4.4 Localization of Production and R&D by
4.4.1 Increase in the Foreign Direct Investment
Another factor contributing to the formation of the FPD components, materials, and equipment industries in Korea is the expansion of local production by Japanese suppliers. As shown in Table 4.3 , since the mid- 2000s, Japanese suppliers have established manufacturing plants in Korea and increased the number of production lines and products produced, especially FPD components and materials. It should be noted that some Japanese suppliers listed in Table 4.3 , such as Dongwoo Fine-Chem, TORAY Advanced Materials Korea, JSR Micro Korea, NCK (a subsid- iary of Nissan Chemical Industries), and ULVAC Korea, have also estab- lished R&D centers in Korea.
Why have Japanese suppliers established and expanded manufactur- ing plants in Korea since the mid-2000s? Mitarai ( 2011 , pp. 159–60) explained that one of the reasons is a characteristic of the FPD industry.
In the LCD industry, the size of the glass substrates has grown in order to increase productivity by producing a larger number of panels from a single substrate. Glass substrates were less than a 1 m in height and width until the start of mass production of G4 manufacturing lines in 2000.
Since then, they have grown to about 2 m in height and width on the G7 manufacturing lines, which started operation in 2005 (Electronic Journal 2006 , pp. 122–3). As a result of the rapid increase in transpor- tation costs between Japan and Korea as the size of the substrates grew,
Table 4.3 Local subsidiaries of Japanese LCD components, materials, and equip- ment suppliers in Korea
Company name Year Event
Ulvac Korea 2000 Completed a sputtering equipment factory (Expanded the factory in 2001, 2003, 2005, 2006)
2011 Established a research institute Korea Nitto Optical
(Nitto Denko: 80.38 %)
2000 Established a polarizer factory (Expanded the factory in 2002, 2003, 2005)
Koyo Thermo Systems Korea
2002 Completed a thermal processing equipment factory (Expanded the factory in 2005, 2006) Dongwoo Fine-Chem
(Sumitomo Chemical:
100 %)
2002 Completed polarizer and color fi lter factories (Expanded the factories in 2004, 2005, 2006, 2007, 2008)
2007 Established an R&D Center
2011 Set up a manufacturing line for touch sensor panels used in OLED panels
TORAY Advanced Materials Korea
2002 Completed a fi lm processing line (Expanded the line in 2004, 2005, 2006, 2007, 2012)
2004 Established an Advanced Materials Research Center
NCK (Nissan Chemical Industries 90 %)
2003 Completed an alignment fi lm plant 2007 Completed an R&D Center
AGC-Fine Techno Korea (Asahi Glass: 67 %)
2004 Completed a glass substrate factory (Expanded the factory in 2006, 2007)
JSR Micro Korea 2004 Started production of color resists (Expanded production in 2005, 2008)
2011 Established a Research Center
HOYA Electronics Korea 2005 Started production of large photomasks for LCDs JNC Korea 2005 Completed alignment fi lms and overcoat
factories (Expanded the factories in 2009) Ulvac Precision Korea 2005 Completed an equipment components factory
(Expanded the factory in 2006) HMF Technology Korea
(Hitachi Metals: 100 %)
2005 Completed an equipment components factory JX Metals Korea 2005 Completed an equipment components factory Mitsui Mining & Smelting
Korea
2006 Completed an equipment components factory Paju Electric Glass (Nippon
Electric Glass: 60 %)
2006 Started operation of a processing line for glass substrates (Expanded the line in 2008, 2010, 2011, 2012)
COTEM (Tokyo Ohka Kogyo: 30 %)
2006 Started operation of photoresists (Expanded production in 2008, 2010)
2008 Established a Research Institute
(continued)
Japanese suppliers had no alternative but to locate manufacturing plants near Korean customers. 29
In addition, Mitarai ( 2011 , p. 159) pointed to the impact of the Korean government’s policy to encourage domestic production of components and materials as another reason why Japanese suppliers started production in Korea. Following the Asian economic crisis, the Korean government, which adopted a foreign investment inducement policy, has promoted activities to attract Japanese suppliers in cooperation with customer fi rms Samsung and LG as a means of solving stagnant investment and decreas- ing the trade defi cit with Japan. Th e Korean government has off ered pref- erential treatment, such as tax reductions or exemptions, to foreign fi rms that operate a ‘business involving highly advanced technology’ in Korea (Momomoto and Lee 2012 , pp. 200–7). Moreover, in February 2004, MOCIE, as part of its Korea Core Industrial Technology Investment Association (KITIA), opened a ‘Japan Desk’ to specialize in attracting Japanese cutting-edge components and materials fi rms (MOCIE 2003 ; Choi 2005). As a result of the Japan Desk project, in the fi rst year, six Japanese fi rms invested $150 million, mainly in the area of components and materials for the FPD sector (MOCIE 2004b ; Choi 2005, p. 68).
Preparation of the investment environment also seems to have supported Japanese supplier’s decision to invest in Korea.
29 Th e author’s interview at a local subsidiary of a Japanese FPD components fi rm in Korea on 7 September 2012.
Table 4.3 (continued)
Company name Year Event
Ube Kosan 2011 Established a joint venture for materials used in next-generation display substrates with Samsung Mobile Display
TOK Advanced Materials (Tokyo Ohka Kogyo:
90 %)
2012 Started construction of a photoresist factory and Advanced Materials Research Center Nippon Electric Glass
(Korea)
2013 Started operation of a manufacturing plant for glass substrates
Idemitsu Electronic Materials Korea
2013 Started operation of an OLED materials factory
Source: Author’s elaboration based on data from company web sites