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Management Report

Management reports, briefs and video-clips issued by Samsung Economic Research Institute

China's New Promising Industries

China's New Promising Industries

Dec. 1, 2010

Transcript

Welcome to our video program. I’m Sung-Ho Lee from the Technology and Industry Department.

China, the world’s workshop, is rapidly emerging as a global leader in new growth industries by capitalizing on its low wages. In renewable energy, China’s production of solar energy and wind power over the past four years have zoomed up by 31-fold and 27-fold respectively, making China the world’s largest producer. China is now among the world’s top five nations in the R&D-intensive bio-industry. Building on its abundant talent, a huge domestic market, development of related industries and massive investment in cutting-edge infrastructure like smart grids, China has striven to overtake developed nations. It will not be easy to beat China in this field. Accordingly, today, I’d like to talk about China’s competitive edge in four industries, including the green and bio industries, and Korea’s response strategies, in consideration of the competitiveness of Korea’s backbone industries.

First is China’s wind power industry, which is growing at rapid speed based on China’s huge market. China has secured technologies in a short time through collaboration with globally leading companies and through government policy by using locally-produced parts, and state-owned industries centered on machinery industries. China is the world’s largest producer of wind power turbines. In 2009 alone, 14 GW new wind power turbines were installed, which amounts to 36% of the world’s new installations. In Korea, a total of 21 turbines at 20 MW were installed by July of this year.

China is also developing 3-5 MW, next-generation turbines. Korea thus needs to develop 7MW super-sized turbines and venture into the construction of wind farms and the maintenance and repair businesses to brace for the upcoming offshore wind power era.

Second is solar power. China is the No.1 solar cell producer and supplies 43.2 % of the global solar cells. Four of the top 10 solar cell companies are Chinese. In particular, while the EU solar power market like Germany and Spain has grown an average 80% annually since 2006, China’s solar cell production has surged a whopping 115% during the same period. Based on process innovations in crystalline solar cells, China has secured a high global market share in all sectors, ranging from raw materials, cells and modules, to finished goods.

Thus, Korea has to secure next-generation technologies for materials such as polysillicon, ingots and wafers, where Korea has already secured competitiveness. In addition, by ramping up R&D on nano technology in connection with semiconductors, displays and secondary batteries, Korea has to focus on developing next-generation thin film solar products.

Third is the electric vehicle (EV) market. Based on aggressive entrepreneurship, government support and policy for promoting associated industries, China in 2008 developed plug-in hybrid vehicles for the first time in the world and commercialized them in 2010. As of now, 39 companies offer 110 EV models. The Chinese government plans to pour 17 trillion won, or a subsidy of KRW 20 million per vehicle, over the next decade to revitalize the domestic market. In addition, pushing for strategic partnerships and M&As with global companies such as Volvo, Daimler, and Better Place, Chinese companies are rapidly upgrading their technologies.

On the other hand, Korea’s development and mass production of EVs are two years behind, but international competitiveness has been already secured. The auto, electronic and electric power industries should create synergies to evolve into a total system industry. Then, Korea can overtake China.

Lastly, China is also charging ahead in the bio and pharmaceutical sector. Active basic research, government support, promotion of companies and markets have resulted in China ranking fourth in the number of research papers, third in investment in stem cell research, and fourth in the size of the pharmaceutical market. China is way ahead of Korea, threatening Japan. In particular, China is strong in bio pharmaceutical products such as chemical pharmaceutical products based on traditional Chinese medicine, stem cell and gene therapy products. Thanks to its cheap, less-regulated clinical test market, China has been quick in developing new medical materials, commercializing and exporting them.

On the other hand, Korea’s general hospitals excel in clinical research, but pharmaceutical companies’ R&D investment and sales have failed to live up to the level of Korea’s general hospitals. To secure the future competitiveness of Korea’s bio pharmaceutical industry, global networks for developing new medicine should be activated, led by globally prominent scientists, while clinical test-oriented translational research should be revitalized to break into the global market.

To sum up, Korea, as a latecomer in green industries like solar energy and the bio industry has to fight an uphill battle with China, who has already obtained an edge, propped up by price competitiveness. Therefore, in the face of China’s low cost strategy, Korea needs to develop R&D.based convergence solutions and use value innovation strategies to create new demand. In other words, to compete with China’s pool of engineers and R&D talent, Korea has to push for creative R&D and focus on developing next-generation products. To compete against China’s ability to churn out large quantities of single items based on economies of scale, Korea will need to develop convergence solutions by utilizing the competitiveness of Korea’s flagship industries. And in response to China’s huge domestic market, Korea has to employ strategies for innovative product test beds to take advantage of Korean consumers’ dynamism and voluntary participation.

Thank you for watching. I’m Sung-Ho Lee.

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