South Korea’s top chemical firm LG Chem aims for resurgence with the aggressive investment plan for this year. According to the chemical company on Tuesday, it is planning to invest a total of 1.7 trillion won ($1.5 billion) in major businesses such as petrochemical, information and electronic materials and li-ion batteries this year. The amount of investment is an increase of 13.3 percent from last year’s 1.5 trillion won.
By sector, the company would invest 730 billion won in adding production lines, 300 billion won in research and development and 760 billion won in the existing businesses. If investment in fixed assets and separate personnel expenses are included, research & development investment would climb to a total of 610 billion won. The figure is up 20 billion won from last year. Eyes are on the aggressive investment plan by LG Chem especially as most chemical and oil refining companies are considering freezing or scaling back investment this year.
Korean investment in local start-ups reached a record high of 2.54 trillion won ($2.3 billion) last year, shooting up 61.9 percent over 2013, largely thanks to contributions from the private sector. According to data disclosed on Tuesday by the Small and Medium Business Administration (SMBA), more than half of the new investments came from the private sector, including commercial banks, pension funds, conglomerates and successful start-ups that have grown into large businesses.
The private sector’s contribution of 1.5 trillion won to local start-ups in 2014 showed a drastic increase over the previous two years, due to the Park Geun-hye administration’s efforts to boost start-ups. National policy funds – central and regional governments, the state-run Korea Development Bank and their joint funds – put about 1 trillion won into start-ups last year.
The SMBA added that there were 481 start-up funds operating at the end of last year, holding a total of 12.2 trillion won. The SMBA said that the bigger boost from the private sector is a sign that the nation’s start-up ecosystem has improved and became more attractive to investors.
LG Display, the world’s biggest supplier of display panels, plans to invest up to 4 trillion won in facilities to meet rising demand for display-embedded solutions, a company executive said Monday.
“There won’t be any drastic cut in investment for facilities next year,” its CFO Jeong Ho-young told The Korea Times at the company’s headquarters in Yeouido, Seoul. “We have business areas that need proper investment, on time,” he said. This year, LG plans to invest as high as 4 trillion won on facilities, the company said.
The senior executive said the global display industry is gradually heading toward normalization in the area of supply and demand thanks to the improvement of consumer spending from emerging to developed markets. “Our 2014 investment plan is based on the fact that demand for display solutions are on the normal track, not just in China but in major markets,” said the CFO.
As Korea has become one of the world’s leading high-tech economies, with global titans like Samsung Electronics, the nature of foreign investment in the nation has changed as well.
Over the past six decades, the relationships between Korea and foreign businesses have advanced from rudimentary investment in low-end manufacturing industries to the establishment of high-level research and development centers.
Although the Korean market is relatively small compared to giants like China and Japan, and more regulated than free trade havens like Hong Kong and Singapore, foreign companies see Korea as a more crucial location for product development because of well-educated researchers and cutting-edge IT infrastructure.
In the 1960s and 1970s, the amounts of foreign investment in Korea were relatively small by design and could mostly be found in manufacturing. Under Park Chung Hee, foreign investment was valued mostly for the expertise and technology local companies could gain from it.
Korea’s R&D (research & development) scale was found to be in the top level among those of OECD (Organization for Economic Cooperation and Development) countries. On the 24th, the Ministry of Science, ICT and Future Planning announced the presentation of a report titled “OECD Science, Technology and Industry Score Board’ at the ‘OECD Global Forum on the Knowledge Economy’ held in Istanbul, Turkey.
According to the report, Korea was ranked the second in terms of the ratio of R&D intensity to GDP and the ratio of R&D investment by private companies to GDP. In the last report published in 2011, Korea was ranked the fourth in both categories. In addition, Korea was ranked the fourth in terms of the government’s private R&D subsidy and tax support scale to GDP ratio.
Korea recorded 4.03% in the ratio of total R&D investment to GDP, and thus is only 0.35% behind the top-ranking Israel (4.38%). Finland and Japan, the third and the fourth countries, recorded 3.78% and 3.39% respectively.
The Ministry of Strategy and Finance has adjusted the number of items that may qualify for the 80 percent R&D-related Customs Duties Reduction and these changes will take effect beginning in July. The R&D Related Customs Duties Reduction is aimed at encouraging corporate R&D activities by granting an 80 percent customs duties reduction when corporations with research centers import goods for research purposes.
The number of items that qualify for the customs duties reduction will be reduced from 261 to 220, with 33 items newly added and 74 removed. The adjustment was made to reflect demand changes and FTA tariffs. The government is expecting the adjusted customs duties reduction will help promote corporate R&D activities. New items will include devices necessary for developing semiconductor- or electronic parts-related products, such as digital microscopes, balance machines and flatness inspection.
Technology giants such as Samsung Electronics and SK hynix, hit by the prolonged global economic slump, are now facing another headache because the cost of building new chip-making plants has been snowballing. It’s getting tougher for top-tier computer memory chip makers to build new advanced chip plants because a massive industry shift towards thinner and new manufacturing technology for making microchips with more functions at a low cost is calling them to make increased investments.
Engineers are working on each chip, to squeeze in more transistors, however, the pace of smaller chips is making the top-ranked chip suppliers invest more than $10 billion for a single plant, said a global securities and investment banking firm Jefferies & Co. “We expect over $10 billion to be needed to construct an advanced chip-making plant next year from $7.4 billion in 2011 and $4.4 billion in 2009,” according to a document titled “Cost of building leading edge semiconductor factory” written by Jefferies.