South Korea's plastics machinery sector is seeing signs of a solid recovery, led by demand from multinationals like Samsung Group, LG Electronics Inc. and Hyundai Motor Co.
One of the country's largest injection press makers, Dongshin Hydraulics Co. Ltd., for example, said its sales are now above levels before the economic crisis hit in mid-2008. The company has upgraded its equipment to compete with lower-priced Chinese models.
The company's 2010 sales are about $3.5 million a month, compared with $3 million before the crisis, said Phillip Kim, executive vice president of the Busan-based company.
“Because of the Korean economy we are really, really busy,” he said. “From May 2009, we started to recover slowly. This year is growing fast.”
The company shed a large portion of its workforce in the crisis, slashing employment from 200 to about 120 now, and invested in more-efficient production. It also invested in developing a systems approach to product design that integrates its machines with robots and other equipment, he said.
“We also have to compete with the Chinese machines,” Kim said. “[Ningbo Haitian Plastic Machinery Group] is everywhere. I am not selling the general machine anymore.”
In interviews at the recent KoPlas trade fair, held March 30 to April 3 in Seoul, industry officials echoed broader economic data from the Korean government, and said they are seeing a recovery on the coattails of large Korean global manufacturers.
South Korean government data showed its manufacturers were operating at 80.5 percent capacity (compared with 69 percent for U.S. factories in February), and Korea's central bank said its surveys showed manufacturers' confidence is at a seven-year high.
A sense of good prospects was common among firms at the show, although the optimism was tempered by worries about the uncertainty in major economies like the United States and Europe, and by concerns that if Korea's currency, the won, strengthens too much it will hurt competitiveness.
Korean plastics firms, as well, remain challenged by the rise of the plastics industry in neighboring China, and must focus on increasing their quality and broadening markets to the Middle East, Southeast Asia and India, said Han Ki-Yoon, secretary general of Seoul-based Korea Plastic Processing Machine Industry Cooperative.
While hard data on plastics is not available, Han said Korea's plastics machinery sector overall is doing well now as the global economy recovers, but has probably not yet fully recovered from the economic crisis.
The industry lost about 15 percent of sales in the downturn, and has probably gained back about 10 percentage points of that, remaining about 5 percent below crisis levels, he said.
Still, the mood was generally optimistic at the fair.
Engel Machinery Korea Ltd., which has an injection press machinery plant in Korea, has seen “booming” business at the factory during the last three months, said Robert Bodingbauer, president of the Korean subsidiary, in Pyeongtaek City.
2009 was difficult for Engel's Korean operation as export markets in China and Southeast Asia were down significantly, he said, but what “helped us to survive” was that Korea's domestic market never really slowed down, even during the worst of the global economic crisis.
“The Korea market itself last year was already good,” Bodingbauer said in an interview at the show. “The Korean industry was still investing, so the growth was still OK. It was not as bad as Japan or Europe.”
He estimates Korea's machinery industry dropped about 10 percent, compared with 30-40 percent in Europe, and 50 percent in Japan.
He attributes the country's relative success to the gains that large Korean multinationals made globally in automobile and consumer electronics markets. Samsung, which is the world's biggest maker of computer chips, TVs and flat screens and No. 2 in mobile phones, has been Schwertberg, Austria-based Engel's largest customer the last few years, Bodingbauer said.
Samsung made substantial investments in Engel Combi-series presses for its LCD television manufacturing at factories around the world, as the company took a big gamble on new designs that ultimately proved popular with consumers, he said.
“Korean products have been successful in America and Europe,” Bodingbauer said. “They have not been affected so much [by the economy] because they get more market share in the global market.”
Some attribute South Korea's industrial rise, in part, to its interlocked mega-industrial firms, known as chaebol, and their tight connections with government. There also seems to be a tighter relationship between those firms and their supply chains than in some other countries.
LG and Samsung, for example, have in some cases helped their suppliers buy higher-quality molding machines, and then have taken discounts on the products made as payment for the assistance, according to Shin Yong Jin, sales manager with KraussMaffei AG's office in Gunpo, South Korea.
The Korean molders may not have the financial strength to buy the equipment, while LG and Samsung are financially strong and want good-quality products from their suppliers, he said.
Seoul-based Samsung recently reported that its 2009 profits rose 75 percent, to a five-year high, for example, and Hyundai and its Kia subsidiary became the world's fourth-largest carmaker last year.
Woojin Selex Co. Ltd., another large injection press maker in Korea, said its market had solid growth in the first quarter, with most of its customers being vendors for the large Korean multinationals.
The company's factory is busy, with production of about 100 presses a month, including an increasing number of large-tonnage presses for the country's carmakers, said You Jong Hyuck, manager in the company's overseas business office.
“The production staff have no holidays these days,” he said.
Woojin, based in Incheon, also established its first direct sales office in India last year, in Chennai, and considers that an important future market, You said.
Several Japanese executives said they are focusing more attention on South Korea, which ranks as the world's 13th-largest economy, after the sharp decline in machinery production in their country in 2009.
Copyright 2010 Crain Communications Inc. All Rights Reserved.