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Leading Sectors for U.S. Export and Investment

Aerospace Industry

ITA CODE: PR AIR

Overview

 

2011

2012

2013

2014 (Est.)

Total Market Size

5,930

5,193

5,766

5,974

Total Local Production

2,358

2,697

3,606

4,191

Total Exports

1,019

1,366

1,652

2,002

Total Imports

4,591

3,862

3,812

3,785

Exchange Rate: 1 USD

1,108

1,126

1,069

1,050

Source: Korea Aerospace Industries Association (KAI). Unit: USD Million.

Korea is the 11th largest market for U.S. aerospace exports. In 2013, total U.S. aerospace exports to Korea exceeded USD 3.2 billion (including aerospace products in the defense sector). In total value, U.S. aerospace sales constituted about 68% of Korea’s total aerospace imports in 2013.

Over 91% of total aerospace imports into Korea are for are for commercial aircraft and their parts and components. Of this, 75% of Korea’s aircraft, parts and component imports were from the U.S. in 2013.

While imports constitute a significant portion of Korea’s high technology and aerospace products, Korean President Park Geun-hye’s administration has stressed Korea’s ‘creative economy,’ putting more emphasis in developing and then exporting Korea’s indigenous technologies (essentially this initiative was started in the previous administration of President Lee Myung-bak).

Korea’s rapidly-developing aerospace industry includes the production of military helicopters, super-sonic training jets (T-50 was the first supersonic jet developed in Korea, in conjunction with a U.S. defense company), UAVs, and even MRO parts and components for both Boeing and EADS-Airbus. Korea’s local production of aerospace products continued to grow, at USD 3.6 billion in 2013, while exports of these products grew to USD 1.7 billion in the same year. Recent major Korean exports include sales of the supersonic trainer jet, the T-50s (16 units, USD 0.4 billion) to Indonesia in 2011; the KT-1 trainer jet and KA-1 combat jet (20 units, USD 0.2 billion) to Peru in 2012; the T-50IQ trainer and combat jet (24 units, USD 1.1 billion); and the FA-50 light combat jet (2 units, USD 0.4 billion) to the Phillippines in 2013.

A 2010, Ministry of Knowledge Economy (MKE) report entitled “Aerospace Industry Primary Plan (2010 – 2019)” notes that Korea plans to increase its aerospace production from USD 2 billion (2009) to USD 20 billion by 2020, and raise exports to USD 10 billion, or 3 percent of global market share. This industrial plan aims to take Korea from 16th place to the world’s seventh largest aerospace producer. Additionally, the goal is to push Korean industry to import core technologies, develop domestic capabilities to deliver a ‘complete aircraft,’ and bring effective R&D investment that will contribute to Korea’s aerospace industry.

Based on this plan, Korea will continue to focus on developing its indigenous:

  • mid-sized, fixed-wing aircraft and helicopters for the commercial sector;
  • a Korean fighter and attack helicopter for the defense sector;
  • UAVs;
  • environmentally-friendly aircraft;
  • as well as supporting and exporting core components and MRO services.

Major Local Players

Korea’s aerospace industry is driven by Korea Aerospace Industries (KAI,www.koreaaero.com/English/main.asp) and Korean Air Lines (KAL), one of the largest commercial airliners in Korea. KAI and KAL are also the leading companies which make and assemble parts for Boeing and Airbus. KAI and KAL are active in developing indigenous aircraft including UAVs, rotor-wings, and fixed wings. In 2008, KAI introduced its first non-military private aircraft, ‘Naraon’, making Korea the 28th nation in the world to build and fly an indigenous plane. In 2011, the Korean Aerospace Research Institute (KARI; http://eng.kari.re.kr/) succeeded in developing an unmanned tilt-rotor aircraft and, together with KAL, plans to commercialize it. If successful, Korea will be the first in the world, after the U.S., to commercialize a tilt rotor UAV. KAL is also active in providing MRO services for both commercial and defense aircrafts.

Commercial Airliners

KAL has a total of 149 aircraft and is one of the largest consumers of aircraft, equipment, components, and various aerospace services -- as well as being one of the major exporters of aerospace parts and components. Asiana Airlines is the second largest airline in Korea, currently operating a total of 83 aircraft. Additionally, there are five Low Cost Carriers (LCC): Jeju Air, Jin Air, Air Busan, Eastar Jet, and T’Way Air. In 2013, 4.9 million international travelers, or 9.6% of all international travelers, used LCCs. LCCs demonstrated a dramatic annual growth of 76.8% (in number of passengers) in the last past three years.

Korea’s Space Program

Korea also continues to invest in space technology development. In January 2013, Korea succeeded in launching a two-stage rocket, the Korea Space Launch Vehicle-1 (KSLV-1), from its Naro-Space Center on Korea’s southwest coast. This launch makes Korea only the 11th country in the world to successfully send a rocket and satellite into space. In November 2013, the Ministry of Science, ICT and Future Planning (MSIFP; http://english.msip.go.kr/english/wpge/m_72/eng050101.do) and Korea Aerospace Research Insitute (KARI) announced their joint ‘Space Development 2020 Roadmap.’ The revised Korean rocket development plan (2020-2040) and space technology industrialization strategy has numerous ambitious mid-to-long term space development goals, to include the Korean government’s plan to develop an indigenous rocket capable of launching a 1.5 ton satellite into higher orbit (600~800km) by 2020. According to the Ministry of Science, ICT and Future Planning, Korea expects that through its space technology industrialization strategy, Korea’s space market will grow from its current 800 million USD to 2.5 billion USD. Ultimately, the Korean government plans to increase its space R&D budget and become the world’s fourth leading country in space technology by 2040.

Airports

Korea has two state-owned airport companies, Incheon International Airport Corporation (IIAC) and Korea Airport Corporation (KAC). IIAC is the nation’s largest and has its main international airport in Incheon City. Incheon Airport was voted the top in ‘airport service/quality’ for the eighth year in a row. It has also won the highest score in the Airport Service Quality (ASQ) category by the Airports Council International (ACI), which consists of 1,700 airports around the world. In May 2014, Incheon International Airport will host the 2014 Airports Council International Asia-Pacific Regional Assembly, Conference and Exhibition (Seoul).

KAC operates a total of 14 airports in Korea (Gimpo, Gimhae, Jeju, Daegu, Ulsan, Chungju, Muahn, Kwangju, Yeosu, Pohang, Yangyang, Sacheon, Kunsan, and Wonju), of which seven have international status with routes mainly to either China or Japan.

In April 2014, the Ministry of Land, Infrastructure, and Transport (MOLIT– http://english.molit.go.kr/intro.do) announced a plan to construct two new small airports in Ulleungdo (by 2020) and Heuksando (by 2019), designed to accommodate small aircraft of less than 50 passengers.

Best Products/Services

  • Aircraft and aircraft upgrades
  • Radar/surveillance devices
  • Avionics
  • Unmanned Aero Vehicle Systems

Opportunities

Top U.S. aerospace exports to Korea include: complete commercial aircraft, commercial aircraft engines, equipment and parts, as well as military aircraft and their parts and components. The U.S. continues to be the dominant foreign supplier of aerospace/defense products and services, with a dominant import market share. This trend will continue for several years, especially with Korea’s recent decision to purchase next generation fighters and other defense aircraft, thus increasing demand on MRO services in the future and as related to these aircraft models.

For Korea’s commercial airliners, media sources have disclosed the following procurement plans:

  • Korean Air will acquire 64 new aircraft, including ten B787-9 Dreamliners, four A380s, and ten CS300s by 2018;
  • Asiana Air will acquire five new aircraft, including two A380s, one A330, and two A321s by the end of 2014; they will acquire six A380s by 2017;
  • Jeju Air will acquire six to seven new aircraft by 2014;
  • Eastar Jet will acquire five B737-800s by 2014:
  • Jin Air will acquire two new B737-800s.

KORUS FTA Impact

All U.S. aerospace exports are duty-free as of March 15, 2012, and as a result of the implementation of the Korea-U.S. FTA (KORUS).

Resources

Trade Shows

ACI Asia-Pacific/World Annual General Assembly, Conference & Exhibition 2014

May 26 – 28, 2014, Seoul - http://www.aci-waga2014.com/

Seoul International Aerospace & Defense Exhibition 2015 (Seoul Air Show 2015)

October 20 - 25, 2015 - http://www.seouladex.com

In 2013, the Commercial Service Korea, together with pavilion organizer Kallman, erected the largest U.S. pavilion ever at ADEX. This was also ADEX’s largest-ever ‘country’ pavilion. Over 30 U.S. large and SME aerospace and defense companies participated in Korea’s largest and most important aerospace and defense show.

Key Contacts

Korea Aerospace Industries Association (KAIA) –www.koreaaero.com/English/main.asp

Korea Aerospace Research Institute (KARI) – http://eng.kari.re.kr/

Ministry of Trade, Industry and Energy (MOTIE) - http://www.motie.go.kr/language/eng/index.jsp

Ministry of National Defense (MND) - http://www.mnd.go.kr/mbshome/mbs/mnd_eng/

Ministry of Land, Infrastructure, and Transport (MOLIT) – http://english.molit.go.kr/intro.do

Incheon International Airport Corporation (IIAC) – http://www.airport.kr/eng/

Korea Airport Corporation (KAC) – http://www.airport.co.kr/mbs/kaceng/  

Local Contact

Ms. Sunny Park
Commercial Specialist
Commercial Service Korea
U.S. Embassy Seoul
188 Sejong-daero, Jongro-gu
Seoul 110-710 Korea
Tel: 82-2-397-4164
Sunny.park@trade.gov

www.export.gov/southkorea

Cosmetics

ITA CODE: COS

Overview

2010

2011

2012

2013

Total Market Size

5,457

5,947

6,236

7,161

Total Local Production

5,203

5,763

6,326

7,457

Total Exports

597

805

1,067

1,290

Total Imports

851

989

978

994

Imports from the U.S.

225

257

270

285

Exchange Rate: USD1=KW1,156 (2010), 1,108 (2011), 1,126 (2012); 1,069 (2013)
Sources: Korea Pharmaceutical Traders Association (KPTA), Korea Cosmetic Association (KCA)
Unit: USD million

Total imports of cosmetics in 2013 were estimated to be USD 994 million. Of these, U.S. imports were USD 285 million, representing approximately 29 percent of import market share. On a country by country basis, the U.S. is the lead importer, followed by France (USD 257 million) and Japan (USD 134 million).

According to industry sources, the growth of parallel imports and reduced tariff rates will contribute to increasing demand for quality foreign cosmetics. Of note to U.S. exporters, remaining Korean tariffs on imported U.S. cosmetics will be eliminated over a ten-year period under the KORUS FTA. These market trends signal good opportunities for U.S. companies in the years ahead.

The Korean cosmetics market is polarized, with products focused both at the premium end and at the lower-priced, mass-market end. Thus, cosmetics companies focus their offerings toward two distinct groups of consumers or target audiences: consumers shopping at low-cost cosmetics franchise stores and those that are shopping for high-end luxury cosmetics at more expensive department stores. Imported products are primarily sold through department stores, with some sold through multi-level marketing, online sales, hypermarkets, clinics/drug stores, duty free shops, and home shopping channels. There is a large variety of products on the market; competitive imports differentiate themselves from existing offerings through brand identity, packaging, unique formulations, and ingredients.

Sales of men’s cosmetics have been and will continue expanding. According to industry sources, sales of men’s skin care products in Korea were estimated at USD 565 million in 2012. This growth reflects the expansion of interest on the part of Korean male consumers from simple skincare to other cosmetics, such as facial scrubs, facial masks, concealers, SPF products, and other cosmeceutical products. With this trend, men’s skincare salons have opened in business districts and now provide one-stop total beauty and hair care services, including hair cutting, perms, treatments, and facials. To meet this increasing demand for men’s skincare products, many department stores have opened men’s cosmetics counters on the men’s floor, featuring recognized international brands like Clinique, Clarins and Biotherm that offer after-shave lotions, cleaning foams, facial scrubs, facial packs, essences, and functional cosmetics.

In Korea, cosmetics are regulated by the Ministry of Food and Drug Safety (MFDS) and fall under two categories: functional cosmetics and regular cosmetics. Functional cosmetics include whitening, anti-wrinkle, and sunscreen & tanning products. MFDS reviews only functional cosmetics for pre-market approval. For all other regular cosmetics, the Korea Pharmaceutical Traders Association (KPTA) has been authorized by MFDS to review and certify import permission requests submitted by the Korean importer.

Cosmetics regulation changes were made in 2013. MFDS introduced revised cosmetics safety standards, adding negative and restrictive ingredient lists and establishing a safety management standard in the market. The standard applies to all cosmetics manufactured domestically or imported into Korea. In addition, MFDS announced a policy to formally recognize non-animal test results in sunscreens, anti-wrinkle products, and other functional cosmetic product safety assessments.

Cosmetic labelling and advertisement guidelines also underwent a major change in 2013. These guidelines govern the claims that can and cannot be used on cosmetic labels and in advertisements on containers, packages, or in leaflets. This is to ensure cosmetic manufacturers, market authorization holders and distributors properly label and advertise products and to protect consumers from false and exaggerated advertisements.

Best Prospects/Services

  • Natural/organic skincare products
  • Functional cosmetics for both women and men
  • Hair care cosmetics with special functions (e.g., to protect against hair loss)

Opportunities

Pharmacies/drug stores, online shopping malls, and television home-shopping channels (such as QVC) have emerged as challengers to traditional retail channels like direct selling, multi-level marketing, "mom and pop" stores, specialty retail establishments, department stores, and discount stores.

There are currently three major franchise drug stores competing in the local market: Olive Young by CJ, W-Store by Kolon, and GS Watson’s by GS (in partnership with Watson’s). These retailers target customers focusing on wellness products by providing organic/natural cosmetics, nutritional supplements, OTC drugs, and general consumer goods. In addition, some major Korean cosmetics manufacturers are interested in importing well-known U.S. cosmetics.

Sales via mobile shopping have been and will continue expanding as the number of internet and mobile shoppers increase. Above all, the social and e-commerce market is emerging as one of the top distribution channels. Cosmetic subscription services have fast become a new and popular way of advertising and distributing products, as they enable consumers to participate in new cosmetic trends early on.

Resources

Trade Shows

Seoul Cosmetics & Beauty Expo 2015

http://www.cosmobeautyseoul.com

Key Contacts

Ministry of Food and Drug Safety (MFDS) - http://www.mfds.go.kr/eng/index.do

Korea Pharmaceutical Traders Association (KPTA) - http://www.kpta.or.kr/eng/main/main.asp

Korea Cosmetic Association (KCA) - http://www.kcia.or.kr/ENG/_Document/About/about01.html

Local Contact

Ms. Heesook Baik
Commercial Specialist
U.S. Embassy Seoul
188 Sejong-daero, Jongro-gu
Seoul 110-710 Korea
Tel: 82-2-397-4172
heesook.baik@trade.gov

Defense Industry Equipment

ITA CODE: PR DFN

Overview

The Republic of Korea (ROK) has the world’s sixth largest military force, following China, the U.S., India, North Korea, and Russia. In recent years, South Korea’s defense industry has grown far faster than the average regional militaries, principally due to the increasingly antagonistic actions of North Korea. The ROK continues to be a major defense and security ally of the U.S. in the Pacific region and is an integral part of the U.S. ‘Asian Pivot.’

As a consequence of North Korea’s attack of ROK’s navy vessel “Cheonan” (March 2010) and artillery attack on ROK’s Yeonpyung Island (November 2010), the Ministry of National Defense (MND) announced in 2011 it’s Defense Reform Plan 307 (DRP 307), consisting of short-term (2011-2012), mid-term (2013-2015), and long-term plans (2016-2030). DRP 307 is mainly designed to strengthen the ROK’s defense against North Korea’s localized military attacks and asymmetric threats, as well as optimize their own military command structure. In 2013, the MND announced its Defense Reform Basic Plan 2014-2030, as a part of DPR 307, which consists of plans to: 1) reduce the ROK’s Army; 2) restructure ROK units to enhance the response ability to North’s Korean asymmetric threats; 3) optimize ‘the commence structure’; and 4) re-prioritize the military’s power, focusing on Kill Chain and Korean Air and Missile Defense (KAMD).

Kill Chain is an offense-oriented defense system that detects missiles in real-time. The goal is to detect any potential threats from the North and make a head start in attacking the nuclear weapon within 30 minutes. Kill Chain principally uses ROKN an ROKAF fighters and bombing aircraft. KAMD’s defense system (designed for approx. 20 km above ground) involves patriot missiles, AMD cells, and early warning radar. Some of the ROK’s major procurements are decided based on establishing these two systems, which also includes HUAVs (i.e., Global Hawk) and patriot missiles (PAC-2/PAC-3).

It is expected that there will be continued review of platform procurement requirements as Korea continues to revise what products/systems are needed in light of new threat assessments from the North. It is also expected that the force improvement plan (FIP) will focus more on command and control, surveillance, maritime patrol/littoral support and armor.

Market Demand

 

2011

2012

2013 (Estimated)

2014 (Projected)

Total Market Size

8,402

8,348

9,127

10,466

Total Local Production

9,456

8,497

6,266

9,888

Total Exports

2,382

2,353

3,416

4,204

Total Imports

1,328

2,204

6,277*

4,782

Imports from the U.S.

1,015

1,887

5,022

3,363

Exchange Rate: 1 USD

1,108

1,126

1,069

1,050

Note: The statistical data above is based on figures announced by Defense Acquisition Program Administration (DAPA). Estimated and projected figures are based on an unofficial estimate from CS Korea based on the budget of Korea’s Force Improvement Plan (FIP), Defense Acquisition Program Administration (DAPA)’s procurement plan, and media reports. Unit: USD Million.

* Import figures in 2013 increased dramatically due to some of the major foreign procurements including the naval combat helicopter program (Augusta Westlands’ AW159), AH-X program (heavy attach helicopter-Boeing’s AH-64E Apache), targeting pod (Lockheed Martin’s sniper pod), and Taurus missile.

For 2014, a total of USD 32.46 billion has been announced for Korea’s defense budget, which includes USD 9.55 billion for the FIP. The total budget and FIP budget received 4.0 percent and 3.9 percent increases, respectively, compared to the previous year. Korea’s defense budget is around 2.5% of its GDP and constitutes about 14.4% of the total national budget. Korea’s defense spending budget is the 11th largest in the world.

Breakdown

2013

2014

Total Defense Budget

31,223

32,459

Force Improvement Plan (FIP)

9,197

9,554

Operation & Management (O&M)

22,026

22,905

Exchange Rate: 1 USD

1,100

1,100

Unit: USD million

Korea’s 2014 FIP budget includes some of the major procurements necessary to establish Kill Chain and KAMD, which includes a multi-purpose satellite, HUAV (Global Hawk), and PAC-2/PAC-3 missiles.

Korea’s major defense projects include the following acquisition plans and contracts (some are at different phases of finalization):

  • Marine Operation Helicopter: Acquisition of 8 naval combat helicopters from Augusta Westland (AW-159 Wild Cat) worth USD 0.5 billion, by 2016
  • Next generation fighters: Acquisition of 40 stealth F-35s from Lockheed Martin worth USD 6.7 billion, by 2019
  • HUAV: Acquisition of 4 HUAVs from Northrop Grumman (Global Hawk) worth USD 0.8 billion, by 2019
  • TAURUS KEPD 350K: Acquisition of 170 long distance air-to-ground guided missile from TAURUS Systems worth USD 0.5 billion, from 2015
  • KF-16 avionics upgrades: Improvement of over 100 combat planes by BAE Systems worth USD 1 billion, by 2019
  • P-3C Marine Patrol Aircraft: Improvement of marine patrol aircraft by Lockheed Martin worth USD 0.3 billion, by 2016
  • Aerial Refueling Tankers: Acquisition of 4 aerial refueling tankers from Boeing (KC-136 ) worth USD 1 billion, by 2017
  • PAC-3 Missiles: Acquisition of over 100 ballistic missiles worth USD 0.2 billion, by 2018
  • Maritime surveillance aircraft: Acquisition of 20 maritime patrol aircraft from Lockheed Martin (S-3B Viking) worth USD 0.5 billion, from 2018
  • LAH/ LCH: Research and development project worth USD 0.7 billion, by 2022
  • THX (Basic Flight Training Helicopters): Acquisition of 40 training helicopters worth USD 0.09 billion, from 2015

Source: DAPA and media

ROK’s defense industry is mainly focused on establishing independent defense competence and on modernizing its infrastructure. The Ministry of National Defense (MND) has recently announced a continuation of their plan to: optimize indigenous production, diversify suppliers, bolster air and space power, and procure sophisticated technology in the country’s continual process of modernization and advancement.

Currently around 7.1% of the total budget is allocated to defense R&D. But, in MND’s ‘2014~2030 Defense Reform Plan,’ this amount will increase to USD 5.7 billion by 2028; a nearly 15% increase in the ROK’s total defense budget. With the current government putting a greater emphasis on indigenous technology development, the ROK has set up a plan to establish a Defense Technology Support Center (DTSC) under the ADD (Agency for Defense Development) in 2014. The DTSC will be run as an independent entity by 2017. The ROK will continue to support its various indigenous technology and defense development programs, to include Korea’s helicopters, fighter jets, cruise missiles, destroyer ships, and various-sized UAVs.

In 2013, total exports of defense products were USD 3.4 billion, almost triple the amount in 2010 (USD 1.18 billion). Korea’s defense exports dramatically increased in 2011, largely attributable to two major export contracts: the export of 16 units of Korea’s T-50 trainer jet (worth USD 400 million) and three submarine exports (worth USD 1.1 billion) -- both to Indonesia. In 2013, Korea continued push its defense exports with major contracts, including its T-50 trainer and combat jet sales to Iraq (24 units, USD 1.1 billion) and FA-50 light combat jets to the Philippines (12 units, USD 400 million).

There are 28,500 U.S. troops stationed in Korea on more than 100 bases, stretching from the DMZ south to the port city of Busan. Plans call for consolidating the troops onto fewer than 50 bases, with the majority stationed in regional hubs in the areas around Pyeongtaek/Osan and Daegu. Progress is being made with regard to relocating U.S. troops from Yongsan, Seoul, to Pyeongtaek, about two hours south of Seoul. The construction of housing, schools and medical and recreational facilities on bases south of Seoul has long been considered a key element in the U.S. plan to allow more troops to bring along their families to South Korea, allowing for longer tours and greater stability among the ranks on the Peninsula.

Market Access & Obstacles

The ROK’s defense procurement agency, Defense Acquisition Program Administration (DAPA), is the sole ROK governmental agency responsible for conducting and executing the procurement of defense equipment. Established in 2006, DAPA is the only agency authorized to negotiate on behalf of the Ministry of National Defense (MND) for defense products and services, as well as being the only agency which can authorize offset credits, dictate terms and conditions (T&Cs), and make changes to delivery schedules or required deliverables. DAPA controls all formal negotiations on price, technology transfer, local work share, and offset packages, which are required by the Korean government for all projects in excess of USD10 million. Korea’s large and growing defense product exports are a result of DAPA’s defense offset program.

In 2010, DAPA announced new guidelines for the utilization of commissioned agents. The new policy requires DAPA to enter into contract directly with foreign prime contractors, without the intervention of a commissioned agent for major acquisition programs exceeding USD 2 million. The policy applies only to Force Improvement Programs (FIP), which includes purchases, development, upgrades, and associated installations. Smaller value FIP projects and sustainment projects are not affected.

U.S. Position in Korea’s Defense Industry

The U.S. remains Korea’s most significant military ally, owning largely to the presence of 28,500 U.S. troops in Korea as a deterrent to any aggression from North Korea. This 61-year alliance means that most Korean defense systems are based on American standards; U.S. standards are generally accepted in Korea. This history has affected defense procurement decisions. In 2012, the U.S. provided weapon systems to Korea totaling USD 1,931 million, which accounts for 87 percent of Korea’s total defense imports.

Although, the U.S. continues to be a primary supplier in Korea’s defense industry, strict U.S. export control policies and aggressive marketing from other suppliers in Europe and Israel come as a challenge to U.S. firms and Korean reps of U.S. defense products.

Direct Commercial Sales (DCS) in Korea’s defense industry account for 58 percent of all DAPA procurements (2007 to 2012). Recently, the ROK government has shown preference for DCS purchase over Foreign Military Sales (FMS) purchases, in an effort to purchase items in a more economical price range.

End-users

The principal point of contact for major defense projects are the service branches (ROKAF, ROKA, ROKN) and DAPA (Defense Acquisition Program Administration). The defense branches procure all necessary equipment and systems through DAPA. For projects requiring local co-production or co-development, foreign firms very often participate in consortia with leading local firms such as KAI, Korean Air, Doosan, Hyundai, Hanhwa, LIG NEX1, and Samsung Thales, among others.

Sub-Sector Best Prospects

  • C4ISR
  • Military Aerospace (fighters, multi-role airlift aircraft)
  • Avionics
  • Maritime Defense Electronics and Systems
  • Anti-cyber terror systems and equipment

Opportunities

  • Aircraft upgrades (fighters, multi-role airlift aircraft)
  • Asymmetric warfare/littoral/coastal surveillance and patrol
  • Support for combat equipment (fighter aircraft, etc.)

Web Resources

Trade Shows

Defense Expo Korea 2014

September 24 – 27, 2014 – http://www.dx-korea.com

Seoul International Aerospace & Defense Exhibition 2015/ADEX (Seoul Air Show 2015)

October 20 - 25, 2015 - http://www.seouladex.com

(In 2013, the Commercial Service in Korea, together with pavilion organizer Kallman Worldwide, erected the largest U.S. Pavilion ever at ADEX. This was also ADEX’s largest-ever ‘country’ pavilion. Over 30 U.S. large and SME aerospace and defense companies participated in Korea’s largest and most important aerospace and defense show.)

Naval & Defence 2015

October, 2015 (TBD) – http://www.marineweek.org

Key Contacts

Defense Acquisition Procurement Agency (DAPA) – http://www.dapa.go.kr/eng/index.jsp

As the Defense Acquisition Program Agency (DAPA) conducts the formal contracting, presentations to DAPA are the best mechanism to introduce new products/systems/services to the Korean market. DAPA provides this opportunity every two or three months. Consult: http://www.dapa.go.kr/eng/index.jsp to confirm DAPA’s ‘future schedule’, or contact: Acquisition Policy Division, Acquisition Plan Bureau, Defense Acquisition Program Administration (DAPA), 2-15 Yongsandong 2 ga, Yongsan-gu, Seoul 140-833, Republic of Korea.

Ministry of National Defense (MND) – http://www.mnd.go.kr/eng/sub/gov_website01_1.jsp

Agency for Defense Development (ADD) – http://www.add.re.kr

Local Contact

Ms. Sunny Park
Commercial Specialist
U.S. Commercial Service Korea
U.S. Embassy Seoul
188 Sejong-daero, Jongno-gu
Seoul 110-710 Korea
Tel: 82-2-397-4164
sunny.park@trade.gov

http://www.export.gov/southkorea

Education Services

ITA CODE: SV EDS

Overview

2012

2013

(est.)

2014

(estimated)

2015

(estimated)

Total Market Size

42,409

42,500

42,640

42,550

Total Local Production

38,361

38,330

38,442

38,370

Total Exports

70

85

107

120

Total Imports

4,118

4,255

4,305

4,300

Imports from the U.S.

1,030

1,132

1,142

1,150

Exchange Rate: 1 USD

1,126

1,069

1,050

1,050

Sources: Bank of Korea, Ministry of Education, Science & Technology, and Statistics Korea. Note: Total Market Size = Total Local Production + Total Imports – Total Exports. Total Local Production=Total educational expenditures by Korean families. Total Exports=Total educational expenditures of foreign students in Korea. Total Imports =Total educational expenditures of Korean students studying abroad. Imports from U.S = Total educational expenditure of Korean students studying in the U.S. Unit: USD millions.

Education, from pre-kindergarten to college, plays a very significant role and is important to the Korean economy and psyche. There are good opportunities for a wide swath of U.S. educational institutions - sectors and subsectors - if they are prepared to meet a highly sophisticated, demanding, and brand-oriented market. According to the Organization for Economic Cooperation and Development (OECD), Korea is one of the largest investors in education among developed countries.

Korea’s dynamic and constantly evolving education market is best characterized by the speed and power of the information that flows by word-of-mouth referrals. Especially in the educational arena. The pace of change that occurs in this sector, almost on a monthly basis, is one of the challenges encountered by many education service providers which do not have established, active local representatives. The life-span of a popular program in the education sector is relatively short, and typically lasts two to three years, on average. A new trend is taken up quickly after an old one disappears. Students are quick to abandon one program and move on to new opportunities.

Koreans feel that a degree from an elite institution is a lifelong certificate to ensure high social status. They also feel it essential for finding the right job in the right company in Korea. Many talented students opt for the best schools overseas and obtain a diploma from an accredited overseas school. With the lowest birthrates in the world with around 1.2 children per family, the total number of high school graduates is expected to decline by 37 percent within a 10 year period, from 631,000 (2013) to 397,000 by 2023. Despite the decline in population and youth, Korea continues to be a reliable source of international students for U.S. institutions as they are known to have reliable finances and high academic performance.

According to the Student and Exchange Visitor Information System (SEVIS), a total of 91,693 Korean students are currently enrolled in U.S. institutions (2014). Korea, with a population of just over 50 million, ranked third, behind China and India, in terms of the number of foreign students studying in the U.S. in 2014. According to the Korean Ministry of Education, some 296,757 students are presently studying abroad. Korean students are generally going to the following markets: the U.S.: 34 percent; China: 17 percent; Japan: 7 percent; Australia: 6 percent; Canada: 6 percent; the UK: 5 percent; and other countries: 25 percent.

Reputation of educational institution has been key for students seeking higher education degrees, whereas students studying short-term programs, including university-to-university programs, focus on cost, living conditions, and reputation. Additionally, a growing number of Korean students are taking advantage of exchange programs that incorporate other value-added components, such as internships. As for degree programs, recently more Korean students are employing strategies to lower the cost of their education by studying at a community college before transferring to a 4-year school, or studying English in a low-cost country before applying to an American school.

Sub-Sector Best Prospects

  • One-year exchange programs for elementary school students
  • Community colleges
  • One- or two-semester exchange programs for college students

Opportunities

Korean parents are increasingly more savvy about acquiring information on educational opportunities for their children. Agents or representatives are utilized less. Educational entities should consider employing a combination of on-line advertising, blogging, Facebook, Twitter, and advertisements in popular search engines within their promotional campaigns. Koreans prefer educational entities that have a long-term commitment to Korea and its students. Building people-to-people networks through alumni advocacy as well as developing and broadening exchange programs, which could, in turn, raise the profile of the U.S. institution, definitely helps U.S. schools attract Korean students to the United States.

Web Resources

Trade Shows

Korea Study Abroad & Emigration Fair - http://www.yuhak2min.com/new_www/intro.html

MBA Tours - http://www.thembatour.com/index.html

University Fair organized by Linden Tours - http://www.lindentours.com

Korea Student Fair - http://www.aief-usa.org/

Key Contacts

Ministry of Education - http://english.moe.go.kr/enMain.do

Fulbright (Korean-American Educational Commission) - http://www.fulbright.or.kr/xe/?mid=index_en

KOSA (Korea Overseas Studying Agencies) - http://www.kosaworld.org/

Local Contact

Ms. Young Hee Koo
Commercial Specialist
U.S. Commercial Service Korea
U.S. Embassy Seoul
188 Sejong-daero, Jongno-gu
Seoul 110-710 Korea
Tel: 82-2-397-4396
younghee.koo@trade.gov

http://www.export.gov/southkorea

Energy: New and Renewable (NRE)

ITA CODE: PR REQ

Overview

 

2011

2012

2013

(estimated)

2014

(estimated)

Total Market Size

5,195

4,255

6,260

6,981

Total Local Production

8,445

5,744

8,681

9,373

Total Exports

4,770

2,523

3,984

4,079

Total Imports

1,520

1,034

1,563

1,687

Imports from the U.S.

NA

NA

NA

NA

Korean government investment plan

906

887

770

765

Exchange Rate: 1 USD

1,108

1,126

1,069

1,050

Total Market Size = (Total Local Production + Total Imports) – (Total Exports), Imports from U.S.: NA, Unit: USD mil.

Sources:Korea Energy Management Corporation (KEMCO), Export-Import Bank of Korea (KEXIM), Ministry of Trade, Industry and Energy (MOTIE)

Note: The above statistics are unofficial estimates by Commercial Service Korea, based on information from Korea Energy Management Corporation (KEMCO), Export-Import Bank of Korea (KEXIM), Ministry of Trade, Industry and Energy (MOTIE), and industry expert interview.

As one of the top importers of crude oil in the world, Korea is a non-oil producing region that relies heavily on imports to meet its crude oil requirements. Furthermore, with no natural gas resources in the region, South Korea is also the second largest importer of natural gas in the world, with Korea Gas Corporation (KOGAS) being one of the single largest purchasers of natural gas. Due to a lack of natural resources, South Korea has been consistently dependent on imported energy sources to meet over 90% of its energy needs. Thus, due to lack of natural resources and high dependency on imported energy, one initiative to mitigate potential energy crises is the development of new and renewable energy (NRE) sources.

As of 2012, total NRE supplied was 8.8 million TOE, which accounted for 3.1% of total primary energy consumption, an increase from the 2.4 million TOE (or 1.2% of total primary energy consumption) in 2001.

Under South Korea’s Renewable Portfolio Standard (RPS), which took effect in 2012, companies with power plants generating 500,000 kw and above, primarily the GENCOs, referring to the state power generation entities, and IPPs (Independent Power Producers) need to obligate themselves to renewable energy required rates. The 14 applicable companies include Korea Hydro & Nuclear, Korea South East, Korea Midland Power, Korea Western Power, Korea Southern Power, Korean East West Power, Korea District Heat, Korea Water Resources, POSCO Energy, SK E&S, GS EPS, GS Power, MPC Yulchon, and Pyeongtaek Energy Service. The required renewable energy quota for 2014 will be 3%, increasing by 0.5 percentage points every year until 2016, and further increasing by 1 percentage point annually afterward.

[Renewable Portfolio Standard (RPS)quota (%)]

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2%

2.5%

3%

3.5%

4%

5%

6%

7%

8%

9%

10%

Source: KEMCO (Korea Energy Management Corporation), quota (%) subject to change

According to the 2nd National Basic Energy Plan [2014~2035], which is released every 5 years and forecasts the next 20-plus years, South Korea plans to retain 11% of its energy from renewables by the year 2035. Recently, the Korea Electric Power Corporation (KEPCO), along with the GENCOs, announced plans to invest KRW 42.5 trillion (equivalent to approximately USD 40 billion) by the year 2020 in renewable energy power generation capacity of 11.5 GW. This is expected to increase their shares of Korea’s renewable power generation to over 60%.

Sub-Sector Best Prospects

Photovoltaic power - Building integrated photovoltaic (BIPV) and roof-top systems are expected to generate high demand in the future.

Wind power - With oceans on three sides, Korea’s focus on wind power is shifting from ground applications to offshore applications.

Fuel cells - Korea is home to one of the world’s largest hydrogen & fuel cell power plants. With ROKG’s policy support, this industry is forecast to grow in the future.

Marine energy - Korea is emphasizing the development of marine energy through ongoing R&D projects and pilot construction projects.

Integrated gasification and combined cycle (IGCC) - Due to the high efficiency and environmental features of this technology, Korea has plans to adopt IGCC for one of its new coal-fired plants. This 300 MW demonstration plant is expected to be completed by 2015 (Korea Western Power Company).

Opportunities

The Korea Electric Power Corporation (KEPCO) is the government-run power company and one of the primary end-users of NRE products and services. It supplies approximately 90 percent of Korea’s entire electricity needs from its six generating subsidiaries (GENCOs). The trend of shifting the power source to NRE will continue under the RPS requirements.

The six GENCOs are:

As end-users, the GENCOs and the independent power producers (IPPs) exert strong influence in choosing what NRE core parts to use. Under the current supply chain, engineering & construction companies (E&Cs), which provide turn-key construction services, are typically the buyers of most NRE technologies and parts. There are also several large EPC companies, which are mostly subsidiaries of Korea’s business conglomerates (Samsung, Hyundai, SK, GS, etc.). Many NRE power plant construction projects are led by business consortia that consist of end-users, EPC companies, financial service entities, and equity investors. These consortia collectively influence major procurement decisions.

Web Resources

Trade Shows

International Green Energy Expo Korea (Apr. 2-4, 2014)

http://www.energyexpo.co.kr/eng/

Expo Solar/PV Korea (Sept. 17-19, 2014): http://www.exposolar.org/2014/

Energy Korea 2014 (Oct. 14-16, 2014): http://www.energykorea.or.kr/ab-en_hom

Key Contacts

Korea Energy Management Corp. (KEMCO) - www.kemco.or.kr/new_eng/main/main.asp

Ministry of Trade, Industry and Energy (MOTIE)-www.motie.go.kr/language/eng/index.jsp

Korea Customs Service (KCS) - http://english.customs.go.kr

Local Contact

Mr. Seuk Bong (S.B.) Shin
Commercial Specialist
U.S. Commercial Service Korea
U.S. Embassy
188, Sejongro, Sejong-daero, Chongno-gu
Seoul, Korea
Tel: +82-2-397-4186
Fax: +82-2-739-1628
sb.shin@trade.gov

www.export.gov/southkorea

Entertainment and Media

ITA CODE: N/A

Overview

 

2012

2013

2014 (E)

2015 (E)

Total Market Size

2,614.62

2,775.95

2,940.37

3,005.18

Total Local Production

4,097.44

4,270.70

4,697.77

4,797.73

Total Exports

2,097.44

2,135.35

2,391.59

2,439.42

Total Imports

614.62

640.60

634.19

646.87

Imports from the U.S.

245.62

256.24

256.24

261.36

Exchange Rate:

USD1

1,126

1,069

1,050

1,050

Source: Korea Creative Content Agency (KOCCA), Korea Film Council (KOFIC); Unit: USD million.

Sub-Sector Best Prospects

Films

Market Share of Films by Country

 

Korea

U.S.

China

Europe

Japan

Others

2013

59.9

35.5

0.3

3.1

0.8

0.4

2012

57.6

35.7

0.3

4.8

1.2

0.4

Source: Korea Film Council (KOFIC); Unit = %

In 2013, the Korean film industry had the highest revenue and profitability in its history. The total number of movie goers in 2013 was over 213 million; four times more than the total population of Korea and an increase of 9 percent over 2012. The market share of Korean films, relative to imports, increased by 3.3% from 57.6% to 59.9%. In 2013, 217 Korean films were produced, of which 183 were released. During the same period, 780 foreign films were imported and rated, and 722 were released. Although the number of screens is limited to a little less than 2,200 per year, imported content is increasing due to competition among the various platforms and the fact that locally-produced content is insufficient to cover the needs of all platforms.

Number of Korean Films Produced, Foreign Content Imported, and Total Films Released

 

Korean Films

Foreign Films

Total films released

# of films produced

# of films released

# of films imported

# of films released

2011

216

150

551

289

439

2012

229

175

773

458

631

2013

217

183

780

722

997

Source: Korea Film Council (KOFIC)

Opportunities

Growth of Digital On-Line Market

As the broadband Internet penetration rate is at 100 percent in Korea, and digital technologies are upgrading rapidly, VoD service is replacing DVDs in the home entertainment market. The market demand for DVDs, which was over US$ 170 million at its peak, has been shrinking dramatically since early 2000. The DVD market is currently estimated at around US$ 18 million and is still decreasing. As the DVD market has almost collapsed, new media platforms lead the growth of the content market post-first release.

The number of digital broadcasting subscribers is increasing rapidly. As of April 2013, the number of IPTV subscribers is almost 7 million and the number of digital cable TV subscribers is more than 5.4 million. Satellite TV (KT Skylife) subscribers number approximately two million, which makes the total number of digital broadcasting subscribers more than 14.4 million in a country with a population of approximately 50 million.

The increase in digital broadcasting subscribers invigorates demand for Video on Demand (VoD). According to a survey conducted by KCC (Korea Communications Committee) in 2012, VoD users were at 19.9 percent, on average, over all platforms. Almost two out of ten digital broadcasting TV subscribers are utilizing VoD service. By platform, 9.8 percent of digital cable TV subscribers are using VoD service and 33.5 percent of IPTV subscribers are, which shows that IPTV subscribers are using VoD service about three times more than digital cable TV subscribers. The reason for this is that the marketing strategy of IPTV is specifically focusing on promoting VoD service.

Source: Survey of how to utilize broadcasting and media platforms in 2012 by KCC

As VoD service becomes more and more popular, it directly affects the revenue of all the major broadcasting platforms. According to Home Choice, a VoD service provider to cable TV subscribers, it has become possible for cable TV subscribers to watch their TV programs just one or two hours after the content has been aired on terrestrial TV. Also, viewers can watch some currently released theatrical content at home while it is still in theaters, due to the shortening of the hold-back period and the advancement of network bandwidth capabilities. The Hold-back period is the time gap between the original release date of the content and the re-release date of the same content. Another factor in the growth of the VoD market is the expansion of N-Screen service to multiple platforms, which allows viewers to watch the content on any platform and at any time. Also, service providers offer a continuously increasing content library to satisfy viewers’ demand.

According to industry experts, in 2013 it is estimated that the revenue of digital cable TV VoD was over US$ 110 million and that of IPTV was over US$ 260 million, which make the total revenue of VoD approximately US$ 370 million. This is more than double the $180 million in revenue of 2012. The market demand for VoD is expected to grow continuously in 2014.

Source: Hanwah Investment & Security Research Center; Unit: USD million

While the paid TV service providers offer free VoD to their subscribers, they also provide fee-based VoD for very recently released content, including both TV and film content. Paid TV service providers have realized that fee-based VoD is very important for their revenues. They put a lot of effort into maximizing viewers’ convenience by improving the UI (User Interface). Service providers are simplifying the payment process and accepting a diversity of payment methods, i.e., payment by TV points, coupons or via subscription services. As mentioned, providers are developing their content libraries so that the viewers have more choice. In particular, they continue to add new content to their libraries and differentiate the fees with respect to the release window, e.g., first-run films (US$ 9/content), the latest films (US$ 3 to $4/content) and films past the hold-back period (US$ 2/content).

Very recently, cable TV introduced “Quick One Minute VoD Terrestrial TV Content”. This service enables viewers to watch terrestrial TV content right after the program has finished. IPTV service providers also follow this trend and try to increase the speed at which they can make content available to the viewers.

According to a survey done by the Korea Film Council, when asked for their top category, viewers overall chose the action category (23.7 percent), followed by drama (17.3 %) and crime/detective story/thriller (11.0%). When the viewer chose multiple genres they like, action is still the favorite (16.6%), followed by comedy (12.8%), drama (12.4%), SF/fantasy/martial art (11.7%) and romantic comedy (11.3%). There are enthusiastic groups for certain niche genres, similar to when the DVD market was at its peak. The VoD market is even more subdivided and provides opportunities for indie films and content that was not popular during its first run. The diversity of content has become the selling point for VoD, as theaters focus on box office hits. This presents good opportunities for U.S. content providers which offer diversity of content.

Web Resources

Trade Shows

Busan Int’l Film Festival: http://www.biff.kr

KCTA Show: http://www.kctashow.com/eng/main.html

Busan Contents Market: http://www.ibcm.tv/eng/index.php

Asian Film Market: http://www.asianfilmmarket.org/structure/eng/default.asp

Key Contacts

Korea Communications Commission: http://eng.kcc.go.kr/user/ehpMain.do

Ministry of Culture, Sports and Tourism: http://www.mcst.go.kr/english/index.jsp

Korea Creative Content Agency: http://www.kocca.kr/eng/index.html

Korea Cable TV Association: www.kcta.or.kr (Only Korean available)

Korea Film Council: http://www.koreanfilm.or.kr/jsp/index.jsp

Local Contact

Ms. Alex Choi
Commercial Specialist
U.S. Commercial Service, Korea
U.S. Embassy Seoul
188, Sejong-daero, Chongno-gu
Seoul 110-710 Korea
Tel: 82-2-397-4466
alex.choi@trade.gov

http://www.export.gov/southkorea

Franchising

ITA CODE: SV FRA

Overview

Franchising in Korea constitutes a USD 89.8 billion (2013) industry. According to the Korea FTC (Fair Trade Commission), approximately 2,973 franchises were registered in Korea in 2013. Nearly 2,089 were food service franchises, 283 were retail franchises, and 601 were service-related franchises. In 2013, the share of the food service franchises relative to total franchises registered has increased compared to 2010, while retail has decreased. Overall, South Koreans are well versed and knowledgeable in the products and services offered in the local retail market; thus, they are considered very demanding.

[Table 1] Number of Franchise Registered 2010 ~ 2013

 

2010

2011

2012

2013

Compound Annual Growth Rate (%)

Food Services

1,309 64.1%

1,598 66.5%

1,810 67.6%

2,089 3.3%

16.9%

Service Related

440 21.6%

489 20.3%

513 19.2%

601 20.2%

11%

Retail

293 14.3%

318 13.2%

355 13.2%

283 9.5%

Total

2,042 100%

2,405 100%

2,678 100%

2,973 100%

13.3%

Sources: Korea FTC (Fair Trade Commission)

The Korean franchise market is heavily concentrated with food service and other retail franchise operations. In fact, in 2012, food service franchises consisted of 70.3% of total franchise operations, compared to 29.7% of non-food service franchises registered in Korea. This is in contrast to the United States, where the distribution by franchise sub-sector is more spread out.

[Table 2] Franchising Market Sales in Korea 2012

Industry Sector

Sales

Food Service

USD 9.8 (27.2%)

Service

USD 10.6 (29.4%)

Retail

USD 15.7 (43.4%)

Total

USD 36.1 (100%)

Sources: Korea’s Franchising Industry - 2012 by Korea Chamber of Commerce & Industry Retail db (KCCI), 2012 Franchise Statistics by Statistics Korea; Unit: USD billion

Franchisors interested in the local market must take into consideration the following factors:

  • Meet the rules under Korea’s Fair Transactions in Franchise Business Act
  • Register disclosure documents with Korea FTC (Korea Fair Trade Commission). As it relates to disclosure requirements, franchisors are required to register the disclosure document with the Korea FTC first and then furnish the registered disclosure documents to the potential franchisee.

[*] Note: Amendments to the Fair Transactions in Franchise Business Act took effect February of 2014. Some of the provisions reflected in Amendment to the Fair Transactions in Franchise Business Act are as follows:

  • Information on revenue projection: Franchisors - excluding those stipulated in the Framework Act on Small and Medium Enterprises - are obliged to provide adequate information on projected sales revenue.
  • Requirement to share remodeling cost: Franchisor may not force the franchisees to remodel the interior of stores without reasonable cause. When franchisees do remodel stores with the request of franchisors, franchisors may have obligation to cover up to forty percent of the remodeling cost.

Sub-Sector Best Prospects

  • Senior care - Pre-kindergarten/childhood education & services
  • Fitness - Health and organic foods
  • Aesthetic

[*] Due to the vast array of franchise concepts, CS Korea can assist in pre-marketability checks on a case-by-case basis, upon request.

Opportunities

A representative from a major retailer in Korea notes that “when assessing and evaluating a potential brand to bring into South Korea, the current local market situation (i.e., compatibility with current trends, competition/substitutes, etc.) and positive expectations for market growth (in the short term) are some of the factors which need to be taken into consideration.”

With respect to the F&B sector, the modern food service sector in South Korea can be considered intensely competitive and saturated, with limited room for capacity expansions in strategic locations throughout Korea. Although estimates differ, Korea has definitely reached its saturation point. However, massively appealing and popular brands in the U.S. that offer the sophisticated Korean consumer unique features and experiences can still have potential.

Prior to the start of formal education, South Korean parents are eager to engage their children in “creativity” focused curriculum. According to the Korea Institute for Child Care and Education, approximately USD 2.4 billion is spent annually on services related to education and development for young children. Thus, childcare, child development and education services geared toward the pre-school segment can hold potential.

Services targeting the senior segment is also a market with potential. According to Statistics Korea, South Korea will be an ‘aged society’ by 2016, with seniors (over the age of 65) constituting 13.4% of the total population. Korea is expected to reach the ‘super-aged society’ by 2026, with over 20% of the population becoming senior citizens.

Resources                                                                                         

Trade Shows

The 31th Korea Franchise Business Expo 2014
http://www.kfaexpo.kr
(English website is not available)

Franchise Seoul 2014
http://franchiseseoul.co.kr
(English website is not available)

Busan International Senior Expo 2014
http://www.busanseniorexpo.com

Gwangju International Senior & Humancare Expo 2014
http://www.seniorfair.kr/kr/

Key Contacts

Korea Franchise Association (KFA) - http://www.ikfa.org

National Commission for Corporate Partnership (NCCP) - http://www.winwingrowth.or.kr

Korea Chamber of Commerce & Industry (KCCI) - http://english.korcham.net

Korea Fair Trade Commission (KFTC) - http://eng.ftc.go.kr

Local Contact

Mr. Seuk Bong (S.B.) Shin
Commercial Specialist
U.S. Commercial Service Korea
U.S. Embassy
188, Sejongro, Sejong-daero, Chongno-gu
Seoul, Korea
Tel: +82-2-397-4186
Fax: +82-2-739-1628
sb.shin@trade.gov

www.export.gov/southkorea

Laboratory Scientific Instruments

ITA CODE: PR LAB

Overview

 

2012

2013

(estimated)

2014 (estimated)

2015

(estimated)

Total Market Size

3,231

3,489

3,769

4,070

Total Local Production

1,439

1,554

1,678

1,813

Total Exports

147

159

171

185

Total Imports

1,939

2,094

2,262

2,443

Imports from the U.S.

582

628

678

733

Exchange Rate: 1 USD

1,126

1,069

1,050

1,050

Source: Korea International Trade Association (KITA) & National Research Facilities & Equipment Center.

Unit: USD millions.

Korea’s market demand for laboratory scientific instruments was estimated at US$ 3.5 billion in 2013, an 8% increase from the previous year. Korea depends heavily on imports. Over 60% of total market demand is met by foreign suppliers. U.S. companies are leading suppliers, with 30% of the market, closely followed by Japan with 25% and Germany with 24%. The U.S. dominates mainly the upper-end and high value-added segments of the market.

For the last five years, Korea’s R&D budgets have recorded an annual increase of 12%, on average. These budgets are anticipated to maintain an approximate 8-10% increase year-on-year for the next five years, reaching $57 billion in 2015. Investment in laboratory scientific instruments has taken about 8% of Korea’s total R&D expenditure. The healthy increase of Korea’s ministerial and university-based R&D budgets will generate steady demand for laboratory scientific instruments.

New Growth Engine and Green Technology investments are considered top priority programs for Korea’s short and medium-term strategies. Back in 2010, the Korean government designated 17 industry areas that will lead Korea’s future economic growth. The government also committed to continuous investment in some top 27 Green Technologies, such as bioenergy and intelligent power grid, that can greatly mitigate greenhouse gases. In 2014, $2.8 billion was allocated to the New Growth Engine R&D Investment Plan, while $3.7 billion was earmarked for the Green Technology R&D Promotion Plan.

Korea’s mid-term R&D strategies also highlight R&D investment focus on development of basic science studies and core technology in areas of software content, nano-material, and biology. At the same time, the Korean government plans to increase its support of R&D efforts of private enterprises, especially with those indigenous technologies close to commercialization. Examples are the hybrid car, alternative vehicle fuels, and items like the ‘cleaning robot.’

Over the past seven years, government-funded research institutes (25 in total) were the largest end-user group of laboratory and scientific instruments, with 34% of Korea’s total investment in these instruments. This was followed by universities and private enterprises – both with 17%. In the private sector, key end-user industries include electronics, automotive, chemicals, materials, and pharmaceuticals. The main private buyer groups are private research labs affiliated with major Korean conglomerates, including Samsung, LG, SK and Hyundai, and independent pharmaceutical and biotechnology companies, to name a few.

Sub-Sector Best Prospects

In line with Korean government short- and mid-term R&D strategies, the following six industry technology areas are identified as laboratory scientific instruments best sales prospects:

  • Environment
  • Biotech
  • Nano
  • Information
  • Semiconductor
  • Computer

Opportunities

Laboratory scientific instruments for technology development of the following New Growth Engine segments will find sales growth potential for at least the new few years:

Green technology industry: renewable & low-carbon decrease energy, water treatment, green transportation systems, IT convergence citywide, LEDs.

High-tech convergence: broadcast and communications media, intelligent robots, biopharmaceuticals and medical devices, IT, food industry, nano-convergence.

Web Resources

Trade Shows

The 8th KOREA LAB 2014 (http://www.korealab.org/eng)

Energy Korea 2014 (http://www.koreaenergyshow.or.kr/ab-en_home)

Bio Industry Expo, Osong, Korea 2014 (http://eng.bio-osong.kr/)

SAMPE Asia 2014 & Korea Composite Show (http://www.compositekorea.com/english/)

Key Contacts

National Research Facilities & Equipment Center - http://www.nfec.go.kr/html/kr/index.html

National Science and Technology Commission - http://www.pps.go.kr/english/

Local Contact

Ms. Young Hee Koo
Commercial Specialist
U.S. Commercial Service Korea
U.S. Embassy Seoul
188 Sejong-daero, Jongno-gu
Seoul 110-710 Korea
Tel: 82-2-397-4396
younghee.koo@trade.gov

http://www.export.gov/southkorea

Medical Equipment and Devices

ITA CODE: PR MED

Overview

                                                                                                         Unit: USD thousands

 

2012

2013

(estimated)

2014

(estimated)

2015

(estimated)

Total Market Size

4,077,900

4,404,100

4,756,500

5,137,000

Total Local Production

3,443,500

3,837,500

4,261,000

4,696,600

Total Exports

1,966,600

2,320,500

2,738,100

3,148,900

Total Imports

2,601,000

2,887,100

3,233,600

3,589,300

Imports from the U.S.

1,171,800

1,253,700

1,341,500

1,435,500

Exchange Rate: 1 USD

1,126

1,069

1,050

1,050

Total Market Size = (Total Local Production + Total Imports) – (Total Exports)

Source: Korea Medical Devices Industry Association, KMDIA

The Korean medical device market is estimated to reach USD 4.8 billion in 2014. Korea depends on high-end medical devices from the U.S., EU, and Japan to supply about 60 percent of total market demand. Korean companies make comparatively lower-end (mid-technology) medical devices. Another factor favoring the use of imported advanced medical equipment and devices is the growing elderly population, as well as Korean doctors educated in the U.S. and Europe, who are accustomed to using advanced medical devices. At the same time, U.S. medical device manufacturers carefully watch government pricing and reimbursement policy as Korea grapples with cost containment under its national healthcare system.

In 2012, total imports of medical devices were USD 2.6 billion, with U.S. imports totaling over USD 1.2 billion. However, the Korean economy has not fully recovered to its pre-global financial crisis levels. While U.S. market share represents 45 percent of the import market, estimates are that market demand for foreign advanced and innovative medical devices showed relatively slow growth in 2013.

The importation of medical devices requires the assignment of an importer or representative based in Korea to manage medical device approvals and to ensure regulatory compliance. As part of pre-market approval requirements, the Government of Korea requires testing reports on safety and efficacy. In addition to medical device approvals, companies also need to negotiate pricing terms with the Korean Health Insurance Review & Assessment Service (HIRA). For further details on the medical device import process, please contact Ms. Yoonshil Chay of CS Korea at the e-mail address below.

Current issues for the medical device industry in Korea include reimbursement pricing and the healthcare technology assessment system for medical devices. The U.S. Embassy in Korea works closely with key associations, including AdvaMed and the American Chamber of Commerce in Korea, to ensure that U.S. medical device industry interests are well represented.

The KORUS FTA was implemented on March 15, 2012. U.S. medical device and pharmaceutical companies now have the ability to request a review of government pricing and maximum reimbursement determinations for their products through the Independent Review Process. Established to regulate medical devices and drug prices, this review process is independent of the Ministry of Health and Welfare (MoHW), the National Health Insurance Service (NHIS), and the Health Insurance Review and Assessment Service (HIRA).

Sub-Sector Best Prospects

  • Stents
  • CT systems
  • MRI systems
  • Knee implants
  • Soft contact lenses
  • Kidney dialysis devices
  • Lenses for eye glasses
  • Medical probes
  • Catheters
  • Ultrasound imaging systems

Opportunities

A potential area for U.S.-Korea cooperation in the healthcare technology sector is in the area of clinical trials. Korea is interested in developing a more robust clinical trial environment for medical devices and pharmaceuticals. U.S. companies that need clinical trials for their medical devices may wish to contact the Medical Device Policy Division of the Ministry of Drug and Safety for details specific to their products, through their Korean importer.

Web Resources

Trade Shows
Korea International Medical, Clinical, Laboratories & Hospital Equipment Show 2015 - www.kimes.co.kr

Key Contacts

Ministry of Health and Welfare (MoHW) – www.mw.go.kr

Ministry of Food and Drug Safety – www.mfds.go.kr

Health Insurance Review & Assessment Service (HIRA) - www.hira.or.kr

Local Contact

Ms. Yoon-Shil Chay
Senior Commercial Specialist
U.S. Commercial Service, Korea
U.S. Embassy Seoul
188 Sejong-daero, Jongno-gu
Seoul 110-710 Korea
Tel: 82-2-397-4439
yoonshil.chay@trade.gov

http://www.export.gov/southkorea

Pollution Control Equipment

ITA CODE: PR POL

Overview

Unit: Million USD

 

2008

2009

2010

2011

2012 (est.)

2013 (est.)

2014 (est.)

Total Market Size

4,510

5,062

6,972

7,656

8,087

9,480

11,546

Total Local Production

5,421

5,642

7,858

9,013

9,851

11,417

12,786

Total Exports

1,539

1,262

1,628

2,248

2,628

2,868

2,240

Total Imports

628

683

742

800

863

931

1,000

Imports from the U.S.

188

205

223

240

259

279

300

Exchange Rate: 1 USD

1,105

1,276

1,156

1,108

1,126

1,069

1,050

Note: The above statistics are unofficial estimates by Commercial Service Korea, based on information published by the Ministry of Environment, Korean Statistical Information Service (KOSIS) and industry experts.

Since Korea’s implementation of its Low Carbon, Green Growth Strategy in 2009, the country has continued to demonstrate a strong commitment to environmental improvement. The pollution control equipment industry continues to grow in various areas, such as water treatment, power plants, and steel mills, with support from the government.

CS Korea forecasts that the size of the pollution control equipment industry will be USD 10.5 billion in 2014. According to several industry sources, imports account for about 10 percent of the total market. Japan has been the principal foreign supplier, with approximately 50 percent import market share, followed by the U.S. at 30 percent, then Germany and France.

Local environmental equipment manufacturers in Korea have supplied a major portion of Korea’s environmental projects with medium-level technology and moderate cost products. While they have significantly improved technical levels, mostly via technology transfer and mergers with non-Korean suppliers, local manufacturers still lack core technologies to supply products that meet the government’s stringent regulatory requirements. There is, therefore, demand for advanced imported products and technologies. Because most competing Korean manufacturers target larger volumes and export markets, highly customized solutions for specific applications, like in-house recycling and ultra-pure water treatment, offer potential for U.S. exporters.

Sub-Sector Best Prospects

  • Carbon capture & storage technologies and equipment
  • Volatile organic compounds (VOCs) control in oil refineries and petrochemical plants
  • Dioxin abatement in municipal and industrial incinerators
  • Advanced sulfur oxides/nitrogen oxides abatement in power plants and steel mills
  • Energy saving and waste-to-energy in steel mills and municipal landfills
  • Pollution-free and low-emission vehicles in engineering technology, engine components and parts for CNG
  • Pollution abatement technologies for the automobile and oil refinery industries
  • Advanced water pollution control technologies
  • Environmentally-friendly construction materials

Opportunities

The Korean government plays a key role in the pollution control equipment industry, serving as both the regulator and the largest end-user in this area. Due to an overall economic downturn, the 2014 national expenditure for environmental protection will decrease by approximately 0.2 percent from the previous year. The national expenditure for environmental protection for 2014 is set at USD 5.15 billion.

Korean government project tenders are announced on the Korean government procurement (PPS) website, with detailed information on project scope and contact information (http://www.pps.go.kr/english/). For more information on PPS, readers are encouraged to review the “Selling to the Government” section of chapter three of this guide.

To enter the pollution control equipment market, we recommend that U.S. suppliers partner with qualified and capable Korean companies, which maintain existing sales networks to serve end-users and which are fully aware of the regulatory changes that drive the market. Exhibiting at local environmental trade shows can also be a good platform to explore the market, as well as gain exposure to end-users.

Web Resources

Trade Shows

International Exhibition on Environmental Technologies (ENVEX 2014), June 10-13, 2014 - http://www.envex.or.kr

Water Korea, March 18-21, 2014 - http://waterkorea.kr

Key Contacts

Ministry of Environment - http://eng.me.go.kr/main.do

Korea National Cleaner Production Center - http://www.kncpc.or.kr/en/main/main.asp

Public Procurement Service (PPS) - http://www.pps.go.kr/english/

Local Contact

Nathan Huh
Senior Commercial Specialist
U.S. Commercial Service, Korea
U.S. Embassy Seoul
188 Sejong-daero, Jongno-gu
Seoul 110-710 Korea
Tel: 82-2-397-4130
Nathan.Huh@trade.gov

http://www.export.gov/southkorea

Semiconductors

ITA Code: N/A

Overview

 

2012

2013

2014 (E)

2015 (E)

Total Market Size

36,274

40,995

41,498.80

43,515.53

Total Local

Production

54,462

63,519

66,473.66

73,120.70

Total Exports

50,430

57,143

67,631.36

74,394.50

Total Imports

32,242

34,619

42,656.50

44,789.33

Imports from the U.S.

3,815.2

4,016

4,417.6

4,859.36

Exchange Rate : 1USD

1,126

1,069

1,050

1,050

Source: Korea Semiconductor Association (KSIA), Korea Association for ICT Promotion (KAIT), and Ministry of Trade, Industry & Energy (MOTIE); Unit: USD million.

The memory semiconductor industry is one of the major IT industries in Korea. Korean conglomerates Samsung and SK Hynix cover 65.8 percent of DRAM and 52.5 percent of NAND Flash in the global market. Korea is also competitive in the system memory chip industry and has five percent of that market globally. However, memory chips are only approximately 22 percent of the total semiconductor industry.

Almost eighty percent of system semiconductor applications cover diverse wireless and wired market demand such as smart phones, tablet PCs, smart home appliances, energy, and aerospace, which are generating steady market growth. The market demand for analogue semiconductor applications includes automobiles and sensors for smart devices. This trend will continue as the mobile and wireless environment evolves.

Sub-Sector Best Prospects

Analogue Semiconductors - Automobiles

Logic semiconductors for automobiles

32-bite Micro Controller Units (MCU)

Tire Pressure Monitoring Systems (TPMS)

Sensors for sound, pressure and temperature

System Semiconductors - High-Definition Multimedia Interface (HDMI)

Display ports

Mobile High-Definition Links (MHL)

Power Control – Discrete/IC/Diode

Opportunities

As digital IT devices become smarter, they are evolving and working toward being able to recognize, imitate, interpret and act as if they are human beings. With the expansion of smart IT devices, the market demand for analog semiconductors is rapidly growing. Korea is one of the major smart IT device, high-end TV (Digital TV, Smart TV and other high-end flat screen TVs), and automobile manufacturing countries. These industries lead Korean market demand for system and analog semiconductors.

Samsung manufactures image sensors and APs (Application Processors), which are a part of system semiconductors; in this area it has more than 20 percent of global market share. However, Korean semiconductor manufacturers other than Samsung have an insignificant market share. The major suppliers of analogue and system semiconductors are from the U.S., Taiwan, Germany, and Japan.

Import Requirements

Korea is a member country of the World Trade Organization Information Technology Agreement (ITA); as such, 92% of U.S. ICT products enjoy duty-free treatment into Korea. The remaining 8% enter duty-free under the Korea-U.S. FTA (KORUS), except for several items which will be duty free as of 2015. These include chemicals related to the batteries and semiconductor-related products.

Semiconductors have been duty-free under the Information Technology Agreement since 1996. However, emerging semiconductor devices may or may not be subject to duty. This issue is being handled at the Governments/Authorities Meeting on Semiconductors (GAMS). In 2006, the U.S., Japan, Korea, Europe, China and Chinese Taipei agreed to eliminate tariffs on Multi-Component Packages (MCPs). However, the definition was not as broad as hoped. Efforts continue to broaden tariff free coverage for the next set of products, Multi-Component Integrated Circuits (MCOs). At the 2012 World Semiconductor Council Meeting, industry reached a consensus definition of MCOs and recommended that WSC governments and authorities provide duty free treatment for MCOs.

There is no regulation applied to semiconductor chips, per se. However, when chips are utilized in electronic devices, the devices are subject to KC Mark conformity assessments. As the assessment procedure can be complicated, U.S. firms should consult with their Korean partners before exporting products containing these chips to the Korean market. The guidelines for the KC Mark can be found at: http://rra.go.kr/eng/approval/process/about.jsp.

Web Resources

Trade Shows

Korea Electronics Show - www.kes.org

Semicon Korea 2014 - www.semiconkorea.org

LED Korea 2014 - www.led-korea.org

World IT Show 2014 - http://www.worlditshow.co.kr/eng/index.php

Key Contacts

Ministry of Trade, Industry and Energy – www.motie.go.kr/language/eng/index.jsp

Korea Semiconductor Industry Association - https://www.ksia.or.kr/new/eng/main/

Korea Institute for ICT Promotion - http://www.kiat.or.kr/site/main/index/index002.jsp

Korea Electronics Association - http://www.gokea.org/neweiak/eng/

Local Contact

Ms. Alex Choi
Commercial Specialist
U.S. Commercial Service, Korea
U.S. Embassy Seoul
188, Sejong-daero, Chongno-gu
Seoul 110-710 Korea
Tel: 82-2-397-4466
alex.choi@trade.gov

http://www.export.gov/southkorea

Travel and Tourism

SV TRA

Overview

 

2011

2012

2013

2014 (estimated)

Outbound Travel

12,693,733

13,736,976

14,846,485

16,689,000

Outbound Travel to the U.S

1,145,216

1,251,432

1,359,924

1,482,000

Inbound Travel

9,794,796

11,140,028

12,175,550

13,500,000

Source: Korea Ministry of Culture, Sports and Tourism (MCST), Tourism Organization (KTO), U.S. Department of Commerce National Travel & Tourism Office (USDOC, NTTO).

In 2013, over 14.8 million Koreans – roughly one fourth of the population – traveled abroad. International travel is a rapidly-growing activity for Koreans and offers opportunities for U.S. tourism exports. Rising disposable incomes, gradual increases in vacation time, heightened globalization, and greater awareness of developments outside the Korean Peninsula are causing more Koreans to travel overseas. Korea's per capita GDP rose to almost USD 33,200 in 2013, placing it securely in the ranks of middle-income countries. Korean consumer confidence has also increased gradually, including a rise in discretionary spending for such activities as overseas travel for business and leisure.

Positive economic indicators, Korea’s addition to the U.S. Visa Waiver Program (late-2008) and the U.S.-Korea Free Trade Agreement (KORUS FTA), which entered into force in March 2012, should help spur even more leisure and business-related travel to the U.S. Currently, 12.4% of Korean travel to the U.S. is for business purposes. Korean mass media is influenced by U.S. movies, advertising, popular culture, and the Internet, which continue to stimulate interest in U.S. travel destinations.

The U.S. remains one of top five destinations for Korean outbound travelers. Koreans overwhelmingly choose the U.S. as their non-Asian long-haul destination, primarily because of the diversity of tourism opportunities not generally available in Asia, including U.S.-style shopping, theme parks, cultural attractions in major U.S. cities, relatively inexpensive golf experiences, and U.S. National Parks.

According to the U.S. Department of Commerce, a total 1.36 million Koreans traveled to the U.S. in 2013, up 8.7 percent from the prior year. The increase is attributed to the stabilization of Korea’s economy after the global financial crisis in 2008 and the Visa Waiver Program that Korea joined in 2008. By 2014, it is estimated that 1.45 million Koreans will travel to the U.S. On average, a Korean visitor to the U.S. spends approximately USD 3,320 per trip. This number translates to over USD 4 billion annually of tourism revenue from Korean outbound travelers to the U.S. Korea is currently the ninth-largest source of inbound travel to the U.S., behind Canada, Mexico, the United Kingdom, Japan, Germany, Brazil, China and France.

Sub-Sector Best Prospects

  • Free and independent travelers
  • Group package tours
  • Family vacation packages
  • Honeymoon packages
  • Luxury packages catering to Korea’s single, professional women, traveling for leisure
  • Cultural tours and scenic/nature tour packages, especially designed for Korean travelers
  • Educational travel
  • MICE

Opportunities

The U.S. is the leading non-Asian destination for Koreans as it offers a variety of activities, climates, and cultural experiences. However, there is room for growth. U.S.-bound Koreans account for only 9.2 percent of Korea’s outbound market. Los Angeles, San Francisco, Las Vegas, and Seattle, followed by the New York-Washington, DC corridor, are the most popular destinations. Koreans use group tours or travel individually to visit friends and relatives. Group tours should focus on price-competitive products that entice travel agencies in Korea to sell these products. Korean travelers are generally interested in visiting museums, amusement parks, finding bargains at fashion outlets, purchasing OTC pharmaceuticals/vitamins and U.S. cosmetics, playing golf, and visiting restaurants and wineries.

To enter this market, travel and tourism entities should provide materials and guide experiences in the Korean language, continue knocking on doors (i.e., visit Korean travel wholesalers), and cultivate long-term relationships with the travel trade in Korea. There are approximately 9,000 tour agents in Korea. Promotional information and product training programs on the U.S. is urgently needed for developing this market. Contact CS Korea for more details.

Web Resources

Trade Events

May 23-25, 2014

Hanatour International Trade Show 2014 - http://www.hits2014.co.kr

May 29-June 1, 2014

The 29th Korea World Travel Fair (KOTFA) – http://www.kotfa.co.kr/eng/main/main.htm

May 17-18, 2014

Weddex Korea – http://www.weddex.com

Key Contacts

Korea Tourism Organization http://kto.visitkorea.or.kr/eng.kto

Ministry of Culture, Sports & Tourism http://www.mcst.go.kr/english.index.jsp

Brand USA http://discoveramerica.co.kr

Local Contact

Ms. Jessica Son

Commercial Specialist

U.S. Commercial Service, Korea

U.S. Embassy Seoul

188 Sejong-daero, Jongno-gu|
Seoul 110-710 Korea|
82-2-397-4587
Jessica.son@trade.gov

http://www.export.gov/southkorea

Agricultural Sectors

For information on agricultural products including bulk commodities or processed foods and the distribution channels in Korea, please see the US Department of Agriculture (USDA) Exporter Guide 2013.

When considering the Korean market, US food exporters should conduct preliminary research to determine if the market is appropriate for the product. Possible sources of market information include Korean importers, US state departments of agriculture, the US Agricultural Trade Office in Seoul and the US Department of Commerce. Lists of Korean importers, by product, can be obtained from the US Agricultural Trade Office. The next step might include sending catalogues, brochures, product samples, and price lists to prospective importers as a way of introducing the company and products.

Once contact is established, it is advisable to visit the importer(s) in person, which will increase the seller's credibility with the Korean importer and give an opportunity to see the Korean market first hand. In Korea the clichés about "seeing is believing" and "one visit is worth a 1,000 e-mails" are especially true. Especially in Korea, there is no substitute for face-to-face meetings. The supplier or exporter should bring samples as well as product and company brochures including price lists, shipping dates, available quantities, and any other information needed for negotiating a contract. While information in English is acceptable, having it in Korean is especially helpful. A general overview of the firm in Korean is a good place to start.

The Seoul Food Exhibition 2014 presents an excellent opportunity to explore possible market opportunities in Korea. This show is a trade only show and targets importers, wholesalers, distributors, retailers, hotels, restaurants, food processors, media, etc.