3 in India on Oct. 21. Foreign presses needs to develop apps that are suitable to According to market research firm comprehensively gather consumer search use in the released countries. Strategy Analytics on Nov. 8, the Tizen inquiries and news, and select the top 10 Meanwhile, as the Tizen-powered operating system (OS) ranked fourth in trending smartphones of the week. Samsung Z3 smartphoneis not officially terms of the global smartphone OS market The Z3 Tizen smartphone ranked released in Korea, an increasing number share in the third quarter. Google’s Android among the top 10 less than a month after of domestic consumers are making a group OS came in first, Apple’s iOS second and the launch. This compares with the fact that purchase of the Z3. Microsoft’s Windows third. the company’s first Tizen smartphone and According to industry sources on Nov. This is because more than 1 million previous model, the Z1, made the top 10 9, more domestic consumers are becom- units of the first Tizen-based smartphone in the chart for a while a month and a half ing interested in the Z3, Samsung’s second Z1 were sold in the Indian market, and the after the launch. Samsung sold more than Tizen smartphone following the Z1. Some sales of the Z3 is on the increase. In par- one million of the Z1 handsets in India so are directly buying the Z3 online, while ticular, Tizen OS ranked second with a 20 far, but it was an experimental model. The others are purchasing it through Internet percent share in the Indian market, follow- Z3, however, dramatically improved its group purchase programs. ing Google’s Android. functions equivalent to medium-low priced smartphones and maintained a low price of some 150,000 won (US$128), raising its competitiveness. There is much attention being paid to whether the Tizen-powered Z3 will help spread the Tizen operating system (OS). Earlier, U.S.-based market research firm Strategy Analytics said that for the first time, Tizen surpassed BlackBerry OS for fourth place in the global OS market in the third quarter. As the Z3 is expected to greatly expand the markets to not only emerging countries, including India and Bangladesh, but also Russia and Europe, it will lead to the spread of Tizen OS, which shows an upward trend. However, industry watchers say that Samsung Z3 Tizen smartphone.

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Samsung-Apple Compatibility Samsung Gear S2 Smartwatch Can be Compatible with Apple iPhone Soon by Cho Jin-young

he Samsung Gear S2 smart watch As the Gear Manager app for the Tis expected to be compatible with iPhone is almost prepared, the Gear S2 can the Apple iPhone soon. In the smart watch be compatible with the iPhone as early as market, which is dominated by the Apple by the end of this year. Previously, foreign Watch, the Gear S2 will accelerate the pur- press, including SamMobile, also said that Samsung's smart watch suit. the Gear devices can be connected with Gear S2. According to industry sources on Nov. the iPhone within this year. 19, the screen to prepare its Gear Manager In the smart watch market, the Gear An official from the industry said, app for the iPhone appeared on Samsung S2 is expected to increase its market “Apple Watch led the smart watch market Electronics’ app mobile home page. The share. According to the U.S.-based mar- until the third quarter but the Gear S2 will Gear Manager app should be installed ket research firm Strategy Analytics (SA), change the market trend in the fourth quar- when using Gear devices. The Gear Man- Apple Watch dominates the smart watch ter. This is because the model is receiving ager app is not registered in Apple’s app market with a 74 percent market share in good initial consumer response, and the store yet, but the preparation screen is con- the third quarter, followed by Samsung number of its users will dramatically grow nected to the app store. Electronics with a 9.8 percent market share. when absorbing the iPhone users.”

MicroSD Inclusion Edge will house a 5.7-inch flexible dis- play. What’s interesting is that the Galaxy Samsung Might Reintroduce MicroSD S7 Edge have its display curved from the top and bottom, not from side to side. To Expansion in Galaxy S7 be sure, these are all rumors and not con- firmed by Samsung. by Cho Jin-young Meanwhile, S7 is highly likely to be unveiled at Mobile amsung is reportedly reconsidering removable battery and microSD card slot. World Congress to be held in Barcelona at Sincluding a microSD card slot in As there has been a mixed reaction among the end of Feb. next year. The Galaxy S7 its next-generation Galaxy S7 smartphone, consumers, it is rumored that the compa- series is believed to come powered by Sam- according to a report from Italy-based ny will reintroduce the microSD card slot sung’s own Exynos 8890 or Qualcomm information and technology news outlet from the Galaxy S7. Snapdragon 820 chipsets. Plus, it will fea- HD Blog on Nov. 23 (local time). In addition, the Galaxy S7 will feature ture a 20-megapixel rear-facing camera and It said that there is a possibility that the a 5.2-inch display, while the Galaxy SS7 the ubiquitous USB Type-C connector. microSD card slot will return on the Gal- axy S7. Samsung Electronics decided to remove the microSD card slot in the Gal- axy S6 lines as it introduced the embedded battery instead of the removable battery. Accordingly, consumer complained since they couldn’t change its battery and expand its memory. On this account, sales of the Galaxy S6 fell short of expectations. Some said that this is because Samsung excluded its points of difference from Apple’s iPhone –

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phones can be used as mobile credit card payment terminals. When you order some food for delivery or go to a gas station, you can pay for food or gas with your smartphone without any wireless credit card payment devices. While doing it, you don’t use the value-added (VAN) network, due to the direct communication with card companies. Therefore, credit card fees will be reduced along with monthly rental, maintenance and communication fees caused by the use of costly wired and wireless card payment terminals. In fact, there have been comments that some errors occur when customers try to use Samsung Pay in gas stations. Sam- sung Pay, which uses a one-time security ‘Pay’ War token method, cannot be used at self-ser- vice gas stations due to their characteris- Samsung Pay Appears to tics of approving an actual payment after approving preliminary payment. This is why Samsung Electronics is also looking be More Successful than for appropriate measures, including the installment of an NFC payment module, to Apple Pay So Far solve such errors. An official from a fintech company by Cho Jin-young said, “If Samsung Electronics expands the application of the NFC payment module, arket research firm Aite Group United States have been based on MST or smartphones with Samsung Pay can be Msaid that Apple Pay, which magnetic security transmissions, proving used as mobile payment devices. Accord- made its debut in October last year, is that our payment application supporting ingly, it is possible to not only transfer currently accounting for merely 1 percent both near field communication (NFC) and money between smartphones but also pay of retail payments in the United States. magnetic secure transmission (MST) at the with credit cards.” Phoenix Marketing International added same time is competitive enough.” When smartphones replace credit card that the rate of increase in the number of Still, experts point out that more time payment devices like this, it will greatly its users is slowing down, increasing by will be taken to find out who the winner affect the domestic VAN ecosystem first. just three percentage points to 14 percent will be in the end, because Apple is mak- Currently, VAN companies receive com- of credit card-using American house- ing various investments for the popular- missions in the payment authorization holds between February and September. ization of Apple Pay. Bloomberg recently process after installing its private lines in Meanwhile, Samsung Pay is enjoy- said that stores will adopt the new pay- offline stores and lending card payment ing huge popularity these days although it ment system at a more rapid pace once terminals. However, the mobile payment has been in the market for only a couple of mobile payments become the mainstream, system doesn’t require any private lines or months. In Korea, the number of subscrib- and the growth of Apple Pay is likely to card payment devices, and allows credit ers has already topped one million, and be accelerated after the passage of three to card companies to directly authorize the the number of payments per day and the five years. payments. So, the VAN is not needed any- accumulated amount of the payments have Samsung Pay, which uses the NFC more, according to the majority of industry exceeded 100,000 won (US$86.35) and and the MST to transmit payment infor- experts. 100 billion won (US$86 million), respec- mation, is also expected to be more wide- In fact, a U.S. startup has also com- tively. ly used in the future. This is because the pleted the development of the NFC pay- “It has been found that American con- company has developed a payment mod- ment module and is providing the service sumers who use the Samsung Pay tend to ule that allows money exchangebetween in the country. However, the domestically opt to use it repeatedly,” Samsung Elec- smartphones and pay with credit cards by developed NFC payment module can rap- tronics explained, adding, “75 percent of using an NFC chip in smartphones. idly dominate the market with the power- the Samsung Pay-based payments in the Once the module is installed, smart- ful lever of Samsung Pay.

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Talk via Handheld Computer Walkie-Talkie Service by All 3 Mobile Service Carriers

by Michael Herh

ll three mobile service carri- Aers are launching walkie-talkie services, drawing attention to the back- grounds of the new services. According to industrial sources on Nov. 11, follow- ing LG U+ and KT, SK Telecom is plan- ning to launch the “Push to Talk” service which enables people to use their smart- phones like walkie-talkies by installing an application late in Nov. The LTE walkie-talkie service was first launched by LG U+ in January under the name of “U+ LTE Walkie- Talkie.” As this service open to custom- ers of LG U+’s competitors has gained popularity, with 300,000 customers sign- ing up for the service up to the present, KT debuted a similar service, “Olleh Walkie-Talkie.” SK Telecom also fol- lowed suit. LG U+ announced it provides “Soundcon” service that combines sound and emoticons with U+ LTE walkie-talkies on The mobile telecommunication Nov.10. industry explained that this service was launched to give more benefits to cus- will use this service in groups for a long tion method and those who frequently tomers, since this service through which time,” he added. “You will know that do outdoor activities or hobbies, said the people can talk to dozens of people in a it is a smart service for mobile service company. chatting room comes in handy for out- carriers if you understand the meaning When setting a password, users can door activities such as mountain climb- of the proverb ‘light gains make heavy talk with limited users, such as fam- ing and exercises and offers extraordi- purses.’” ily members and friends. For those who nary fun to customers. In particular, the nation’s second- want to use it while moving or doing But analysts say that such services largest mobile carrier, announced on activities, the service also supports Blue- are intended to lead customers to use Nov. 8 that it has launched a smartphone tooth devices such as headsets. more data. This is because customers radio communication service dubbed The service enables subscribers to need to run walkie-talkie applications “olleh Walkie-Talkie,” that works on use radio communication even in a Wi-Fi to use this service, and this service uses wireless mobile networks. zone without data reduction. Also, it has about 0.5 MB per minute. Users can download the walkie-talkie a high-quality communication mode that “The Talk service uses 0.01 application from Olleh Market or Google enhances voice quality even where Wi-Fi MB per text sent,” said a representa- Play free and open a chat room to start a connections are not stable, by supple- tive at the telecommunication industry. conversation. The service allows them to menting them with the LTE network. “Compared to it, the walkie-talkie ser- have real-time voice chat with a maxi- The service now supports only vice does not consume a small amount mum of 20 people as well as one-on-one Google’s Android mobile operating sys- of data.” conversations. tem version 4.4 or higher, regardless of “The walkie-talkie service does not The olleh walkie-talkie is expected to mobile carrier. A new version for Apple consume as much data as video services. be handy for enterprise customers who iOS devices such as iPhones will be But it is highly likely that many people want a real-time multilateral communica- updated soon.

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Lending Hand Government Offers More Support to Latin America for Cyber Security by Michael Herh

orea is doubling its efforts to Internet & Security Agency (KISA)’s Ktake the initiative in the world Global Cybersecurity Center for Devel- cyber security sector alongside helping opment (GCCD). The GCCD is planning to hold local- Central and South American countries In Costa Rica, the seminar focused ized versions of such seminars in East develop their information protection on the construction and operation of Europe, Africa and Southeast Asia. On capabilities by holding cyber security a computer emergency response team top of that, they will expand capability seminars in Costa Rica and Peru. The (CERT) to enhance the specialties of reinforcement programs operating cours- Ministry of Science, ICT and Future a CERT recently launched by Costa es to invite foreign students to Korea and Planning announced on Nov. 15 that Rica. In Peru, the seminar centered on train them in Korea, diagnosing cyber they held joint seminars in Costa Rica the establishment of and strategies for a security levels, offering cyber security and Peru from Nov. 9 to 13 (local time). national cyber security system is current- education and consulting and an anti- The event was held as a part of the Korea ly underway in the country. hacking training center.

Cybersecurity Cooperation Korea, China to Take Another Big Step in Cybersecurity by Michael Herh

orean and Chinese officials will ways to promote cooperation about com- Kimplement an agreement for the mon issues such as cybersecurity poli- reinforcement of bilateral cybersecurity. cies, tackling cybersecurity breaches and The Ministry of Science, ICT and Future information sharing, the protection of Planning announced on Oct. 28 that they key infrastructure and the promotion of will hold the working-level Korea-Chi- the information security industry. na Cyber Security Cooperation Meeting The meeting will also accompany a with the Ministry of Industry and Infor- workshop for those in the private sec- mation Technology. tor that includes cyber infringement China’s Ministry of Industry and response teams (CERTs), telecommu- Information Technology is a policy-mak- nication service providers and security ing, regulating, and supervision organiza- vendors from both nations. implementing the massive CCTV-based tion in the ICT sector including national On the other hand, the Ministry of Safe City Project that centers regions informatization and information security. Science, ICT and Future Planning will with heavy foot and car traffic. This situ- It is said that this meeting is the first send ten Korean information security ation gives rise to the expansion of the step in the actual implementation of the companies to the China International physical security market as a key growth MOU on the Reinforcement of cyber- Public Security Expo 2015 to be held in engine. security signed by Korea’s Ministry of Shenzhen, China with the aim of devel- Accordingly, the Korean government Science, ICT and Future Planning and oping China’s physical security market. is planning to promote Korean compa- China’s Ministry of Industry and Infor- The Chinese physical security mar- nies’ advancement into China by letting mation Technology in Oct. of last year. ket such as facility protection and anti- ten Korean physical security companies The two organizations are in charge crime management has been rapidly that produce and supply CCTVs, cameras, of cybersecurity in Korea and China, growing, recording a 20 percent growth biometric identification solutions partici- respectively. for the fifth consecutive year since 2008, pate in China’s biggest security expo that They will discuss major polices and Chinese public security authorities are marks its 15th anniversary this year.

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G Electronics is trying to move away from LQualcomm, which the company solely relied on for existing mobile application processors (AP), and is now developing its new mobile AP in cooperation with Intel and TSMC. The company seeks to reduce its dependency on Qualcomm Snap- dragon chipset, which will be manufactured at Sam- sung’s chip-making foundries, and develop its own chip from next year. According to industry sources on Nov. 26, LG Electronics is currently moving to pilot production of ARM-based 64-bit mobile AP called the Nuclun 2 by using Intel’s 14-nanometer FinFET technol- ogy and TSMC’s 16-nm FinFET technology. The Nuclun 2 will be an octa-core processor with four ARM’s Cortex A72 at 2.1 GHz and four Cortex A53 cores running at 1.5GHz. With three years of research and development, LG Electronics introduced the Nuclun 1, which was produced with 28-nm FinFET technology, last year and used it on its G3 Screen smartphone. However, its performance fell short of the Samsung Exynos 5420, which was mass produced a year earlier. Even after that, LG Electronics has not abandoned its mobile AP development plan and is now about to complete the development of Nuclun 2, which can be used in its premium smartphones. The company has been making every effort to develop its own AP due to the fact that LG Group has a strong will not to use semiconductors manu- factured by Samsung. An industry official said, “LG has been solely dependent on Qualcomm’s APs to produce its smartphones. So, it is not a coincidence that LG has decided to move away from Qualcomm when its next-generation chipset will be now pro- duced at Samsung’s chip-making foundries.” LG Electronics’ first mobile application processor Nuclun 1, which was mass produced last year. It is also meaningful in that Intel and TSMC, which are testing the mobile AP with LG Electron- ics, are two companies competing with Samsung Electronics in the mobile chip market. As a strong LG’s Independence partner of Samsung Electronics, Intel supplied its high performance modem chip from the Galaxy LG Electronics S5 lines last year. However, the cooperation has become weak as Samsung Electronics is increas- ingly using its self-developed modem chip. Also, Develops Its First TSMC has been competing with Samsung for years for foundries to produce Apple’s AP. Mobile Application It is still unclear which company LG Electron- ics will finally choose as the producer for the first batch. Some say that the Nuclun 2 produced with Processor Intel’s 14-nm process shows higher performance. Others say that TSMC has a better foundry expertise by Marie Kim in AMR-based chipsets compared to Intel so it will stabilize the production in a shorter time.

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Rising High Based on core designs of ARM, a British semi- conductor processor core designer, the com- pany changed the design to deliver the highest Samsung Unveils Latest performance in its class. Currently, only Apple and Qualcomm has their own CPUs in the global mobile market. As Qualcomm recently released Mobile Application its next-generation Snapdragon 820 chipset, it unveiled the new 64-bit Qualcomm Kryo CPU, Processor Exynos 8 following the previous Krait. When a company uses its own custom cores, it can raise perfor- by Marie Kim mance while lowering power consumption. The highest data transfer rate is another strength of the Exynos 8 Octa. With the indus- try’s most advanced LTE modem, which provides the maximum download speed of up to 600Mbps (Cat.12) and upload speed of up to 150Mbps (Cat.13), the Exynos 8 Octa delivers an excellent mobile experience, allowing users to enjoy and share high resolution video content in real time with ease. Also, the chip employs ARM’s lat- est GPU, Mali-T880 to enable users to enjoy 3D games on mobile devices without interruptions. In particular, Samsung Electronics is expected to catch up with Intel, the world’s largest semi- conductor company which sees a slowdown in mobile AP sector, as soon as the company raised the competitiveness in the semiconductor sector, including the price bargaining power of the Exy- nos smartphones. Exynos 8 Octa 8890 mobile Kim Soo-kyum, director at market research system-on-chip (SoC). firm IDC Korea, said, “Once the Exynos 8 receives recognition for performance and is used in global leading smartphones as well as the Gal- amsung Electronics, a world leader in advanced memory semicon- axy S7, Samsung Electronics would become the Sductor technology, rewrote the non-memory semiconductor history world’s number one semiconductor company, this time. As the company rolled out a mobile application processor (AP) overtaking Qualcomm and Intel.” Currently, only with its own custom designed central processing unit (CPU) for the first one smartphone manufacturer – China’s Meizu time in the domestic industry, it has come in range with global leading CPU – uses the Exynos AP, apart from Samsung Elec- manufacturers, such as Intel, Apple and Qualcomm. tronics. When global major smartphone makers Samsung Electronics announced on Nov. 12 that it will start mass pro- including Chinese and Indian companies decide duction of the Exynos 8 Octa 8890 mobile system-on-chip (SoC). This chip to use the Exynos 8 instead of mobile APs of is Samsung’s second premium application processor built on 14nm FinFET Qualcomm and Taiwan’s MediaTek, Samsung process technology. Unlike the previous Exynos 7 Octa 7420, the Exynos 8 Electronics can become the number one maker in Octa is an integrated one-chip solution that features the company’s first cus- the non-memory semiconductor sector as well as tom designed CPU core and combines the application processor and modem. memory semiconductor sector. It will be used in the production of Galaxy S7 next year, and this will be the An official from the semiconductor indus- first time to use its own integrated chip in the Galaxy S series. try said, “Expertise in the semiconductor design An integrated chip, which is considered the centerpiece of non-memory area, which has been accumulated in the process semiconductors, raises overall performance of smartphones, including the of developing the Exynos 8, can be used in not processing speed and power and storage efficiency. Also, a SoC is a semi- only smartphones but also crucial semiconduc- conductor chip that provides systemic functions by integrating numerous tor designs that are needed in the future oriented component functions into an integrated circuit. industry. In a few years, Samsung will be able to In particular, the Exynos 8 Octa features Samsung’s first custom core surpass Intel in terms of semiconductor design after years of research and development, including the critical AP design. technology.”

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Semiconductor Changes Korea to Become Game Changer in Global Semiconductor Market

by Cho Jin-young

espite the recent decrease in semiconductor prices, Samsung Elec- However, overseas competitors showed Dtronics posted double-digit growth in the global semiconductor mar- relatively low results. As the estimated sales of ket this year, being hot on the trail of the industry’s number one Intel. SK Intel this year stood at US$50.3 billion (58.32 Hynix entered the top five list in the industry for the first time ever. trillion won), down 2 percent year-on-year, the Korean companies made advances this year, though sales of the U.S.’ gap between Samsung Electronics narrowed to semiconductor makers, including Intel and Qualcomm, showed decreases. US$8.7 billion (10.09 trillion won). The sales There can be a transition of power in the industry after next year. difference between the two companies last year According to the monthly report released by semiconductor market reached US$13.6 billion (15.77 trillion won). research firm IC Insights on Nov. 12, Samsung Electronics is expected to have In addition, Qualcomm, which was considered US$41.6 billion (48.24 trillion won) of sales in the semiconductor market this to be the absolute power in the system semicon- year. It is combined figures in the memory semiconductor, in which Samsung ductor sector, is also expected to record US$15.6 Electronics has maintained its top place for 22 years in a row, and the system billion (18.09 trillion won) of sales this year, show- semiconductor and microprocessor chip sectors, in which the company is rela- ing a 19 percent decrease from the same period. tively weak. The advances of Korean companies stand out As Samsung Electronics increased sales by 10 percent from US$37.8 bil- more when reflecting the exchange rate effects. lion (43.83 trillion won) last year, the company also ranked top in terms of the The report said that the won this year is devaluat- growth rate among the top five companies with the highest sales. Samsung ed by nearly 7 percent against the dollar compared Electronics started mass production of 48-layer V-NAND flash memory chips, to last year and sales of Samsung Electronics will and began the 14nm FinFET manufacturing process in the system semicon- reach US$44.8 billion (51.95 trillion won) if the ductor sector this year, showing unrivaled competitiveness in technology. exchange rates this year are same as last year. SK Hynix also showed good performance this year. As the company is Then, the sales gap between Samsung Electronics likely to post US$16.9 billion (19.6 trillion won) in sales, up 4 percent from and Intel will narrow even further to US$6 billion US$16.3 billion (18.9 trillion won), it moved into fourth place in the industry, (6.96 trillion won). Based on such a calculation, surpassing Qualcomm and Micron. It is the first time for SK Hynix to join the sales of SK Hynix will also surge to a whopping top five list in the industry in the rankings released by IC Insights. US$18.2 billion (21.1 trillion won).

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Semiconductor Battle SK Hynix Rejects Tsinghua Unigroup’s Offer by Cho Jin-young

hina’s state-backed Tsinghua Unigroup suggested a strategic partner- Cship to SK Hynix last month but was rejected immediately. Chinese company has been aiming for the memory market, which is dominated by Korean semiconductor manufacturers. SK Hynix said on Nov. 26 that it is true that Tsinghua Unigroup offered Digital to acquire Sandisk, making a lot of waves the partnership but the company rejected. Based on Taiwan’s local media in the industry. reports, the news that Tsinghua Unigroup failed to establish partnership with Previously, Chinese state-owned corpora- SK Hynix spread through the domestic stock industry, . tion failed to take over U.S. memory chip maker According to the reports, Tsinghua Unigroup offered to buy 15 to 20 per- Micron Technology, which is one of the world’s cent of SK Hynix, at a condition that SK Hynix sets up a factory in China to top three memory semiconductor players along produce NAND flash products. However, SK Hynix immediately rejected the with Samsung Electronics and SK Hynix. After offer since it believed that there would be no solid benefits. that, the company changed its direction to promote Tsinghua Unigroup, which aims to become a major global semiconductor cooperation in the memory business with Micron player in China, recently made massive investment in the U.S.-based Western but this is not quite favorable as well.

SanDisk Rise SanDisk Emerging Rapidly in Global NAND Flash Market by Cho Jin-young

cording to market research firm DRAMeXchange’s recent report, to 16.1 percentage points between the second and ASamsung Electronics accounted for 31.5 percent of the global NAND third quarters. flash market in the third quarter of this year, followed by Toshiba (20.5 per- SanDisk was recently acquired by Western cent), SanDisk (15.4 percent), Micron (13.8 percent), SK Hynix (10.9 per- Digital at a price of US$19 billion. The Tsinghua cent) and Intel (7.8 percent). Unigroup has 15 percent of shares of Western Dig- Samsung Electronics’ market share and sales declined by 1.1 percentage ital now via its subsidiary Unisplendour, which point and about 1 percent from a quarter ago, respectively. Toshiba increased means the Tsinghua Unigroup can exert a sub- its sales by 10 percent during the same period, when SanDisk boosted its sales stantial influence on SanDisk. Although industry by no less than 17.7 percent in spite of a 22 percent decline in the average insiders say that SanDisk’s management rights are selling price of NAND flash memories. Its sales growth amounts to 49 percent still out of China and the company still has a far on a bit basis. SanDisk raised the ratio of microfabrication processes at a level way to go in terms of memory process technology, of 15 nm up to 60 percent, too. Samsung Electronics might have to be concerned Micron recorded a decrease in sales of 6.5 percent in the third quarter, over the rise of SanDisk with the Chinese govern- allowing SanDisk to take the third place instead of itself. The gap between ment having raised a fund of 120 billion yuan for SanDisk and Samsung Electronics was reduced from 19.2 percentage points the growth of the semiconductor industry.

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Samsung Electronics starts mass producing 128-gigabyte DRAM Next-gen DRAM module with through-silicon via (TSV) technology for first time in Samsung Begins Mass Production the world. of Industry’s First 128GB DRAM Modules by Cho Jin-young ased on a three-dimensional through-silicon via (TSV) technology, Sam- Bsung Electronics has started mass production of its new DRAM module Samsung’s advanced 128GB TSV DDR4 featuring the world’s largest capacity and the highest performance and energy effi- RDIMM provides processing speeds from 2,400 ciency that are existing in today’s market. The company is planning to strengthen to 3,200 megabits per second (Mbps), achieving supremacy further in the memory market by bringing TSV technology into high nearly twice the performance as well as capacity, bandwidth memory (HBM), which is considered the next-generation memory. while cutting power usage by 50 percent, compared Samsung Electronics announced on Nov. 26 that it has started mass pro- to using the previous 64GB DRAM modules, which duction of the industry’s first 128GB registered, dual inline memory module used conventional wire bonding. (RDIMM) in earnest. TSV technology is a high performance technique aimed Samsung Electronics plans to begin mass pro- at creating 3D packages that enable a vertical electrical connection of chips by duction of the 128GB DDR4 load reduced DIMMs making tiny holes in chips. After DRAM chips are sliced thinner than half the (LRDIMM) by the end of this year with the use of thickness of paper, they are pierced to contain hundreds of fine holes and ver- its TSV technology, providing the complete lineup of tically connected through electrodes that pass through the holes of the chips. its new high-performance TSV DRAM modules. A Compared to the DRAM chip with plane structure, the cutting-edge packaging LRDIMM is a kind of DRAM module for data cen- technology can improve capacity, performance and reduce power consumption. ters and servers and suitable for large capacity. Keep The new 128GB TSV DRAM module is composed of 144 20-nm 8GB pacing with the growing demand of high capacity DDR4 DRAM chips, featuring 36 4GB TSV DRAM chips in a four-layer stack DRAM modules, the company will rapidly increase assembled with TSV packaging technology. the production of 20-nm 8GB DRAM chips.

Biosensor Chip Samsung Electronics to Release Biosensor for Smartwatches Early Next Year by Marie Kim Biosensor chip.

uring the Samsung Electronics 2015 Investors Forum at the Ritz-Carlton DHotel in Singapore on Nov. 16, Samsung Electronics announced that it electrocardiogram sensor. In addition, it can be used will commercialize a biosensor processor in the first quarter of next year and roll as information to identify individuals, just like fin- out related products. For the system semiconductor business, which is considered gerprints, since everybody has different heart rate the new growth engine in the semiconductor sector, the company revealed its strat- signals. egy to concentrate on mobile systems-on-chips, imaging sensors and biosensors. In regard to biosensors, Hong added, “Although Hong Kyu-sik, vice president of Samsung Electronics’ system large-scale the final product hasn’t come out yet, it will be integration (LSI) business division, gave a lecture on the topic of “Innovation for released in the form of a smart watch. We will devel- Next-generation Mobile Experience,” and said, “We will commercialize biosensors op devices that can recognize even people’s feelings.” in the first quarter of next year.” A biosensor is a device that measures heart rate Previously, Samsung Electronics unveiled Sleep- and blood pressure, and links such information to other devices, including smart- Sense, an Internet of Things (IoT) product that track phones. their sleep, movements and sleep patterns, and deliv- Samsung Electronics’ system LSI business division recently completed the ers personalized expert tips for sleep improvement development of bioprocessors (BP) that can monitor electrocardiograms. When at the IFA 2015 trade show in Berlin, Germany, in making use of BPs, users can monitor their health conditions by checking an September.

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TV Strategy Samsung, LG Focus on Boosting Profitability Rather Than Greater TV Market Share by Cho Jin-young

arket research firm IHS announced on Nov. 4 that the global TV mar- cent decrease in sales during the same period. Mket is estimated to record US$97.1 billion in sales this year, US$2.4 However, the two companies’ profitability in billion less than a year ago. The amount had reached US$97.9 billion in 2006, the TV business has improved. This is largely due topped US$100 billion for the first time in 2007 by a margin of US$400 million to the fact that they continuously strengthened their and jumped to US$117.8 billion in 2010. Then, it fell to US$115 billion in 2011 marketing with premium models, including 55-inch and US$110.2 billion in 2012, and has remained below US$100 billion since UHD TVs, rather than joining the cutthroat compe- 2013, when the sales were US$100 million short of US$100 billion. tition in the 30 to 40 inch low-end models market, The market research firm predicted that the US$100 billion mark would which has continued from the end of last year to not be broken again for the time being. According to the firm, the global TV this year. Another factor is that the price of panels market’s sales are estimated at US$98 billion for next year, US$97.7 billion for has dropped by more than 10 percent this year as 2017, US$97 billion for 2018 and US$96 billion for 2019. the largest UHD panel companies, such as Sam- Under the circumstances, Samsung Electronics and LG Electronics are sung Display and LG Display, have successfully trying to make a breakthrough by focusing on high-end products. The Home cut costs and strengthened productivity. Entertainment (HE) Division of the latter succeeded in recording a positive Meanwhile, The Creative Life (TCL) and operating profit in the third quarter by increasing the sales of such products, Hisense showed the highest growth among six and Samsung Electronics boosted its UHD TV sales in the same quarter by 23 leading companies, which have had the intense percent in comparison to the previous quarter, raising the ratio of UHD TV sales competition to raise the market share in the low- to its total TV sales by two percentage points to 19 percent. As of the end of the end LCD TV market in China, the largest market in first quarter of 2015, the two companies took up 35.1 percent of the global TV the world. TCL sold 3.66 million units in the third market. quarter, while Hisense sold 3.34 million units. The According to the data from a market research firm WitsView on Nov. 1, figures were almost double the shipments of other Samsung Electronics and LG Electronics sold 10.9 million and 6.6 million LCD Chinese TV makers, including Haier and Chang- TVs in the third quarter, respectively. Samsung Electronics showed a 3.8 percent hong. In particular, TCL increased its sales by 31 increase in sales compared to the second quarter, but fell far short of the market percent from the previous quarter, edging out Sony average of 8 percent. In contrast, LG Electronics was the only company that saw and Hisense to reach the number three spot in the shrinkage in shipments among the global top five TV makers, showing a 7 per- global shipment ranking.

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Two Brand Track Hyundai Genesis Goes Head to Head with Mercedes-Benz, BMW in Luxury Car Market by Marie Kim

esis with a number representing the segment. For instance, the next model of the Equus, the large luxury sedan, will be named the “G90,” while the existing Genesis model, the large sedan, will be named the “G80,” and a midsize sedan to be released in 2017 the “G70.” With the launch, Hyundai will develop environmentally-friendly car models and add models of its high perfor- mance N brand lineups. Hyundai Motor created a Prestige Design Division “G-Force” at Hyundai Motor Design Center in order to differentiate designs that directly show the identity of the Genesis brand. Also, the company hired world class auto design- er Luc Donckerwolke, former design head at Lamborghini and Bentley, as chief design officer Hyundai Motor Vice Chairman Chung Eui-sun presents the company’s new luxury brand strategy at at the center. Dongdaemun Design Plaza in downtown Seoul on Nov. 4. 1st EQ900 Genesis ModelUnveiled yundai Motor, the world’s fifth-largest automaker, is moving into Hthe global premium car market in earnest with a new luxury brand, Hyundai Motor had a media preview for the Genesis. The company will consolidate its Equus premium large sedan with EQ900, the first model under its new premium its existing large sedan models under the brand, and form a total of six mod- brand of Genesis, that will officially be launched els of the Genesis lineup by adding four new models by 2020. Then, it plans next month at the Namyang R&D Center on Nov. to go head to head with leading global luxury car makers such as Mercedes- 10. Benz, BMW, Lexus and Audi. Accordingly, Hyundai Motor now has the first On this day, the company unveiled rendered separate brand under the Hyundai umbrella, 48 years after the company was exterior images of the EQ900 for the first time. founded in 1967. The concept for its interior and exterior design is Hyundai Motor made an official announcement to enter the global high- “polite and elegance.” In its exterior, a large-size end car market at its luxury Genesis brand launch event at Dongdaemun radiator grille dominates the front with refined Design Plaza, Seoul, on Nov. 4. head lamp designs. The company said that the Chung Eui-sun, vice chairman of Hyundai Motor, said, “The Genesis, lines that come off the grille are in harmony with which was first released in 2009, has given us pride and confidence in our the overall ample body that makes an “elegant” ability to produce global premium cars. The model is now born as a new impression on the sides. brand with a ‘human-centered innovation’ strategy.” Hyundai Motor joined hands with Pasu- The Genesis brand will start with two large and premium large sedan bio, the leading producer of luxury automotive models, the existing second-generation Genesis model and the new Equus upholstery and manufactured leather in Italy, to model, which will be launched next month. After that, it will add four other develop leather seats, and used real wood for the midsize luxury sedans, sports coupes, large sports utility vehicles, and mid- wood trim. The steering wheel of the EQ900 is size SUV models, completing the full lineup with a total of six models by also equipped with premium Italian leather for a 2020. The Genesis brand will adopt a new alphanumeric naming struc- comfortable and stable grip. ture. Future models will be named by combining the letter ‘G’ for Gen- By greatly expanding the portion of ultra-

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high-strength steel in its body, the EQ900 offers more safety and driving effi- of 370 horsepower and 52.0 kilogram-meters of ciency. The company said it has improved the car’s strength against outside torque, boasting higher power performance than shocks, including twisting and bending, by more than 181 percent compared turbo engines of overseas automakers. with the previous model. By using the latest suspension technology The EQ900 is also the first locally produced model equipped with a called Hyundai Variable Control Suspension Highway Driving Assist (HDA) system intended to help autonomous driving. (HVCS), the EQ900 will make sure its passen- A clash avoidance system, an upgraded version of the existing blind spot gers can enjoy smoother driving and driving per- detection system, has also been used for the first time. The system prevents formance, even at high speeds, than they could collisions by imperceptibly controlling the front and back wheels on the feel in other luxury sedans. The technology offers opposite side of a lane change when there is the high possibility of a crash. both a comfortable ride and safety with embed- The EQ900 also boasts “modern ERGO seats.” Designed after the first- ded valves that can independently control the class seats in airplanes, the “First Class VIP Seat” in the back allows pas- internal pressure. sengers to lie down comfortably. It is designed to make the driver and pas- The EQ900 is also equipped with so-called sengers feel at ease when driving. The seat can be adjusted in 18 different H-TRAC, reminiscent of the smart all-wheel- ways, such as the slope of the shoulders and headrests, by touching a button drive system of the second generation Genesis, on the armrest. which allows safe yet outstanding driving perfor- There is also a new smart posture control system. The system automati- mance in heavy rain or snow in the winter. cally recommends and sets up the best driving posture for drivers based on “Signaling the start of the Genesis brand, the medical verification. EQ900 will provide the highest level of satis- In a bid to reduce the inside noise level, Hyundai Motor said it applied a faction that customers could not feel before,” a triple sealing weather strip to its doors and used sound insulation glass on the Hyundai Motor official said. “We are sure that it rear window. The EQ900 comes in three types of power train – the Lambda will become a representative luxury brand of our 3.8 V6, the Lambda 3.3 V6 Turbo and the Tau 5.0 V8 – all of which have country by establishing diverse lineups ranging passed intensive engine durability tests. from large sedans, mid-size sedans, SUVs to sports In particular, the Lambda 3.3 V6 Turbo engine produces a maximum coupes as well as premium sedans in the future.”

EQ900, the first model under its new premium brand of Genesis.

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Buying from Home Domestic Car Sales Volume Increased 18.6% in Oct. by Jung Min-hee

he Ministry of Trade, Industry & Energy announced on Nov. 8 that a Ttotal of 164,507 cars were sold in Korea in Oct., showing an increase The sales volume of imported cars totaled of 18.6 percent from a year ago. The year-on-year growth rate was the highest 21,229, up 18.3 percent from a year earlier and of this year. It had reached 13.2 percent in August and 16.3 percent in Septem- down 12.7 percent from a month ago. Their mar- ber. ket ratio was 12.9 percent, and the market share of ’s domestic sales volume rose by 16.7 percent Volkswagen dropped 67.4 percent month-on-month year-on-year, led by the Avante and the Sonata. The sales volumes of the best to 947 in the wake of the emissions scandal. and second-best sellers added up to 12,838 and 10,487, respectively. Its SUVs Korean automakers’ exports rose 7.5 percent such as Santa Fe and Tucson posted a sales volume growth of no less than 47.3 year on year to 259,306. The percentages had been percent. Kia Motors’ Sportage, K5, Carnival and Sorento boosted the com- -0.7 percent and 3.5 percent in August and Sep- pany’s sales volume by 25.9 percent, too. tember, respectively. The auto parts exports, in Ssangyong Motors increased its monthly sales volume by 83.5 percent to the meantime, declined by 7.5 percent to US$2.27 10,008, breaking the 10,000 mark for the first time in 12 years. The percentages billion due to the factors including recessions in were 8.6 percent for GM Korea and -4.7 percent for Renault Samsung Motors. emerging markets.

A Few Ripples Imported Car Sales Plunge Due to ‘Dieselgate’ by Jung Min-hee

omestic market sales of Volkswagen, which admitted to cheating on Ddiesel emissions tests, fell by half year-on-year in Oct. Compared to Sept., when Volkswagen’s emissions cheating scandal started spreading, the The Volkswagen logo on a TDI diesel engine of one of its cars. figure reduced by a third. With negative recognition on diesel cars prevailing, sales of three German automakers also dropped nearly 20 percent from last drop in sales, Volkswagen ranked fifth in terms of month. brand sales rankings, pushed down by Peugeot. The Korea Automobile Importers and Distributors Association (KAIDA) Moreover, sales of three German automakers said on Nov. 5 that the number of new imported cars registered in Oct. totaled dropped in October compared to September, when 17,423 units. The figure increased 6 percent from the same period last year, the emissions cheat scandal emerged. Mercedes- but decreased 14.5 percent in September. By month, it is the lowest level in Benz sold the most cars in the country with sales eight months. of 3,713 units, a decrease of 14.2 percent from the By brand, Volkswagen showed a dramatic drop in sales. The total sales of previous month. BMW saw its sales drop by 10 the company amounted to 947 units, down 46.2 percent from 1,759 units last percent to 3,156 units in October, while Audi also year and 67.4 percent from 2,901 units in September. It was the first time that saw its sales decrease by 27 percent to 2,482. In Volkswagen sold less than 1,000 units a month since it sold 725 units in Dec. particular, the figure of BMW fell by 9.3 percent 2011. By model, sales of diesel vehicles plunged. The Volkswagen Tiguan 2.0 from the same period last year. With the sluggish TDI, which ranked top in terms of monthly sales, saw sales of 201 units in sales of BMW, the accumulative sales of Mer- October, more than 500 units less than its September sales. Only five units of cedes-Benz in October this year reached 38,603 the Passat 2.0 TDI, which sales exceeded more than 500 units in the last four units, surpassing BMW with 38,436 units. This is months, were sold in Oct. Also, sales of the Golf 2.0 TDI plunged by three- the first time for Mercedes-Benz to beat BMW in fourths, from 430 units in September to 106 units in October. Due to the sharp terms of accumulated sales.

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Engineering Plastics Market of Right Materials for Automobiles Expected to Grow by Michael Herh

he market of petrochemical materials for automobiles such as engineering Lotte Chemical, which recently took over the Tplastics is steadily growing thanks to fuel efficiency issues and the tough- Chemicals Business Division from Samsung SDI, ening of eco-friendly regulations. is eyeing the market of resins for automobiles. Sam- According to the Yano Economic Research Institute, a market survey compa- sung SDI already entered the market of plastics for ny, the market of petrochemical materials will grow 35.2 percent to 10.85 million the exterior and interior of vehicles. Its ABS, one of tons from 8.02 million tons of last year. This means that the market will grow an its representative products, is enjoying a global mar- average of three to four percent a year. ket share of seven percent, according to data by HIS, Resins for automobiles are mainly thermoplastic with a strong ability to with- as of the end of the second quarter. stand heat such as polypropylene (PP) and polyamide (PA 6 • 66), acrylonitrile, In addition, in June, Lotte Chemical founded a butadiene and styrene (ABS), polyethylene (PE), polycarbonate (PC) and PPS corporation for the purpose of building an EP com- (polyphenylene sulfide). pound plant in Shenyang, China. Last month, SK In particular, resins for car windows are light and hard to break, so they are Global Chemical held a ceremony in honor of com- safe and very excellent in insulating heat. Resins for automobiles are easy to pleting a nexlene plant in Ulsan, Korea in partner- process. This point sets them apart from competing materials such as steel and ship with SABIC, and is going ahead with the con- aluminum. struction of the second plant in Saudi Arabia. Even though there is room for improvement in resins for automobiles in terms Hanwha Chemical merged Hanwha Next and of strength, the combination of resins for automobiles and carbon fiber or steel Hanwha Compound with a view to reinforcing its will make the resins tougher, according to petrochemical industry experts. Leading competitiveness in the EP market. BASF, the world Korean petrochemical companies are busy, spurring the expansion of their market. leader in the chemical industry completed an EP LG Chem is rolling out 230,000 tons of engineering plastic in Korea such as compounding plant in Yesan, South Chungcheong Yeosu and Iksan. Province last month. The company is operating production plants in China (Guangzhou, Tianjin What is more, Toray built a giant PPS production and Ningbo) and Poland (Wroclaw) as well. Furthermore, the company is build- plant in Korea, and SK Chemical is test operating ing an EP compound plant with an annual production capacity of 20,000 tons in a PPS plant in Ulsan, which the company built in Chungching. cooperation with Japan’s Teijin.

Eun Bin (left) and Park Si-hyun (right) were models at last year's Automotive Week in KINTEX.

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Floating Rumors Restructuring Scenarios Flying Around in Shipbuilding Industry

by Michael Herh

ith a restructuring whirlwind hitting the Korean shipbuilding industry, rier market,” said a representative in the shipbuild- Wvarious restructuring scenarios are flying around, fueling confusion in ing industry. “The expansion of their sizes through the industry. According to creditors and the shipbuilding industry on Nov. 22, the mergers can hardly produce synergies.” government originally pushed forward with coupling-style restructuring, through With coupling-style restructuring and integra- which small and mid-sized shipbuilders will be entrusted to big shipbuilders. tion plans in doubt, it has become highly likely that Daewoo Shipbuilding and Marine Engineering (DSME) was already entrust- shipyards will be restructured through extreme mea- ed with Daehan Shipbuilding. took in Samsho Heavy sures such as sell-offs or court receivership. At the Industries, and later took it over. So, a rumor is going around that Samsung Heavy moment, SPP Shipbuilding is in a sell-off process Industries will be given control of Seongdong Shipbuilding and Marine Engineer- while steps are being taken to let Shina SB go bank- ing, while STX Offshore & Shipbuilding will be entrusted to the DSME. rupt. But the three large shipbuilders could not take care of such small and mid- Under these circumstances, the hottest topic is sized shipbuilders, since a slump in the shipbuilding industry and losses in their how the government will restructure STX Offshore marine plant business resulted in the worst-ever business performance. & Shipbuilding. STX Offshore & Shipbuilding Fortunately, took charge of the management of now has no chance of being entrusted or integrated, Seongdong Shipbuilding and Marine Engineering in September, but losses of and its main creditor bank, the Korea Development over 4 trillion won debarred the DSME from looking out for STX Offshore & Bank, is working on due diligence on the troubled Shipbuilding. In addition, word was passing around that the government demand- shipbuilder. ed that Hyundai Heavy Industries be responsible for looking after STX Offshore Even though the results of the due diligence & Shipbuilding in October, even though the Ministry of Industry, Trade and work will determine the fate of STX Offshore & Resources officially denied it. Shipbuilding, it is said that a possibility of court Integration was one of many plans afoot. The integration plan is to lessen receivership is high. This is because, although the production volume and make organizations slim by merging small and mid-sized shipbuilder has received upwards of 4 trillion won shipbuilders under voluntary agreements or court receivership. Scenarios were in financial aid from creditors, cumulative losses written about the merger between STX Offshore & Shipbuilding and Seongdong put the company into a capital impairment state Shipbuilding and Marine Engineering, and a marriage between Seongdong Ship- and made it incapable of overcoming its difficul- building and Marine Engineering and SPP Shipbuilding. But a dominant view ties. was that this scenario was highly unlikely, since creditors and companies are At the moment, there are various versions of sce- widely apart in terms of interests. narios about STX Offshore & Shipbuilding restruc- “The orders small and mid-sized shipbuilders receive are mostly bulk carriers. turing. But nearly all representatives in the industry Chinese shipyards are more competitive than Korean shipyards in the bulk car- agree that the scenarios all lack credibility.

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CGL Competition POSCO, Hyundai Steel Compete in Expanding CGL Production Lines by Jung Min-hee

ompetition for expanding the continuous galvanizing line (CGL) to Cproduce second hot-dip galvanized steel sheets, which are used for luxury cars, is becoming stronger. The CGL is a facility to produce such high quality auto steel sheets. In Korea, only POSCO and Hyundai Steel have the CGL. Earlier, however, POSCO has begun the con- Hyundai Steel announced on Nov. 19 that it has recently started trial pro- struction of 7CGL with an annual production duction of the CGL line in the second cold rolled coil plant in Dangjin, South capacity of 500,000 tons in the Gwangyang plant Chungcheong Province, the construction of which began in August. Also, it in South Jeolla province in September. There- will start commercial production early next year. Accordingly, the CGL line fore, the gap is expected to widen again. With the with an annual production capacity of 500,000 tons will be added, which will extension, POSCO resumed the CGL construction increase the total auto sheet production capacity of Hyundai Steel’s second in five years. As the company will also sequential- cold rolled coil plant in Dangjin to 2 million tons. When combined with its ly build more CGL lines in Thailand and China, first cold rolled coil plant, the company will have an annual production capac- it will increase an annual production capacity of ity of 5.5 million tons. auto steel sheets to 10 million tons by 2017, elud- Hyundai Steel will also begin additional operations of 12 hot stamping ing pursuit by Hyundai Steel. facilities in Yesan, South Chungcheong Province, in February next year. These In 2013, Hyundai Steel accounted for 50 per- facilities are usually used to manufacture products that have low elongation cent in auto steel sheets supply to Hyundai Motor rates among auto steel sheets but are needed to maximize the strength. Group, while POSCO accounted for 40 percent. With the latest CGL line extension, Hyundai Steel will narrow the gap in Last year, however, Hyundai Steel increased the auto steel production to 3 million tons between POSCO, with an annual pro- figure to 60 percent, decreasing the figure of duction capacity of 8.5 million tons next year. POSCO to 30 percent.

Colorful Leap Dongkuk Steel to Invest 25 Billion Won for Colored Steel Plate Market by Marie Kim

ongkuk Steel is to make a new investment in the colored steel plate Dmarket. Rolls of colored steel coil plate. The company announced on Nov. 18 that it will invest a total of 25 billion won (US$21.35 million) in the Busan plant by the second half of next year num sheets are painted after manufacturing. How- to build additional color-coated steel sheet production lines with an annual ever, the new production line will employ a new production capacity of 100,000 tons. Once the expansion project is completed, technology that does away with a separate process the Busan plant will have a capacity of 750,000 tons from the current 650,000 to spray on the steel or aluminum sheet. tons. It is the world’s largest production capacity for a single colored steel The company expects that it will be able to plate manufacturing plant. make an annual sales revenue of more than 100 The new investment is aiming at the high-quality thick color-coated plate billion won (US$85.4 million) by creating more market among interior and exterior building materials. than 30,000 tons of new demand in the domestic For the building materials market, just like curtain walls, steel and alumi- color-coated steel sheet market alone.

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Sweet Treatment Hanmi Pharmaceutical Signs Mega Deal to Export New Diabetes Treatment by Michael Herh

anmi Pharmaceutical has signed a contract to export a diabetes treat- Hment technology for 5 trillion won (US$4.4 billion), the highest-ever amount in the history of the Korean pharmaceutical industry. Considering that the size of the Korean pharmaceutical industry is valued at 17 trillion won (US$14.9 billion), it is said that this mega deal will advance the Korean phar- maceutical industry by one notch. Hanmi Pharmaceutical announced on Nov. 5 that the company struck a deal to export technologies on three new materials for long-acting diabetes treat- ments to Sanofi, a multinational pharmaceutical firm. The deal is worth a total of €3.9 billion (US$4.2 billion). The company explained that the new materials reduce negative side effects and optimize medical effects by minimizing dosing frequencies and dosages. Under the Hanmi Pharmaceutical's headquarters building in Songpa-gu, Seoul. terms of the agreement, Hanmi will receive an upfront payment of €400 mil- lion (US$435 million), and is eligible for up to €3.5 billion (US$3.8 billion) in EGFR involved in the growth of cancer cells, and is development, registration and sales milestones, as well as double digit royalties evaluated as the third-generation EGFR TKI, which on net sales. overcomes resistance and side effects after admin- In addition, Sanofi will obtain an exclusive worldwide license to develop istration with previous EGFR TKIs. Through the and commercialize drugs based on the materials. But Hanmi Pharmaceutical Phase II trials, diverse variables will be evaluated, will retain an exclusive option to co-commercialize the products in Korea and including oxygen reaction rate (ORR). China. Sungkyunkwan University School of Medicine The Korean pharmaceutical company also exported its new medicine tech- Prof. Park Keun-chil, a coordinating Investigator nology to a global pharmaceutical company at some 1 trillion won (US$862.81 of the global clinical trial and director of the divi- million) once again. sion of Hematology Oncology at Samsung Medical The company officially announced on Nov. 9 that it has entered into an Center, said, “The 3rd generation EGFR TKI will exclusive license agreement with Janssen Pharmaceuticals, Inc. (Janssen) for be an important alternative treatment to patients the development and commercialization of its new oxyntomodulin-based diabe- with EGFR mutation positive non-small cell lung tes-obesity drug, including Hanmi’s HM12525A (LAPSGLP/GCG), at the price cancer who failed previous EGFR TKIs. Through of US$915 million (1 trillion won). this clinical test, we expect to develop succeeding Under the agreement, Hanmi will receive an upfront payment of US$105 targeted therapy drugs and delay the use of chemo- million (116 billion won) and is also eligible for US$810 million (930 billion therapy which is burdensome to patients.” won) in development, registration and sales milestones, as well as double-digit Mehdi, chief medical officer of the anti-cancer royalties on sales. division at BI, said, “BI is committed to develop an Beligium-based Janssen will obtain exclusive worldwide rights, except innovative new treatment for lung cancer patients, Korea and China, to develop and commercialize HM12525A. and the adoption of HM61713 clearly shows the Meanwhile, Hanmi Pharmaceutical and BoehringerIngelheim (BI) determination of the company. The start of the announced on Nov. 3 that they completed the first patient registrations for the Phase II global clinical trial will be an important Phase II domestic clinical trial of HM61713 in patients with non-small cell lung milestone for various studies in the future, includ- cancer (NSCLC) with T790M mutations who have developed resistance to pre- ing the Phase III global clinical trial.” vious EGFR targeting agents. Meanwhile, Hanmi Pharmaceutical official- Hanmi Pharmaceutical’s HM61713 technology was exported to BI for ly presented the safety and efficacy results from US$730 million (827.46 billion won) in July. Under the contract, BI has secured the Phase I/II study of HM61713 in patients with an exclusive license for global commercialization rights, except in South Korea, EGFR mutation positive non-small cell lung cancer China and Hong Kong. BI plans to develop HM61713, aiming to receive who failed previous EGFR TKIs at the 51st Ameri- approval in 2017. can Society of Clinical Oncology (ASCO) Annual HM61713 selectively inhibits the mutation of signal delivery substance Meeting taking place in May.

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Previously, the company invested more than 100 billion won (US$88.22 mil- lion) to establish the second Jeju Creative Economy Innovation Center, Green Beauty Valley and raw material tourism village, Innisfree Foundation, and “shared-growth” fund when it opened the first Jeju Creative Economy Innovation Center in June. Accordingly, the second center plans to take the initiative in fostering cosmet- ics industry research and small prospec- tive companies in Jeju through support from the Amore Pacific Creative Econo- my Support Division in the future. It will also promote sixth industry development by developing high-quality tourism con- Jeju Business Industry Division Chief Park Hong-bae (3rd from left), 2nd Jeju Creative Economy Innovation Center tent connected with K-Beauty, culture, and CEO BaekSeok-yun (4th from left), and Amore Pacific Group Public Relations Division Managing Director Lee Hee- experience, and strengthen the value of bok (2nd from right). Jeju’s resources by establishing a foothold Cosmetics Innovations of creative research and development, revi- talizing the local economy. Amore Pacific Opens 2nd Creative The 2nd Jeju Creative Economy Inno- vation Center CEO BaekSeok-yun said, Economy Innovation Center in Jeju “The second center will support K-beauty commercialization and create role mod- by Marie Kim els linking the sixth industry. Also, it will more Pacific held an opening JejuTechnopark Bio Center on Oct. 27 and preserve the cultural ecological value of Aceremony for the second Jeju started promoting Jeju Island as a “creative Jeju Island and create sustainable shared Creative Economy Innovation Center at island integrating work, rest and culture.” values.”

Startups with the eye movements while wearing special eye-tracking glasses, and debuted SKT Hosts Startup Demo Day its prototype for the first time. SNI Square, a developer of interpre- by Marie Kim tation “appccessory” solutions connect- ed to , showed models talking Telecom T-Tower in Euljiro, Seoul, on with foreigners by making use of a mini Nov. 9, and hosted a demo day in order appccessory for interpretation. to attract investors. As the “3rd Bravo! Restart” attract- First of all, Dot Incorporation, which ed 4.2 billion won (US$3.62 million) received the International Telecommu- of investments in the past year, it has nication Union (ITU) Telecom World become one of the best venture startup Entrepreneurship Award held in Buda- support programs in the information and tartups, which are supported by pest, Hungary, last month, unveiled a communications technology sector. SSK Telecom, are commercializ- prototype of a Braille smart watch for In addition, JD Sound, one of the ing products one by one, entering global the visually challenged. The product is companies, took part in the 3rd startup markets and attracting investment, show- smaller, lighter and more stylish than program, tapped into the 10 global mar- ing notable achievements. existing Braille translators, and will be kets, including the U.S., with its portable SK Telecom opened the one-year commercialized in the first half of next DJ device, while VisualCamp attracted results of 11 companies, which partici- year. investments from Israel-based accelera- pated in its “3rd Bravo! Restart” start- VisualCamp has developed an eye tor KOISRA, achieving global recogni- up support program last year, at the SK tracking solution that can give orders just tion for growth potential.

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Crowdfunding Era IBK Showcases Crowdfunding at Creative Korea 2015

by Lee Song-hoon

he industrial Bank of Korea T(IBK), South Korea’s fourth-larg- est bank by assets, announced on Nov. 23 that it will display and provide consulta- tion about “crowdfunding,” which is rap- idly emerging as a new trend in the era of days from Nov. 26. “open trade” site. fintech, at Creative Korea 2015. During the event, it will organize a Keeping pace with the “equity invest- Hosted by the Ministry of Science, “mock crowdfunding contest” online ment type crowdfunding”, which will ICT and Future Planning (MSIP) and and offline at the same time. The con- become effective from January next year, Small and Medium Business Administra- test will be participated in by seven the IBK will open a “business investment tion (SMBA), the Creative Korea 2015 companies, which are predicted to have information square” site that provides will take place at the COEX Convention great growth potential by the institution, information about promising companies Center in Samsung-dong, Seoul, for four and the result will be broadcasted on its to investors.

Startups Promotion Yang-hee), organized by KOTRA and the NIPA, and supported by Born2Glob- Born2Global Center Holds K-Global al Center as part of the K TECH ► K GLOBAL @ Silicon Valley 2015. It is Demo Day at Silicon Valley a large-scale event attended by Korean startups, U.S. businesses, venture inves- by Lee Joon-dong tors and technical experts. In particular, three startups support- ed by Born2Global Center made the top three at the demo day. Huinno (www. huinno.com) won the crown, followed by Smart Study (www.smartstudy.co.kr) and Bluepin (www.bluepin.com). A total of 10 teams participated in the demo day. Meanwhile, the event was attended by more than 250 major venture and angel investors of Silicon Valley Bank, SoftBank, Garage Technology Venture and Concordia Ventures from Silicon Val- ley, New York and the Middle East. In addition, major decision makers of global Four winners of awards from KTECH Global at Silicon Valley on Nov. 13 (local time). leading companies such as Google and Yahoo took part in the demo day, show- n a bid to attract global investment Marriott Hotel in Santa Clara, Califor- ing a high interest in Korean startups. Iin Korean startups and seek busi- nia, on Nov. 13 (local time). The event Meanwhile, Born2Global Center will ness opportunities, K-ICT Born2Global was hosted by the Ministry of Science, hold the last overseas demo day for the Center hosted an overseas demo day at ICT and Future Planning (Minister Choi year in Shanghai, China, in December.

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‘The Big 5 Show’ Closes with Great Success after Setting the Place on Fire

expected topush down building mate- rial and transportation costs, which will filter down to contract value, the report explained. “The Middle East is seeing a region- wide innovative transformation in the construction industry, with projects for mega-events such as the World Expo 2020 in Dubai and 2022 FIFA World Cup Qatar coming,” Paul Wallett at Tekla Middle East said in a statement.

Best Venue to Maintain Pace Participants walk under the information desk at The Big 5 Show on opening day. with the Booming GCC Construction Market he Big 5 International Building lenges and opportunities in construction T& Construction Show,the larg- and project management. In this context, this year’s The Big 5 est construction exhibition in the Middle Show wasbelieved to be one of the best East, came to a close on Nov. 26 (local Region-wide Innovative opportunities for professionals and busi- time) with a great success amid the slow Transformation in nessmen to connect with the region’s regional and global economy. Construction Industry booming construction industrywhile This year’s four-day event held at the highlightingthe latest products, technolo- Dubai World Trade Centre,the 35th edi- Such strong demand and biggerpartic- gies and trends in the construction indus- tion of the event, has drawn over 85,000 ipation aremainly due to the rapid growth try. participants, up 6 percent from last year, of the construction industry as well as On the opening day of the show, and 3,000 plus exhibitors from 174 coun- innovative transformation in construction JosineHeijmans, event director for The tries worldwide, according to dmg, the demand and technology in the Gulf coun- Big 5, said, “The diversity and innovative organizer of the event. Among the top tries, including the U.A.E. In particular, level on display at The Big 5 this year visitors are those from the U.A.E., Saudi the U.A.E.’s construction sector is esti- reflects the demand for sustainability in Arabia, Iran, India, Oman, Qatar, Kuwait, mated to grow 9.3 percent this year, com- the construction industry. Together with Bahrain, Egypt and Pakistan.Among pared to 5.5 percent last year. the addition of The Big 5 Focus hall,the the top exhibitor countries from Europe According to a recent report by expanded education and product demon- wereItaly, Germany, Spain, Greece and Deloitte, the value of both ongoing and stration programs will force visitors to the U.K. South Korea sent 107 exhibitors planned construction projects in the Gulf need a couple of days to see everything to the event. Cooperation Council (GCC) area totals the show offers.” Due to the strong demand for par- US$2.8 trillion, particularly for mixed- Launched in 1979, the Big 5 Interna- ticipation this year, the available floor use mega-developments and transporta- tional Building and Construction Show space was expanded by eight percent tion infrastructure likeairports and sea- has served as a platform for the building to 56,400 square metersthis year from ports. and construction industry to showcase 52,265 square meters last year, follow- A report titled “GCC Construction cost-competitive products and cutting- ing the expansion of Dubai World Trade Industry – Trends and Challenges for edge technologies, spanning the entire Centre. The expanded floor space was 2015” also says that the value of con- construction industry from perception to used to accommodate a new hall called tracts to be given this year in the GCC design and construction. The event also The Big 5 Focus, which made its debut countries could reach over US$194 bil- provided access to knowledge of the this yearto serve an increasing number of lion. The figure is down US$2 billion industry with free-to-attend accredited visitors seeking information on the chal- from last year, as lower oil pricesare workshops and seminars.

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This year, in particular, the eventof- tors. It provided insights into the latest bian buyer.” fered more than 75 free CPD-certified architectural design trends and technolo- “This year’s participation, which and free-to-attend workshops and semi- gies in terms of sustainability and cost- is the 5th one for us, is paying off. Our nars worth US$250,000 to the industry via competitiveness, while providing an on- steady participationin this event is likely a series of live product demonstrations, the-ground analysis of local (UAE) and to bring in good results,” said Manager which were run by industry specialists. regional GCC markets. James Hwang at Bookwang Steel (book- The workshops and seminars focused on wangmetal.co.kr). He continued by say- a range of topics including green building Big 5 Show as Priority ing, “Our focus should be likely to move certification, sustainability, business intel- Destination for Marketing to this event instead of participating in ligence, design and architecture, affordable Construction Products similar exhibitions in the other regions, housing, and construction technology. as we see many buyers come to visit this Among the highlights of the whole Around 4:30 p.m. on Nov. 25 (local event from Northern Europe and South event were some seminars to offer infor- time), the day before the show closed, West Asia regions.” mation on the complex regulatory and some Korean exhibitors were engaged Song In-hwe, CEO of Push Bull legal framework to set up a business and in business talks with buyers while some Company, said, “We have participated in to provide key insights into effective busi- others weremore laidback. They, how- the event since last year. This year seems ness practices in the U.A.E. Some other ever, looked satisfied and relieved as they to be a little slower compared to last year. workshops provide essential informa- participated in the show, amid some con- But I will take part in the show next year, tion on market intelligence and potential, cern over the regional and global slow too, as I believe that the bigger the show business development, cultural diversity economy. Most of them were, however, is, the more buyers will come.” management,ethical issues, and so on, reluctant to expose the specifics of their- Gen Plus has participated in The Big helping visitors learn and maintain pace signed deals, saying that the actual clos- 5 show for eight years in a row. Manag- with the booming GCC construction mar- ing of the deals would be followed up ing Director Brandon Song said it joined ket. after they returnedhome. the exhibition independently this year, A unique feature of The Big 5 was Fanzic (fanzic.com) participated in the though the company had participated in the Gaia Awards as a green initiative.It event for the 6th year. Manager Kim Jae- the event jointly with KOTRA for the last was launched in 2008 to honor construc- yu said, “We signed a contract this time. seven years. Song said, “We succeeded tion products and services that contribute Even if the deal money does not cover all in signing the first deal three years after greatly tothe reduction of the impact on the cost for participation in the event, we the first participation in the show.” He the environment. The winners are eligible will take part in this event next year, too.” went on to say, “Hallyu(Korean Wave) to receive up to US$50,000. The award Another Korean exhibitor sunWood seems to have given much influence on is open to exhibitors and non-exhibitors (sunwoodvina.com), which has spe- raising the brand image of Korea and its which have products that are distributed cial interest in the North African mar- products in the Middle East.” He added, within the Middle East and North Africa ket, signed a first deal for 1,000 sets of “If Korean exhibitors jointly set up a big (MENA) area. wood panels from a buyer in Dubai pavilion,unlike this year’s display scat- Another popular feature at The Big three years ago. General Manager Song tered to the five areas, it would raise the 5 was the Design Summit, which brings Gi-hwansaid, “We have sold 2,000 sets image and status of the Korean exhibitors together leading architects, consultants, of wood panels worth 260 million won as well as create a synergy effect.” urban planners, engineers and contrac- (US$224,796)this time to a Saudi Ara- With The Big 5 nearing the close, event director JosineHeijmanssaid A Korean booth at The Big 5 Show. that the event has proven to be another record-breaker for organizers and exhibi- tors. “It has been a strong show with great exhibitors, fantastic sponsors and the biggest ever educational program,” she added. The Big 5 Show has now become one of the most highly anticipated con- struction events not only in the Middle East but across the globe. Consequently, many international construction players are increasingly seeingThe Big 5 Show asthe priority destination for marketing their products.

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orean researchers developed a new ies. Electrons generated by corrosion reac- Kmetallic material that can induce tions of magnesium spread on the surface angiogenesis and promote tissue regeneration. of a medical metallic material and generate A team led by Dr. Ok Myeong-ryeol at the oxygen free radicals by reducing oxygen Biomedical Research Institute of the Korea on the oxide film surface. Institute of Science and Technology (KIST) Specifically, they confirmed the new announced on Oct. 28 that they developed material’s performances by finding optimal the new metallic material by giving a current density that activates cells in inner walls medical metallic material simple treatments. of blood vessels by controlling active oxy- Medical metallic materials for medical gen generation rates. They also developed use such as titanium or cobalt chrome alloy a bolt-like prototype that is commonly used are generally covered with nano-meter- in orthopedic and dental clinics for its com- thick or thicker oxide films to prevent their mercialization. Tissue Regeneration corrosion in human bodies. “This is a fusion technology jointly The research team developed the new developed by researchers in various fields KIST to Develop technology out of the idea that the oxide such as metallurgy, catalyst chemistry, film can produce oxygen free radicals electrochemistry, tissue engineering and Metallic Implant known to promote the creation of angio- nanotechnology,” Dr. Ok said. “In particu- genesis in a suitable low concentration lar, our partnership with Korea University for Tissue through photocatalytic reactions or electro- Hospital set our direction for its commer- Regeneration chemical catalytic reactions. cialization.” The research result recently The researchers produced a battery-like hit the international edition of Ange- by Michael Herh structure by utilizing magnesium, a main wandteChemie, a world-class chemical element of metals that melt in human bod- journal published in Germany.

Synthetic Sensory Overload function sensors and released it in the Oct. 30 edition of Science Advance. Artificial Electric The electronic skin can detect micro- surface roughness which current touch sen- Skin That Can sors cannot. It can also catch even the subtle pressure and temperature changes that occur Sense Sound when water droplets collide, thanks to the by Michael Herh coating of a curved surface, like a fingerprint. People can sense surface structures,

rtificial electronic skin has been temperature, and roughness while touching Flexible artificial electric skin based on a thin film. Adeveloped by a team of Korean something with their hands. This is because researchers. The skin can detect the sur- the skin has a sensor that detects pressure, ering it with artificial fingerprints with a face’s texture, temperature, pressure, and temperature and vibration. In particular, a curved surface. even its sound by copying fingerprints and unique microstructure inside the skin makes “The newly-developed electronic skin even the internal structure of the skin. Since the touch sense sensitive. A structure of is able to recognize voices more accurately the skin has all the senses of a hand, it is tiny, mutually-linked domes amplifies tac- than smartphones, since it can detect chang- expected to contribute to various sectors tile signals and sends them to the sensor. es in vibrations made by sound,” said Park such as robots, artificial arms, prosthetic What is more, fingerprints detect min- Jong-hwa, a research fellow who took part devices, wearable devices, medical exami- ute roughness while making a contact with in the project as the first author. “This tech- nation and speech recognition. a surface. The research team had micro nology will help hearing-impaired people.” The Ulsan Institute of Science and Tech- domes formed on a side when processing “The skin can recognize biometric nology (UNIST) announced on Nov. 1 that a polymer composite film. Then they placed information such as pulses that change joint team led by Professor KohHyeon-hyup two sheets of film so that convex parts according to skin temperatures,” said Kim of the Energy and Chemical Engineering engage with each other. They made micro Ma-ri, a joint first author and a master’s Division and professor Lee Heon-sang of structures engaged with each other like the degree candidate at the Chemical Engineer- Donga University has developed biomimetic inside of the skin. Finally, they completed ing Division at Donga University. “It can be electric skin that can play the roles of multi- flexible biomimetic electric skin by cov- used in the security and IoT sectors.”

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Swift Detection Korean Researchers Develop Tech to Quickly Find Circulating Tumor Cells by Michael Herh

team of Korean researchers has slashing their surface resistance. The Adeveloped a technology to mea- team explained that when the electric sure circulating tumor cells and deter- conductivity of cancer cells was weak- Professor Han Ki-ho (right) and his research fellows. mine whether or not a human body has ened by graphene, they could be mea- cancer cells. The team led by professor sured when they passed between two on the separation of circulating tumor Han Ki-ho at the Nano Convergence electrodes. The team can estimate the cells can cost a patient 1 million won Engineering Division at Inje University number of cancer cells with low electric (US$865), and the measurement of cir- announced on Nov. 10 that they devel- resistance with 94 percent accuracy. culating tumor cells based on fluorescent oped a cell separation technology that Since this technology is able to select immunostaining technology is compli- can separate living circulating tumor circulating tumor cells via an electric cated. These reasons have hampered the cells and a technology to precisely mea- method, it is expected that this techno- introduction of the method to Korea. sure the separated cells via an electric logical breakthrough will be a core tech- “We are planning large-scale clinical method. nology for the development of a portable tests using circulating tumor cell mea- This technology can measure all cancer diagnosis device. They also fore- surement technology developed in part- circulating tumor cells within ten min- cast that it will be possible to genetical- nership with Paik Hospital,” professor utes, the team emphasized. The research ly analyze cancers by putting separated Han said. The research team has been team used graphene, a highly conductive circulating tumor cells to good use, and, applying for the registration of a patent at material that can easily combine with therefore, diagnose cancers at the molec- home and abroad. The September edition circulating tumor cells in a body. They ular level in the early stages. of Analytical Chemistry, an international observed graphene selectively combin- The team said that current commer- science magazine, carried a story about ing with rare circulating tumor cells and cial cancer diagnosis methods based this research.

Plate Fuel in the ATR research reactor of the Idaho National Laboratory (INL). Plate-type Nuclear Fuel Developed by The U-Mo nuclear fuel has a higher level of uranium density than uranium- Korea Undergoing Testing silicon fuel, and thus it can use low- enriched instead of highly-enriched by Cho Jin-young uranium, while contributing to research reactor performance and efficiency by he plate-type uranium-molyb- means of high output and improved com- Tdenum (U-Mo) nuclear fuel that bustion. In addition, it allows a research a Korean team recently developed is reactor to remain in operation for 300 going through a performance test in an days, about 1.5 times that allowed by the advanced research reactor in the Unit- current fuel. ed States. After the test is completed at The institute produced the world’s the end of 2017, the nuclear fuel is to first U-Mo powder for use in the nuclear be used in Korea’s new research reac- fuel by employing its own nuclear fuel tor under construction in Busan City for powder production technique. This pow- export purposes. der almost doubles the uranium den- The Korea Atomic Energy Research sity per unit volume, so that even the Institute (KAERI) announced on Nov. low-enriched uranium with a degree 3 that the test of its plate-type U-Mo of enrichment of 20 percent or less can KAERI’s plate-type U-Mo nuclear fuel assembly mount- nuclear fuel assembly started on Oct. 26 ed in a research reactor of the INL. ensure an excellent performance.

71 International Airport last year. The airport Fly to Paradise has seen 19.28 million as of September this year, and is expected to see 28.3 mil- New Airport to Open in Jeju Island lion in 2018 and 40 million in 2025. by 2025 To meet such demand, the Ministry of Land, Infrastructure and Transport mulled over three options: greatly expanding Jeju by Kady Na International Airport, building a com- pletely new airport with two runways and closing the current Jeju International Air- port, and keeping the Jeju International Airport and building a second airport at a separate location. Among these three options, the third one was chosen, as it was considered most reasonable. This option is to keep the operation A view of Seogwipo City. of Jeju International Airport as it is and to build a new airport which has one new airport in Jeju Island will be two airports. The current Jeju Internation- runway, which would have a relatively Abuilt in Sinsanri, Seogwipo City al Airport will be operated continuously low construction cost (4.1 trillion won) by 2025. with the new terminal. compared to the other options. The target The Ministry of Land, Infrastruc- The current Jeju International Airport area for the new airport has a nice cli- ture and Transport announced on Nov. needs an urgent expansion of its facili- matic condition and relatively less resi- 10 that it will build “a second airport” in ties, as the airport is expected to reach dents suffering from aircraft noise. The Sinsanri, Seogwipo City. The target area the limit of its capacity by 2018 due to a site also causes less damage to the envi- is located near SeongsanIlchulbong, or sharp increase in the flight demand result- ronment. Sunrise Peak, that was inscribed in the ing from the invigoration of low-cost car- The second airport is expected to UNESCO World Heritage list. riers and a large influx of Chinese tour- serve an annual accommodation of some Consequently, Jeju Island will have ists. About 23.2 million people used Jeju 25 million visitors.

Healthy Drinking his may be good news for Kore- who do not drink, one glass of soju (10g Tan soju companies and soju lov- of alcohol), two glasses of soju, and three 3-4 Glasses of ers. It was found on Nov. 6 that three to to four glasses of soju can scale down four glasses of soju reduce stroke (cere- stroke risk by 62 percent, 55 percent and Soju a Day Lower bral infarction) risk. It is first time to 46 percent, respectively. Drink-based confirm that not wine or beer, but soju stroke prevention effects were the highest Stroke Risk (diluted alcohol) common among Asians when a person drinks one glass or less of by Michael Herh helps prevent strokes. soju. A team led by Dr. BaeHee-jun at Observing a difference between men Seoul National University Hospital and women, men can reduce stroke risk by Bottles of Korean brand soju. in Bundang found out this result after drinking three to four glasses of soju, but conducting a survey of 1,848 patients women by one to two glasses. One glass registered in a database of the Stroke of soju or less found to have the highest Research Center from 2011 to 2013, and stroke prevention effects corresponded to 3,589 people who took part in a national about one third of the patient group and health survey in a similar period. The sur- about a half of the comparison group. vey checked their drinking and cerebral A thesis on these results (first author infarction risk while taking into consider- Lee Soo-joo, professor of Euljin Univer- ation age, gender and education level. sity Hospital) was published in the latest Research results suggest that three edition of Neurology, an official academ- to four glasses of the drink a day lower ic journal of The Society for Neurosci- males’ stroke risk. Compared to those ence.

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Baking in Vegas Paris Baguette Opens First Nevada Café in Las Vegas by Marie Kim he SPC Group, a Korean pas- The store carries American favorites Ttry conglomerate, announced on from sandwiches, croissants, muffins and Nov. 4 that it has opened Paris Baguette cakes to souvenirs, such as diverse gift sets, Café and Bakery in Las Vegas, the tumblers and mugs with images and words world’s largest entertainment city, for the symbolizing Las Vegas. These souvenir first time in the domestic bakery industry. products can only be purchased at the Las It is Paris Baguette’s 44th store to open in Vegas store. Also, it provides visitors with the United States. a space where they can rest comfortably An inside picture of Paris Baguette Café in Las Vegas. Paris Baguette Café in Las Vegas while viewing the shopping mall and the is 408 square meters and is formally artificial canal. ing them in Los Angeles, San Francisco, described as a bakery and restaurant. It is Since launching the first outlet in the San Diego and Orange County in the West located at the Grand Canal Shoppes at The U.S. in 2005, Paris Baguette has been Coast. In particular, Paris Baguette opened Venetian and Palazzo, two popular hotels steadily expanding its stores in hub cities seven stores in the main business districts in Las Vegas. With a Venice-inspired inte- in the East and West Coast. It opened cafes in Manhattan, New York alone, capturing rior design, it is one of the most popular in New York, New Jersey, Boston and New Yorkers’ fastidious tastes and success- tourist attractions in the city. Philadelphia in the East Coast, while open- fully targeting the U.S. market.

4DX ies screened at 4DX theater was “Jurassic World.” When the movie was screened, CJ 4DX to Break the theater generated a 55 percent occu- pancy rate. Other blockbuster movies were 10 Million Annual “Avengers 2” and “the Fast and the Furious 7” that generated 1 million viewers, testify- Record ing to the worldwide popularity of 4DX. Moviegoersenejoy the experience of a 4DX theater. by Marie Kim Achieving significant successes at the box office, the 4DX theater also draws 10 times more viewers than the previous J 4DPLEX (4DX), a five-sense the interest of theater operators world- year. In fact, 4DX has a passionate fol- Cimmersive cinematic theater, has wide. Drawing 10 million viewers and lowing in Japan, which can be seen by set a record of 10 million customers in one grossing 150 million won (US$131,430), recent strong showings. For example, year. CJ 4DPLEX, the CGV subsidiary, 4DX has recently emerged as a new “Avengers: Age of Ultron” generated said on Nov. 5 that for the last 10 months growth engine in the slumping movie an occupancy rate in 4DX that was five (from January to Oct. 29), the theater industry. On average, three 4DX theaters times higher than non-4DX, and “The brought audiences that surpassed the 10 are opened monthly worldwide. Fast and the Furious 7” recorded more million annual mark worldwide. Consider- China is the country with the largest than 91 percent average occupancy rate ing the there are 187 CJ 4DX theaters in number of 4DX theaters. With the first as part of the film’s fantastic international 32 countries, the figure indicates that each theater opened in 2010, there are currently opening weekend 4DX theater brought in more than one mil- 41 4DX theaters in operation in that coun- 4DX has also witnessed positive mar- lion people monthly for an average of 6 try. Forming a partnership with Wanda ket responses in Western Europe. In fact, movies that are screened each month. Cinema, the largest theater company in this month, the British and Swiss theater For reasons behind the rapid growth China in February, CJ expects the further markets saw an additional 4DX theater. of the 4DX enterprise, industry insiders expansion of the 4DX business in China. For the British this is the third 4DX the- cite blockbuster movies, high occupancy Among 32 countries, Japan saw the ater, following the second one opened in rates, and the worldwide popularity of a most rapid growth of 4DX. This year October. Industry insiders expect these 4DX theater. alone saw the addition of 11 additional recent additions to spur further expansion One of the highest grossing mov- 4DX theaters. The year 2014 witnessed in the markets in West Europe.

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