South Korea’s machine tool industry has resurrected. Its surplus from trade balance in 2017 surpassed $933 million (1 trillion KRW) for the first time since 5 years ago.
Machine tool industry is seen as a composite leading indicator for manufacturing companies’ economy. It is expected that South Korea’s machine tool industry will grow by about 3% again this year. This indicates that economy of manufacturing companies centered on major industries such as semiconductor is going to be bright again this year.
According to ‘Trend on Machine Tool Industry’s Trade Balance’ published by Korea Machine Tool Manufacturers’ Association (KOMMA), it is estimated that surplus from trade balance of South Korea’s machine tool manufacturers in 2017 was $1.011 billion. Amounts of exports and imports were $2.35 billion and $1.34 billion respectively. Compared to surplus in 2016 ($806 million), surplus in 2017 grew by 25.4%.
Within past 10 years, this is the first that surplus went over $933 million (1 trillion KRW) since it happened in 2012. South Korea’s machine tool market that made a downturn since it reached the highest point in 2012 is showing recovery at fast speed.
KOMMA wrote its report based on import and export data from Korea Customs Service. Based on statistics from Statistics Korea in 2016, there were 459 South Korean machine tool manufacturers and 15,985 workers. Amount of production from members of KOMMA was $5.13 billion (5.5 trillion KRW), which is 6.6% higher than the previous year and is the 6th highest amount in the world.
Performance of major manufacturers such as Doosan Machine Tools and SMEC improved greatly. SMEC made $150 million (161.1 billion KRW) and $4.38 million (4.7 billion KRW) in sales and operating profit respectively in 2017. Its sales and operating profit increased by 31% and 12.7% respectively compared to the previous year. Although Doosan Machine Tools did not announce its performance separately, it is heard that it recorded a similar growth rate as SMEC.

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<Logo of KOMMA>

Reason why South Korea’s machine tool market has resurrected again is because manufacturing industries such as semiconductor and display industries started to invest more into foreign countries. South Korean machine tool manufacturers all went together to construct manufacturing plants in Vietnam and China. Actually, Samsung Electronics extended its home appliance and display as well as Smartphone plants in Vietnam one after the other in the past 2 years. LG Electronics is also accelerating extension process of its foreign plants.
“Amount of relevant exports increased due to increase in investments into foreign plants by semiconductor and display industries in 2017 and amount of imports decreased due to poor performance by automotive and shipbuilding industries.” said Team Leader Kim Kyung-dong of KOMMA’s Industry Promotion Team. “There were also times when South Korean products replaced major products from certain foreign businesses.”
It is likely that global machine tool industries will continue to grow for awhile due to increase in number of enhanced machine tools that are needed for automated processes.
However, fact that South Korea’s machine tool industry is leaning too much on particular industries and countries is seen as its weakness. South Korea’s machine tool industry has high number of demands from semiconductor and display industries and it exports large amount of percentage of its products to Vietnam or China. Some are pointing out that it needs to diversify its customers in rising markets such as Mexico and India.
KOMMA is estimating that overall amount of surplus may be lower than last year’s surplus as both amounts of exports and imports are expected to increase greatly. It is estimating that amount of production, amount of exports, and amount of imports will be $5.27 billion (5.665 trillion KRW, 3% growth), $2.44 billion (5% growth), and $1.495 billion (10% growth) respectively.
“Because our machine tool industry is heavily dependent on particular industries, we urgently need some type of improvement.” said Team Leader Kim. “Because level of importance in export has risen greatly as South Korean companies are extending their plants in foreign countries, we need to focus on increasing our sales based on rising markets.”
Staff Reporter Oh, Daeseok | pioneer@etnews.com

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<■Trend of trade balance of machine tool industry ▲Export Δ2007: $1.816 billion Δ2008: $1.910 billion Δ2009: $1.212 billion Δ2010: $1.678 billion Δ2011: $2.301 billion Δ2012: $2.551 billion Δ2013: $2.216 billion Δ2014: $2.236 billion Δ2015: $2.342 billion Δ2016: $2.020 billion Δ2017: $2.352 billion ▲Import Δ2007: $1.351 billion Δ2008: $1.334 billion Δ2009: $1.133 billion Δ2010: $1.444 billion Δ2011: $1.791 billion Δ2012: $1.492 billion Δ2013: $1.386 billion Δ2014: $1.496 billion Δ2015: $1.407 billion Δ2016: $1.214 billion Δ2017: $1.341 billion ▲Trade balance Δ2007: $465 million Δ2008: $576 million Δ2009: $79 million Δ2010: $234 million Δ2011: $510 million Δ2012: $1.059 billion Δ2013: $830 million Δ2014: $750 million Δ2015: $935 million Δ2016: $806 million Δ2017: $1.011 billion >