[30 Years of Korea-China Diplomatic Relations] ⑤ Reversed Offense and Defense... Allowing Future Growth Opportunities to Be Overtaken

Mobile, Display, Electric Vehicles, and Other 'Advanced Industries' Struggle
LCD and Solar Power Businesses Shut Down One After Another

"Efforts to Diversify Next-Generation Materials Like Lithium Hydroxide"

On March 27, 2017, when China's retaliation against the deployment of THAAD (Terminal High Altitude Area Defense) on the Korean Peninsula was at its peak, an advertisement with the phrase "We understand you, so we wait" written in Chinese was displayed on the exterior of the Lotte Department Store main branch in Jung-gu, Seoul.
(Photo by Moon Honam munonam@)

[Asia Economy Reporters Moon Chaeseok, Han Yeju, Kim Pyeonghwa]

South Korea, a powerhouse in displays, lost its position as the world's top leader to China last year. It was the first time in 17 years since surpassing Japan to become the global number one.

According to the Korea Display Industry Association, as of last year, China's share of the global display market was 41.5%, while South Korea's was 33.2%. This includes both Liquid Crystal Display (LCD) and Organic Light Emitting Diode (OLED) technologies. It is the first time China has surpassed South Korea in annual market share.

Over the 30 years since the establishment of diplomatic relations between South Korea and China, the industries led by the two countries have also changed. In advanced industrial sectors where South Korea once dominated the Chinese market with superior technology, China is now leveraging a joint private-sector 'volume offensive' to challenge the sectors previously held by South Korea. Smartphones and automobiles, which were once synonymous with 'number one' when it came to Korean brands in China, have now become representative items where Chinese native companies have pushed Korean companies out. As more Korean companies lose ground to Chinese native firms, there is a growing trend of moving away from China. Due to a sharp decline in sales caused by protectionist territorialism, groups like Lotte were forced to withdraw.

China Surpasses South Korea in Smartphones, Displays, and Electric Vehicles

Photo of Vivo advertisement taken by Song Joong-ki. (Photo by Asia Economy DB)

According to industry sources on the 23rd, Samsung Electronics' market share in China's smartphone market, which was in the 20% range 10 years ago, has now fallen to the 0% range. Chinese native companies such as Vivo (19.8%), Honor (18.3%), Oppo (17.9%), Xiaomi (14.9%), and Huawei (6.9%) have filled the gap left by Samsung. In the automobile sector, Beijing Hyundai once dominated most taxis in Beijing city, recognized for its technology and brand, but now its market share in China is only in the 1% range, failing to make the 'top 10' list.

China has also overtaken South Korea in the electric vehicle export market share. According to the Federation of Korean Industries, China's share of the global electric vehicle (BEV) export market rose by 9.5 percentage points last year to 13.7%, while South Korea's share fell by 0.8 percentage points to 9.5%. Having successfully penetrated the European Union (EU) market, China jumped to third place globally, pushing South Korea down to fourth. In the global shipbuilding market, China has also surpassed South Korea. Last year, buoyed by a surge in container ship orders, China (22.86 million CGT, 49%) overtook South Korea (17.44 million CGT, 37%).

This means that even in premium, high value-added industries rather than low-cost consumer goods, China's competitiveness is rapidly advancing. The Korea International Trade Association recently cited companies such as OCI and Hanwha, which produce carbon-neutral related plastic products, Nongshim, which produces water and consumer food products, and bio-feed companies like CJ and Harim as some of the few brands increasing their presence in China. Although it is difficult to find indicators ranking brands rather than product categories, it is clear that the presence of Korean products in cutting-edge industries is gradually weakening.

China's Rise... South Korean Companies Withdraw One After Another

Han Gap-su, Vice President and Head of Samsung Display's LCD (Liquid Crystal Display) Division, delivering a welcome speech at the 2nd Curved Forum held in Beijing, China, on August 8, 2017. The event showcased 65-inch 4.9mm ultra-thin LCDs and premium LCDs that bend in all directions to local TV manufacturers in Beijing. Samsung Display has since discontinued its once ambitious LCD business. (Provided by Samsung Display)

The rise of Chinese companies is directly hitting the global standing of South Korean companies. It has even led to decisions to withdraw from business.

As of the end of last year, Samsung Display reduced its local workforce in China to 9,153 employees, down 30.6% from 13,190 the previous year. In June, it also exited the LCD business, selling its 8th generation LCD production line at its Suzhou plant to China's CSOT. OCI and Hanwha Solutions withdrew from the polysilicon business, part of the solar supply chain, due to China's low-price offensive. In the electric vehicle battery market, the gap between China's CATL, ranked first with a 34.8% global market share in the first half of the year, and LG Energy Solution, ranked second with 14.4%, is widening. As foreign companies operating in China increase semiconductor production, China has also taken the top spot in memory semiconductor export market share (China 30.7% vs. South Korea 28.8%).

Lee Jaesu, head of the Asia-Pacific Cooperation Team at the Federation of Korean Industries, said, "China has grown rapidly over 30 years, and recently the localization rate in sectors like batteries and electric vehicles has increased, raising concerns about widening future gaps. It is necessary to quickly finalize the revision of the Korea-China Free Trade Agreement (FTA) and strengthen support for regulatory reforms in domestic industries."

South Korea's Increasing Dependence on Chinese Products

On February 21, 2012, ten years ago, Choi Tae-won, chairman of SK Group, showed great dedication to the semiconductor business, visiting the Hynix Wuxi plant in China shortly after being appointed chairman at the board meeting. (Photo by SK Hynix)

It is also difficult to completely turn away from China. Although a significant portion of the Chinese market has been taken over by Chinese native companies, the influence of Chinese products on South Korea's industrial sector remains substantial. In particular, South Korea and China are tightly linked through 'semiconductors.' Just as China accounts for a large share of South Korea's semiconductor exports, semiconductors also hold the highest share among South Korea's imports from China.

The top 10 import items from China to South Korea last year were semiconductor (16.8%), computers (7.2%), fine chemical raw materials (6.3%), wireless communication devices (5.3%), industrial electrical equipment (3.6%), steel plates (3.3%), clothing (2.7%), batteries and accumulators (2.4%), automobile parts (1.6%), and furniture (1.5%).

Imports of secondary battery materials from China are also prominent. In particular, dependence on China for lithium hydroxide, a key secondary battery material, has exceeded 80%. Since this material can only be mined in China and some other countries and is refined in China, import dependence has intensified. Recently, a surge in lithium hydroxide imports through China has also worsened the trade balance.

Hong Jisang, a research fellow at the Korea International Trade Association's Trend Analysis Office, advised, "To maintain a trade surplus with China, it is necessary to diversify next-generation core materials with high dependence on China. Especially for lithium hydroxide, whose dependence has increased, efforts such as POSCO's overseas investments to increase supply should be expanded."

This content was produced with the assistance of AI translation services.