Japanese chemical group Toray held a ground-breaking ceremony for a carbon fiber plant in Gumi, North Gyeongsang Province on Tuesday. It is the first such factory on Korean soil.
Toray says it will invest a total of W1.3 trillion (US$1=W1,084) in the plant over the next 10 years to make Korea the world’s largest production base in the industry with an annual output of 14,000 tons, twice as much as its main plant in Japan.
◆ Influx of Japanese High-tech Firms
Other Japanese firms in the high-tech industry are also building plants here since the massive earthquake and tsunami there in March. On Tuesday, Japanese Ambassador Masatoshi Muto said they are seeking to diversify their production base due to frequent earthquakes and Korea has become a popular destination because it is nearby.
Sumitomo Chemical has joined hands with Samsung to build a plant to manufacture components for smartphones in Pyeongtaek, Gyeonggi Province. It will start producing touch panels next year. Yodogawa Hu-Tech invested W4.5 billion last month to build a secondary car battery plant in Pyeongtaek.
Japanese firms are also relocating research facilities to Korea. ULVAC, one of the world’s top LCD production equipment businesses, will put up its first overseas research center in Pyeongtaek in January next year, while Tokyo Electron’s research facility in Hwaseong, Gyeonggi Province is scheduled to start operations next year.
According to the Ministry of Knowledge Economy, Japanese investment in Korea soared 40 percent on-year in the first half of this year to W400 billion and is likely to continue to rise in the second half.
◆ Exodus After Quake
Japanese investment in Korea is shifting from the labor-intensive industry to high-tech industries such as smartphones, LCDs and new materials, triggering concerns there over possible leakage of core technology, the Nihon Keizai Shimbun reported.
The shift is largely attributable to Korea's proximity to Japan and far lower costs in labor, electricity and taxes. A psychological factor also comes into play as they want to free themselves from persistent worries over earthquakes. The March quake dealt a huge blow to production and distribution in Japan's Northeast, causing damage to numerous firms.
"With an increasing demand for storing important data in a safe place since the earthquake, we're now building a facility for that purpose in Busan together with KT," said Softbank president Son Jung-ui, or Masayoshi Son.
That Korean manufacturers are emerging as the world’s leading players in their sectors is another attraction for Japanese firms in the parts or materials industry, since there is high demand from Samsung Electronics, LG Electronics, Hyundai Motor, Hyundai Heavy Industries and others.
Japanese businesses are also seeing opportunities from Korea’s free trade agreements with the EU and U.S. They hope to expand exports by producing components in Korea so shipments to those parts of the world will not be subject to tariffs. "The advance of Japanese high-tech firms into Korea will benefit both countries," said vice economy minister Kim Jung-gwan.