South Korea is taking the dust of China in Japan's digital device market, according to the local research paper.
According to the latest report released by the Korea Economic Research Institute, there is a warning sign ahead for the Korean information and technology industry.
The report compared global competitive index on 193 sectors including information and telecommunications devices during the period from 2009 to 2014. It shows that smartphone and laptop put Korea at a competitive disadvantage with China while system semiconductor with Japan.
Especially, in the Japanese market, Korean companies were overtaken by Chinese counterparts in the areas of smartphones and LCD panels for the first time in six years. China enjoys a comparative advantage over Korea in the Japanese market in the area of laptop, auxiliary memory, multi-media card and wireless telecommunications parts. China's comparative advantage is especially outstanding in smartphone and LCD panels, the report said. In terms of smartphones, Korea's index dropped to 1.65 in 2014 from 5.36 in 2009 while China's index rose to 2.09 in 2014 from 2.04 in 2009. In terms of LCD panel, Korea significantly dropped to 2.57 in 2014 from 18.47 in 2009 while China rose to 13.4 from 3.74 during the same period.
The report suggested that Korea should upgrade its global production system and network to specialize in high-value added production process, for instance, by upgrading the conventional structure capitalizing on China as global production base to partners for intermediary goods.
The report also said, "With Korea's tech industry shifting from end products to parts, more should be invested in boosting the development of core technology."
According to another latest report "Merger and Acquisition of Korea, China and Japan" released by the Korea Economic Research Institute, Korea is also lagging behind its rivals Japan and China in the M&A of six industries including manufacturing and service during the period from 2005 to 2014.
For the last decade, China had 94 global big deals with over $1 billion and Japan had 91 such deals, accounting for 3.6 percent and 4.3 percent respectively in the total global M&A market.
For mega deals with more than $5 billion, China had 5 and Japan had 13. During the same period, Korea had only 15 in the big deals, accounting for 1.8 percent and it had no mega deal. The size of global deals of Korea was also smaller than China and Japan. The average size per deal in Korea started from $24 million in 2005, hit 140 million in 2010 and then dropped to $85 million in 2014. Meanwhile, the size of China's deals continued to increase to $160 million in 2014 from 73 million in 2005.
"Since the Asian financial crisis, China and Japan have actively bought diverse foreign companies for the sake of securing high-end technologies. Korean companies should also boost their global competitiveness by capitalizing on M&A," the report said.
"The government should give tax support to companies attempting to do M&A and reform the unnecessary institutions. More strategies are needed centering on new growth engine," the report added.
