Post on 06-Feb-2018
AUTOMOTIVEOPPORTUNITIESIN DGFEZ
03 Korea at a glance
07 Korea’s Automotive Industry
12 Daegu-Gyeongbuk at a glance
14 Automotive Industry in Daegu-Gyeongbuk
18 Competitiveness of Automotive Industryin Daegu-Gyeongbuk
21 Promising Business Areas in Daegu-Gyeongbuk
23 DGFEZ
26 Incentives
1. KOREA at a glance
◆Country Profile (2009)
Official Name
Capital
Area
Population
Language
Literacy
Religion
Climate
Time
Political System
Economy
Currency
Main Industries
Republic of Korea
Seoul
100,140㎢
49.8 million
Korean (official) / English widely used
99.9% (between 20-40)
Buddhism 24%, Protestant 23%, Catholic 8%, Other 0.8%, None 44.2%
Continental with four seasons
9 hour + GMT
Democratic Republic, Presidential System
15th largest economy (based on GDP), OECD member
South Korean Won (KRW)
IT, Electronics, Semiconductor, Automotive, Shipbuilding, Steel, Petrochemical
◆Key Economic Indicators
Source : Bank of Korea, Korea Customs Service
Source : Korea Trade-Investment Promotion Agency (KOTRA)
National GDP (USD billion)
Real GDP Growth (%)
GNI per capita (USD)
Exports (USD billion)
Imports (USD billion)
Current Account (USD billion)
Unemployment Rate (%)
CPI Inflation (%)
Treasury Bond Yield (3 year, %)
Foreign Exchange Reserves (USD billion)
Exchange Rates
won/USD
won/yen100
won/euro
2004
681
4.6
15,082
254
224
28
3.7
3.6
4.1
199
1,145
1,059
1,423
2005
791
4.0
17,531
284
261
15
3.7
2.8
4.3
210
1,024
931
1,274
2006
887
5.2
19,722
325
309
5
3.5
2.2
4.8
239
956
821
1,199
2007
1,050
5.1
21,695
371
357
6
3.2
2.5
5.2
262
929
790
1,273
2008
928
2.2
19,231
422
435
-6
3.2
4.7
5.3
201
1,103
1,077
1,607
2009
833
0.2
17,175
364
323
43
3.6
2.8
4.0
270
1,276
1,363
1,774
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1-1. A Vast Domestic Market
As the world’s 15th largest economy in terms of GDP and home to 49.8 million people, Korea offersan attractive marketplace for international investors. Korea’s tech savvy consumers interested in newand advanced technologies have been instrumental to the expansion of the domestic market in thelast decade. Korean manufacturers of the mobile phones and consumer electronics well known fortheir top quality products worldwide owe much to the discerning and difficult to please Koreanconsumers who continuously push the industry to raise the bar. This explains why consumer goodscompanies like P&G and L’Oreal, and tech firms like Microsoft, Motorola, Olympus and Siemens,are using Korea as a test market for their new products.
1-2. A Big Trading Nation
Values of Korean imports and exports in 2008 totaled USD 435 billion and USD 422 billionrespectively, equivalent to 47 percent and 45 percent vis a vis GDP. Korea is the world’s 11th largesttrader with imports and exports accounting for nearly 90 percent of the country’s GDP. Currently,Korea sells to and buys from over 220 countries around the globe with China, Japan, and the U.S. asits major trading partners. Korea’s trade with its Asian neighbors is particularly active, representingover half of the country’s total trade volume. Korea’s major export items include semiconductors,automobiles, wireless communications equipment, ships and petroleum products, while crude oil,semiconductors, natural gas, and petroleum products make up major imports.
◆Economic Growth Rate
◆ 2008 export partners ◆ 2008 import partners
Source: Korea International Trade Association
Source : Bank of Korea
1-3. Gateway to Northeast Asia
Conveniently located between China and Japan, two of the world’s largest markets, Korea lies within
an average air travel time of three hours from over 60 cities with a population of 1 million or more.
Meanwhile, the conclusion of the Korea-US FTA and Korea-EU FTA has set the stage for further
improvements in access by Korean businesses to two of the world’s largest consumer markets. Korea
signed a comprehensive FTA with ASEAN in June 2009 and an interim agreement with India in
February 2009. In addition, FTA talks are currently under way with other major markets like
Canada, Mexico, GCC, Australia, New Zealand and are due to begin with China, Japan,
MERCOSUR, Turkey and Russia shortly.
1-4. Dynamic and Competitive Market Players
Korea based firms have competitiveness on the global stage with growing popularity in international
business. Korean companies have achieved top global market shares in shipbuilding, DRAM
semiconductors and TFT-LCD displays, and rank among the top five in automobiles, steel,
petrochemicals, textiles and consumer electronics.
Industrial Complexes, home to major Korean corporations, are tremendous sources of competition
and cooperation. A joint venture between Samsung and Sony is a excellent example of productive
industrial partnerships in the LCD sector, while the takeover of Daewoo Motors by GM and that of
Samsung Motors by Renault represent success in the automotive sector.
1-5. Talented Human Resources
Koreans have earned a global reputation for their educational fervor. According to the IMD World
Competitiveness Yearbook 2010, the percentage of the Korean population aged 25~34 that has
attained at least tertiary education is as high as 58 percent. This is above the corresponding figures
for most OECD nations, excluding Japan and Canada.
In 2007, Korean students made up the largest group of foreign students both in China and in the
U.S., accounting for 36 percent and 20 percent, respectively, of all foreign students enrolled in
Chinese and U.S. schools.
The growth rate of labor productivity in Korea posted 4 percent and 5.4 percent in 2006 and 2007
respectively, which far exceeds 1.6 percent and 1.4 percent on OECD average, and is the third
highest level in the world.
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1-6. World Class R&D Centers
Korea’s state of the art IT infrastructure, competitive IT firms and technology, and innovation
friendly consumers constitute a winning combination that has attracted global IT giants to her soil.
Microsoft has opened its R&D lab for mobile technology in Korea; IBM, an R&D lab for ubiquitous
computing; and Google, an engineering lab.
Meanwhile, Motorola, Microsoft and Intel have chosen Korea as the test market to first release new
products to technology savvy and trend conscious consumers whose feedback is highly prized.
Motorola and eBay have selected Korea as their Asia Pacific head quarters from which to oversee
their business interests. Kimberly-Clark opened its first R&D center outside the United States in
Korea while Siemens and DuPont also operate a medical R&D center and a nano R&D lab,
respectively, in Korea. L’Institut Pasteur, an eminent French biotechnology institute, has also had a
research presence in Korea since 2004.
1-7. Well developed Transportation Infrastructure
Korea is located in the center of the Pacific Rim with a highly developed transportation infrastructure
such as the Incheon International Airport, northeast Asia’s air hub and the Busan port, the world’s
5th largest international port. Logistically, Korea is well connected by expressways, complemented
by a high-speed rail system, KTX that enables access to all major cities in Korea within 3 hours.
◆ Information Technology Skills (2007) ◆Patents Granted to Residents (Average 2005-2007)
source : IMD World Competitiveness Yearbook 2009
※ based on a scale of ten
2-1. Automotive Competitiveness
2-1-1. Dynamic Automotive Industry
Korea’s automotive industry ranks 5th in the world, and accounts for 10.2 percent of exports, and its
surplus accredits for two thirds of Korea’s total trade surplus. As of 2009, domestic and overseas
manufacturing reached 4.78 million units (including passenger cars, 4.29 million units) and 2.93
million units, respectively.
Korea’s automotive industry is comprised of seven auto makers, 910 Tier 1 suppliers, and thousands
of Tier 2 suppliers. As of 2008, Korea’s automotive industry employs 1.67 million, which accounts
for 7.1% of total labor market. Through high labor efficiency and cost competitiveness Korea’s
automotive industry aims at becoming the top auto manufacturer in the global market.
According to various studies like J.D. Power and Consumer Reports in 2010, the quality and
customer satisfaction of Korean automobiles have highly increased, especially durability and initial
customer satisfaction which rank 1st in the U.S. market.
2-1-2. R&D Activities
Within the auto industry, Korea ranks 2nd with 1,008 patent applications for pollution-free vehicles,
behind Japan’s 1694, but ahead of Europe (354). Hyundai Motor has developed an electric vehicle,
BlueOn which outperforms the well-known Mitsubishi i-MiEV. Currently, Korea’s alternative
energy vehicle technology is considered in the initial stage and its technology level is evaluated at
76% of the level of an advanced competitor. Korea’s level is expected to be elevated to 88% in 10
years.
2. Korea’s Automotive Industry
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2-2. Global Competitiveness
Using a global sourcing strategy to maintain cost competitiveness, Hyundai-Kia Automotive Group
(HKAG) has increased production at offshore plants from 1 million units (2006) to 1.9 million units
(2009). The most prominent of these auto plants (in 8 countries) are in China (1.03 million), the
United States (600,000), India (600,000), Slovakia (300,000), Czech Rep. (300,000) and Turkey
(100,000). This will enable HKAG’s overseas production capacity to increase to 4 million units in
2012 (from 2.93 million units in 2009).
◆Hyundai-Kia Overseas Production Bases (2010)
◆Number of Applications and Patents Registered ◆Patent Applications for Pollution-Free Vehicle
Source: Industrial Core Technologies Road Map, Korea Institute of AdvancedTechnology, 2009
Year
2000
2001
2002
2003
2004
2005
2006
2007
2008
Total
Korea
32
59
101
114
181
203
198
91
29
1,008
U.S.
39
58
87
91
96
105
157
107
124
864
Japan
123
144
186
261
240
282
283
162
13
1,694
EU
18
57
47
49
56
40
57
22
8
354
※ US Patent Registered.Korea, Japan and EU Patent Applications
HKAG pursues industry leadership, not only in terms of volume, but also in terms of customer
satisfaction and overall brand value. In particular marketing strategies like the Assurance Program
in U.S. have proven successful to upgrade its image. By focusing on customer satisfaction, product
quality, while maintaining a competitive price, HKAG is convincing car buyers that Hyundai is a
quality brand. HKAG utilizes these tactics along with other strategies: entering emerging markets
with small and medium size cars, and value-added vehicles equipped with IT convergent
technologies.
2-3. Automotive Parts and Materials
Accounting for over 3 percent of domestic manufacturing output, Korea’s auto parts market, is a
powerful engine for the Korean economy and exports within the auto parts sector totaled 11.7 billion
USD (2009). Approximately 260 foreign invested automotive parts makers have established
operations in Korea including Delphi and Visteon of the U.S., Germany’s Bosch and Siemens,
Denso and Calsonic of Japan, and Valeo from France.
2-4. Automotive Makers and Component Companies
Approximately 910 module makers are supplying parts in Korea, of which 118 are large size and
792 are small/medium size companies. Large companies have been increasing their market share
(13% in 2009 from 9.3% in 2005), while small parts suppliers are focused on diversifying their
customer base. Currently, the majority (50.1%) of SMEs are reliant upon 1 auto maker. It is
encouraging that an increasing number of suppliers (14.4%), as of 2006, have secured contracts with
Total Manufacturing
Auto Industry
Percentage
Auto Parts
Percentage
No. of Employees
2,454 thousand
259 thousand
10.55%
93 thousand
3.79%
Production Value
USD 1,009 billion
USD 107 billion
10.60%
USD 30 billion
2.96%
No. of Firms
58,459
3,037
5.20%
1,636
2.80%
Exports
USD 363.5 billion
USD 37.1 billion
10.21%
USD 11.7 billion
3.22%
Imports
USD 323 billion
USD 5.9 billion
1.83%
USD 3.4 billion
1.05%
◆Korean Automotive Industry Production
Source : Statistics Korea 2008 (2009 for exports / imports )
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at least 4 assembly firms. Korean auto parts industry held an impressive 8% (51 firms) of global
market share in 2006 up from 3% in 2001 (29 firms).
2-5. Competitiveness of Technology
The Korea Institute of Patent Information reported that engine and electrical/electronic technologies
represent the highest segment for patent applications and continues to increase (2004~2008). Patents
for engine technology have increased by 14.7% over 5 years, representing 11.9% of total patent
applications. Patents of electrical/electronic components gained 13.4%, representing 6.2 % of total
patents. Automotive material and energy technologies have also increased.
2006
8%
89.6%
88.9
1,798.2
2005
7%
88.1%
50.1
1551.4
2004
5%
88.1%
52.4
1127.5
Global market share
Domestic market share
Revenue per firm (million USD)
R&D investment (million USD)
◆Automobile/Transportation Component Industry
Source: Survey on evaluation of Korean part/materials product, KITECH (2008)
2003
4%
86.7%
43.6
892.7
◆Patents Trends of Korea’s Auto Parts
Source: Korea Institute of Patent Information (2010)
2-6. Korean Government Support for Automotive R&D
Since 2004, the Korean government has been preparing for the future demands of industry,
implementing ‘Future Automobile Development Project’. The eco-friendly vehicles development
and popularization program is designed to meet the requirements of new environment protection
laws from around the world. As of 2010, the R&D budget for this program is approximately USD 95
million, allocating USD 70 million for core technology, USD 12 million for electric vehicles, and
USD 13 million for on-line electric vehicles.
Major goals of these programs include: commercialization and standardization of core components
for EV and HV, construction of charging stations, distribution of electric cars to the public sector, and
modification of laws. As a first step, 800 electrical cars were tested by government organizations
(August~December 2010). This is part of Korea’s aggressive plan for electric vehicles to capture
10% of the domestic small car market by 2015, and reach 1 million electric cars (20% of domestic
market) with 2.2 million charging units by 2020.
In 2010, the Ministry of Knowledge and Economy (MKE) chose 10 material technologies (5 auto
related) and 20 core components technologies (3 auto related) to be applied to next generation
vehicles. Funding for auto parts and materials will be USD 130 million annually.
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3-1. Global Industrial Cluster
Daegu-Gyeongbuk is home to global clusters specialized in IT, auto and new materials. Leading
companies include: Samsung Electronics, LG Electronics, LG Display, POSCO, Samsung Corning,
ExxonMobil, Nippon Oil Corporation, Toray Advanced Materials and Asahi Glass.
3-2. Excellent Human Capital
51 universities and colleges graduate 70,000 students annually (17,000 graduates in the IT, NT, BT
and intelligent automotives). Daegu-Gyeongbuk also boasts low employee turnover (2.04%) and
was awarded the President’s Trophy for the best labor management in Korea. Moreover, Daegu
International School opened in August 2010.
3-3. R&D Hub of Korea
Daegu-Gyeongbuk offers superior and specialized R&D facilities such as Electronics &
Telecommunications Research Institute (ETRI), Korea Institute of Industrial Technology (KITECH),
Pohang Accelerator Laboratory (PAL), Pohang Institute of Intelligent Robotics (PIRO). POSTECH
and Daegu Gyeongbuk Institute of Science & Technology (DGIST).
Daegu Metropolitan City(Daegu), Gyeongsangbuk-do Province(Gyeongbuk)
Korea’s southeast region (E127。48″-131。52″, N35。34″-37。33″)
5,222,266 (Daegu 2,512,604 and Gyeongbuk 2,709,662)
19,909㎢ (Daegu 884㎢ and Gyeongbuk 19,025㎢)
Electronics, Mobile, Mechatronics, Metals, Automotive Parts, Textiles
Official Name
Location
Population
Area
Major industries
◆Region Profile (2009)
Source : Daegu Metropolitan City Government, Gyeongsangbuk-do Provincial Government
3. Daegu-Gyeongbuk at a glance
3-4. World’s Major Cultural Region
Daegu-Gyeongbuk is recognized globally with its selections to host numerous international sporting,
cultural and business events. The 13th IAAF World Championship in Athletics 2011 and the World
Energy Congress 2013 are scheduled to take place in Daegu. Daegu-Gyeongbuk maintains its
cultural significance by hosting an International Musical Festival and an International Opera
Festival. One can explore World Heritage Sites (UNESCO) such as Bulguksa, Seokguram and the
Gyeongju Historic Areas, as well as visit the birthplace of Korean Confucianism at Andong’s Hahoe
Traditional Folk Village.
3-5. Convenient Transportation Infrastructure
Daegu-Gyeongbuk connects to Seoul by KTX in approximately 90 minutes. Daegu International
Airport has direct flights to such destinations as Beijing, Shanghai, Manila and Bangkok. Gimhae
International Airport also provides international access with 17 flight routes to destinations as Tokyo,
and Hong Kong, among others. Additionally, expressways connect Daegu-Gyeongbuk to 5
international ports, which are located less than an hour away.
3-6. Comfortable Living Environment
Daegu-Gyeongbuk provides an eco-friendly living environment with energy efficient commercial,
residential buildings and convenient amenities including shopping, sporting, and medical facilities in
Daegu-Gyeongbuk.
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4-1. Overview
The automotive cluster in the Gyeongbuk-Gyeongnam region is the largest in Korea, producing
approximately 2.2 million units per year (42.5% of national production, 2008). Four automakers
Hyundai Motors, Renault Samsung, GM Korea, Daewoo Bus operate manufacturing facilities which
are complemented by surrounding industrial complexes in Steel (Pohang), IT/Mobile (Gumi), and
Machinery (Changwon).
4. Automotive Industry in Daegu-Gyeongbuk
◆Auto parts suppliers in Daegu Gyeongbuk
Source: DGFEZ
※ GM Korea replaced the GM Daewoo brand in 2011.
Company
Hyundai Motors
Renault Samsung Motors
GM Korea
Daewoo Bus
Main Car Model
Elantra, Genesis, Azera, SantaFe, etc.
SM3, SM5, SM7, QM5
Chevrolet(Cruise, Spark)
BX, FX, BH, BS series
Capacity (million /yr)
1.7
0.3
0.21
0.009
◆Major Automotive Companies in Daegu Gyeongbuk
Plant Location
Ulsan
Busan
Changwon
Ulsan, Busan
Total Capacity in Daegu Gyeongbuk 2.219
4-2. High Quality Human Resources and Research
As of 2009, 15,000 students are enrolled in programs for automotive engineering, advanced
materials and mechanical engineering at prestigious institutions such as POSTECH, Kyungpook
National University, Keimyung University and Yeungnam university.
Many research and testing institutes have teamed with private companies to conduct product
testing/measurement, evaluation and core technology development. Within the machinery sector,
DMI (Daegu Machinery Institute of Components and Material Foundation) possesses core
technologies and POMIA (Pohang Institute of Metal Industry Advancement) has developed
advanced metal/material technologies. Components research (sensor and embedded systems) is
carried out by DGIST (Daegu Gyeongbuk Institute of Science and Technology), while module-
based research is done at IT/Automotive Innovation Center. In addition, Gyeongbuk Hybrid
Technology Institute is conducting R&D activities for lightweight vehicles.
4-3. Daegu-Gyeongbuk’s auto parts makers
As of 2010, approximately 1,500 auto parts suppliers can be found in the Daegu-Gyeongbuk region.
Considering that Hyundai Motor plays the leading role (75% of auto production) in Daegu-
Gyeongbuk, it is not surprising that the majority of auto suppliers (63% in Daegu, 72.5% in
Gyeongbuk) have a business relationship with Hyundai Motor. For the most part, these companies
are located in the cities of Daegu, Gyeongju, Gyeongsan and Yeongcheon. While many of these
companies have less than 50 employees, several auto parts suppliers are thriving with over 20
companies recording annual sales over USD 100 million.
Daegu 54
Gyeongbuk 69Region
Hyundai
34(63.0)
50(72.5)
Kia
2(3.7)
1(1.4)
GM-Korea
11(20.4)
7(10.2)
Ssangyong
1(1.8)
1(1.4)
Renault-Samsung
1(1.8)
7(10.2)
Daewoo Bus
2(3.7)
1(1.4)
Other
3(5.6)
2(2.9)
◆Relationships between Tier 1 suppliers and automakers Unit: Tier 1 supplier, (% of total suppliers)
Tier 1 suppliers to auto makers
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◆Major Automotive Parts Companies in Daegu-Gyeongbuk(over USD 100 million revenue)
Company Name Revenue (Million USD) Items Location
Hyundai Mobis 9,663.6 module, AS parts, air bag Gimcheon
Korea Delphi Automotive Systems 1,009.4 energy& engine,chassis/thermal/steering/driveline/safety systems, car electronics
Gyeongju
Sungwoo Automotive 463.8 engine/chassis/transmission parts, alloy,wheel, battery Pohang
Delphi Automotive Systems 387.5 recliner, track, height adjuster, latch, swivel&removal, seat Daegu
Ecoplastic 330.9 bumper, trim Daegu
SL 297.3 head/rear/fog lamp, chassis Gyeongsan
Valeo Electrical Systems Korea 291.8 engine/electrical systems Daegu
Pyeonghwa Automotive 272.3 latching system, system module, hinge, striker,door checker Gyeongju
PHC Valeo 266.0clutch disc, clutch cover, release bearing, facingSAT/, SATIC, hydraulic products, torqueconverter, DMF
Gyeongju
Samwon Steel 194.2 multi-leaf springs, parabolic leaf springs Pohang
SL Lighting 186.1 head/rear/fog lamp, washing system Daegu
Korea Powertrain 177.4 torque converter, engine pulley, A/T parts, M/Tparts, engine parts Gyeongju
Iljin BearingIljin Bearing 152.2 door checker, tie rod, corner module, ball joint,wheel bearing Daegu
Sangsin Brake 136.2 brake pad, brake shoe assembly, brake liningbus/truck, brake assembly Gyeongju
Pyunghwa Oilseal Industry 134.7 bearing/diff,side/water/axle/engine/ shockabsorber/lip/valve stem seals Gyeongju
Kyungchang Industrial 129.4 cable, tank, pedal, lever Gyeongju
Daechang Seat 127.5 front/rear seat frame assembly, spare tirecarrier Daegu
Kwangjin 116.0 regulator, door module, body parts Daegu
Shinyoung 114.4 fender, t/gate, hood, back, RAD SUPT COMPL Yeongcheon
Youngshin Precision 109.6 power steering oil pump, hydraulic valve lashadjuster, mechanical lash adjuster, MDPS part Daegu
Sambo Motors 105.5 transmission parts, engine parts, fuel parts Gyeongju
4-4. Specialized areas of Daegu-Gyeongbuk’s auto part makers
Body/chassis components such as door frames and seat frames are the most commonly
manufactured item (34.5%) in Daegu-Gyeongbuk. This is followed by engine components (16.6%)
and electric/electronics parts (10.9%). With regional auto manufacturers specialized in
manufacturing process engineering and press molding, Daegu-Gyeongbuk has a competitive edge in
automotive parts/materials manufacturing and high tech electric/electronics parts.
1.0
0.8
1.5
1.0
1.5
1.3
0.8
0.6
1.2
1.1
0.8
Gyeonggi
Seoul
Ulsan
Incheon
Daegu
Jeonbuk
Daejeon
Gyeongbuk
Busan
Gwangju
Gyeongnam
BRAKE
1.1
1.0
1.0
0.6
1.3
1.0
0.6
0.4
1.1
1.1
1.6
DRIVE,T/M
1.0
1.2
0.3
1.0
1.5
0.6
1.8
1.8
1.1
0.9
1.0
ELECTRICALPARTS
1.1
1.1
1.0
0.8
1.1
0.8
0.8
0.4
0.9
1.0
0.8
ENGINE
1.0
1.2
1.0
1.9
0.4
0.3
0.4
0.4
0.4
0.3
0.6
INTERIOR
1.1
0.8
1.0
0.8
1.5
0.9
0.2
0.4
0.8
0.5
1.0
STEERING
1.0
0.8
1.5
0.8
0.5
3.3
0.3
0.3
0.7
0.9
1.2
Suspension
0.7
0.7
0.6
0.5
1.0
0.6
1.8
8.3
2.1
0.9
3.1
MaterialsRegion
◆Regional Index of Patents in Korea
※ Base is 1.0Source: Korea Institute of Patent Information, 2010
◆Percentage of Manufactured Items in Daegu-Gyeongbuk
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5-1. Raw Materials
Automotive parts complexes in Daegu-Gyeongbuk offer convenient access to materials companies
producing aluminum, magnesium, steel, and plastic. Single component makers account for 55%,
followed by 12% for large module makers, and 33% for other products. Three hundred large and
medium size companies produce steel products (150) and non-steel products (150), in addition to
molding and casting companies (120 cast iron, 80 non steel) and plating firms (300) playing a
fundamental role.
5. Competitiveness of Automotive Industry in Daegu-Gyeongbuk
◆Daegu-Gyeongbuk Automotive Industry Value Chains
Source: Daegu Gyeongbuk Development Institute
5-2. Processing and Machinery
The systematic structure of the auto supply chain has resulted in highly specialized segments with
strong cost competitiveness; particularly in the raw materials and processing industry. Local metal
companies have advantages in hot rolling, extrusion manufacturing process, and tempering skills for
non-steel like magnesium and aluminum. Notable complexes include plating and molding in Daegu,
and molding in Gyeongbuk.
Highly competitive edge in process/manufacturing machineries provide a competitive advantage for
Daegu-Gyeongbuk automotive electrical/electronics, auto chassis components and power train
products in Korea. Construction machineries have also gained competitiveness through government
programs and incentives.
5-3. Local Government support for auto parts industry
The governments of Daegu and Gyeongbuk have implemented several programs to support the
automotive industry. Research for high efficiency/high performance/lightweight automotive
components will be carried out at KATECH (Korea Automotive Technology Institute) Daegu
Branch and Daegu Gyeongbuk Auto Parts Development Association.
Another key initiative is a USD 145 million Green Car Components Project. Daegu-Gyeongbuk is
developing eco-friendly automotive technologies, such as ultra-light material manufacturing, low
emission components and advanced automotive that are aided by superior IT infrastructure and
automotive electronics industry.
◆Major Industrial Distribution in Korea(No. of employees)
<Metal/Materials> <Machinery> <Automotive>
No. of employees
10~5051~150151~400401~800800~
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A Proving Ground for Intelligent Vehicle & Transport System is currently under construction within
the DGFEZ Daegu Technopolis district. This facility (USD 88 million, 385,000㎡) will be Korea’s
first public automotive testing facility, and part of a greater development plan to become specialized
in intelligent automotive components R&D and manufacturing. Additionally, Gyeongbuk Provincial
Government plans to establish Institute of Construction Machineries Components Technology in the
DGFEZ Gyeongsan R&BD District.
◆Major Support Programs
Program Description Period Funding
Mechatronics Supporting and planning mechatronicsproducts development
2010~2013(4 years)
KRW 5.4billion
Green CarComponents
Supporting and planning for 4 advancedtechnologies.Setting up test & evaluation infrastructure,developing secondary battery component
2010~2013(4 years)
KRW 66billion
Metal Product CompetitiveEnhancement
Improving metal products CompetitivenessSupporting pilot product development
2010~2013(4 years)
KRW 4.6billion
Hybrid Car Components/Materials Enhancement
Hybrid car components developmentEnvironment Friendly vehicle componentsdevelopment
2010~2013(4 years)
KRW 4.6billion
※ 1 USD = 1,100 KRW
6-1. Intelligent Automotive Components
Possessing a competitive edge in mobile and electronics technology, Daegu-Gyeongbuk has beencarrying out intelligent automotive development project. As a part of this project a ProvingGround for Intelligent Vehicle & Transport System is currently under construction within theDGFEZ Technopolis district. This facility (USD 88 million, 385,000㎡) will be Korea’s firstpublic automotive testing facility, to become specialized in intelligent automotive componentsR&D and manufacturing. Due to strong automotive manufacturing potential coupled with a high-levels of IT technology, Korea’s intelligent automotive market is expected to grow to KRW 48trillion by 2015, occupying 60% of the auto industry.
6-2. Hybrid and Electric Vehicles
According to the Ministry of Knowledge Economy. Korea auto manufacturers will produce 1.2million green cars by 2015, exporting 900,000 units. Hyundai-Kia released its first full speed electricvehicle, BlueOn, to the public sector and will release BlueOn commercially in 2013. A hydrogenvehicle, i-Blue (HKAG), will be introduced in 2011 as a pilot product (1,000 units) with massproduction (10,000 units) scheduled for 2015.
6-3. Secondary Battery
Over USD 430 million of foreign investment has been recorded in the secondary battery industry inGyeongbuk Province, particularly in the city of Gumi. The attractiveness of the region is due itsequidistance from Korea’s two largest automotive secondary battery producers: LG Chem (Ochang)and Samsung SDI (Ulsan). Foreign investments have been concentrated on carbon materials,separators and core materials for lithium ion batteries and other advanced batteries.
6-4. Lightweight Components
Daegu-Gyeongbuk controls 52% of Korea’s metal industry, and the bulk of R&D is carried out inthis region. R&D centers are developing high strength/lightweight components and materials toimprove the performance and fuel efficiency of vehicles. The main focus of their research will be on;aluminum chassis, ultra light automotive components, magnesium molding & die casting, plasticextrusion molding and heat & surface treatments.
6. Promising Business Areas in Daegu-Gyeongbuk
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6-5. Bus and Special Vehicles
KIMM (Korea Institute of Machinery and Materials) and Daewoo Bus plan to manufacture hybrid
diesel buses by 2012. The hybrid buses are expected to exceed the performance and efficiency of
existing Euro 4 Diesel buses, with 40% better fuel mileage, and 20% less carbon emission.
Gyeongbuk Provincial Government plans to establish Institute of Construction Machineries
Components Technology in the DGFEZ Gyeongsan R&BD District to foster the growing special
vehicle market.
6-6. Imports of Auto Parts
Major imported components are gear box/transmission, diesel engine components, airbag
component, fuel pumps and brake parts. Automatic transmission/gear box are the largest import
accounting for approximately 27% of total auto part imports.
6-7. Future Prospects
Considering high levels of IT and battery technology, Korean auto industry will increase its global
presence through expansion to BRIC markets. The implementation of trade agreements such as the
Korea-India CEPA (2010), Korea-EU FTA (July 2011), Korea-US FTA and Korea-Peru FTA (est.
2011), will also benefit Korean-based auto component companies.
Gear Box, Transmission
Diesel engine components
Airbag components
Fuel pumps (internal combustion engine)
Brake parts
Others
Total
2008
1,212,621
410,494
239,024
170,441
159,635
2,155,927
4,348,142
2009
900,597
320,573
166,771
120,874
150,541
1,719,316
3,378,672
◆ Imports of Major Automotive Components
Source: Korea International Trade Association (2010)
Unit : thousand USD
2010(Jan~Nov)
1,231,236
410,348
203,065
170,040
212,975
2,267,687
4,495,351
7. DGFEZ
Daegu Gyeongbuk Free Economic ZoneSoutheast region of Korea34.09㎢ (Daegu, Gumi, Gyeongsan, Yeongcheon, Pohang)IT Convergence, High-tech Transportation Components, Green Energy,Knowledge-based Service
Official NameLocationAreaMajor Industries
District Area Target Businesses
① Gumi Digital 6.24㎢ solar PV, secondary battery, next generation display
② Daegu Technopolis 7.27㎢ solar cell, fuel cell, futuristic automotives
③ International Culture Industry 0.07㎢ software development, broadcasting(IPTV)
④ Suseong Medical 1.79㎢ foreign hospital & medical school, medical tourism, medical devices
⑤ International Fashion Design 1.18㎢ fashion school, commercial facilities
⑥ Daegu Innovation 1.03㎢ medical equipment, new medicine development, medical R&D
⑦ Gyeongsan R&BD 6.27㎢ RFID, LED, medical equipment, construction machinery
⑧ Yeongcheon Industry 1.67㎢ automotive parts & materials, intelligent ship components,aerospace
⑨ Yeongcheon High-Tech Park 5.40㎢ mechatronics parts & materials, intelligent automotive parts& materials, logistics
⑩ Pohang Fusion Tech 3.76㎢ fuel cells, wind power, new materials
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7-1. Daegu Technopolis
■ Location : Dalseong gun, Daegu
■ Area : 7.27㎢■ Development period : 2006~2013
■ Land available now
■ Targets : Solar cell, Fuel cell, Futuristic automotives
Daegu Technopolis is designed to become a research &business development hub. Various national institutes anduniversity branches specialized in cutting-edgetechnology and science are in the process of locatinghere.The Korea central government designated DaeguTechnopolis as a Special R&D Zone (Jan. 2011),enabling tenant companies greater opportunities toparticipate in national projects and receive increasedincentives. The district received another boost whenHyundai IHL announced that it will begin construction ofa USD 100 million manufacturing and R&D facility forautomotive LED lamps in April 2011.
◆ Land use plan
◆Overview
Total Industrial andR&D facilities
Commercialfacilities
Residential andsupport facilities
Public facilities(incl. Green area)
Area(㎡) 7,265,599 2,910,546 122,042 1,504,832 2,728,179
Total(%) 100,00 40.05 1.68 20.72 37.55
7-2. Yeongcheon Industry District
■ Location : Yeongcheon City, Gyeongbuk■ Area : 1.67㎢■ Development period : 2008~2012■ Land available now■ Targets : Automotive parts and materials, Intelligent
ship components, Aerospace
Yeongcheon Industry District is being developed as asupply base for components used in vehicle, shipbuilding,aerospace and wind power.Yeongcheon is located in the middle of the auto valleywhich links the automotive, shipbuilding and wind powersupply chains and thus plays a pivotal role in theproduction and supply of mechatronics parts.Relying on its attractive location just 50 minutes fromDaegu and Busan, Yeongcheon Industry District offersinexpensive land (approx. KRW 120,000/㎡) andconvenient access by ground (500m from YeongcheonIC), sea (50min. to Busan and Pohang Port), air (50min. toDaegu and Gimhae International Airports) and rail(10min. from train station).
◆ Land use plan
◆Overview
Total Industrial andR&D facilities
Commercialfacilities
Residential andsupport facilities
Public facilities(incl. Green area)
Area(㎡) 1,668,614 1,088,757 42,564 3,924 533,369
Total(%) 100,00 65.25 2.55 0.24 31.96
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8. Incentives
◆ Tax benefits
Eligibility- Manufacturers, tourist hotels, general facilities and seminar halls : Over USD 10 million of FDI- Logistics and medical facilities : Over USD 5 million of FDI- R&D facilities : Over USD 1 million of FDI
Financial Assistance- Tariff on capital goods : 5 years exemption- Acquisition and property taxes : Exemption 100% for 15 years- Income and corporate taxes : Exemption 100% for 3 years and 50% for 2 years
Tax benefits for foreign workers : Uniform 15% tax rate appliedTax benefits for foreign engineers : 50% income exemption for 2 years
Manufacturers : Over USD 30 million of FDITourists : Over USD 20 Million of FDILogistics : Over USD 10 Million of FDIR&D Facilities : Over USD 2 million of FDI
Income and corporate taxes :Exemption 100% for 5 years and 50% 2 years
◆ Financial support
Building lots supported and distributed at low price for foreign enterprises.National and public property : Rental fee reduced, private contractFinancial support for the construction of main infrastructure.
◆ Labor environment
Provisions of labor standards act notapplicable to DGFEZ Details
Employment quotas No obligation to fill quotas for special classes of workers [elderlyworkers, veterans and workers with disabilities]
Restriction on labor Employers will have greater freedom to hire temporary workers forlonger period
Mandatory paid leave Employers are not required to offer paid leave to employers or paidspecial monthly leave for women[but must offer unpaid leave]
◆ Better living conditions for foreign residents
Measures to improve living conditions Details
Education Operation of Daegu International School [K-12]
Broadcasting Establishment of additional foreign language radio station Increased foreign language television channels
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