Korean shipbuilding

By Bernard Rowan

When it comes to Korea's advanced shipbuilding industry, change can't be easy. Looking at shipbuilding here over several decades presents a mixed picture. Aside from a constant need to improve technology, South Korea faces rising competition from other Asian nations, as well as the negative impacts of currency and demand swings. Some long-standing companies have problems. Overall, the government and chaebol leaders need to create new models for this leading Korean industry in the 21st century.

After China, South Korea remains one of the world's top shipbuilders, but Japan is closing in fast. A Korea Times article by Park Ji-won on Oct. 10 reported that Korea had already fallen to somewhere between third and fifth place (depending on the metrics used). It's hard to compete with cheap labor in China, which has meant it has risen to the top spot recently. With Japan, the relative value of the won hasn't helped South Korea either. Japan has been at pains to organize its industry and capture a greater market share.

The largest conglomerates are Hyundai Heavy Industries, Daewoo and Samsung. Wikipedia and other Korean shipbuilding websites also identify STX, Hanjin, Sundong and Hyundai Samho as major players. Hyundai Heavy Industries remains the world's largest shipbuilder by sales, according to The Wall Street Journal (Oct. 30, 2014). Hyundai stands to lose that position if present trends continue, however.

The big companies benefit from one international partner: Maersk. This global energy giant has ordered several gargantuan container ships over the past two years, with orders worth billions of dollars. Korean shipbuilding won't thrive on Maersk production orders alone, however.

This summer, the big story concerned the dropping value of shipbuilding chaebol shares, in particular Hyundai's. Daehan Shipbuilding Company also filed for Chapter 15 bankruptcy in New York this summer. It was a case of the "best and worst of times" for Korean shipbuilding.

I remember my first visit to Busan and the chance to see the large shipworks there. Even far away, the vessels and construction apparatuses dwarfed everything else. Korean shipbuilders still make many of the world's super-container vessels. Oil tankers, bulk carrying ships, LNG (natural gas) carriers, drill ships and cruise liners are some of the other major production categories (Wikipedia).

Korea must not take for granted its global market power, if temporary currency and stock swings don't motivate it enough. Global recovery and economic strength don't bode well for any boom in naval construction in the near term. Increasing a culture of innovation becomes critical in this environment.

According to the 2014 outlook report of the Korea Offshore and Shipbuilding Association (www.koshipa.or.kr), Hyundai Heavy Industries will develop ''the world's first mobile powership", which promises to revolutionize naval shipbuilding. Samsung is targeting green passenger ships and Daewoo looks to create next-generation warships and submarines. South Korea also opened the Jang Bogo Scientific Research Station in Antarctica, its second base in the South Pole, for research and development. STX runs Europe's enormous Aker Yards and Daewoo's introduction of the RoboShipbuilder exosuit is a good example of innovation as well. Forward planning will be vital for the country's shipping industry keeping market share.

News reports tell us that fracking brings the passing of "the gigantic ship" era (The Economist, Oct. 21, 2013). The future will see greater use of lighter, more efficient, cleaner and safer vessels of all types. As the KOSHIPA 2014 report noted, Korea must continue to develop the best shipbuilding personnel. It must also create "cluster complexes under a value network vision." These can link shipbuilding and related industries. Marine eco-culture, offshore plant construction, construction and engineering complexes must work together.

Also important is countering opinions of unsafe ships and fronting the quality and reliability of Korean vessels in the aftermath of the Sewol tragedy. I'm not placing any fault on the shipbuilding industry here. However, Korean marketing must stress safety considerations. These include shipbuilding designs and operations. The public rightly demands it.

Also important is targeting the use of public funds to guide innovation in this critical area of Korea's heavy industry. Global markets entail more than digital technologies. Encourage Korean industries to keep and increase comparative advantages; this needs targeted national and provincial investment.

South Korean companies should try and capture market share for the kinds of ship production that China excels in these days (bulk carriers and tankers). Others want to focus on LNG and ultra-large vessels. There is a need to identify the best production mix for Korean shipbuilders.

Continue to build Korean shipbuilding! It's a strong suit in need of ongoing support and investment.

Bernard Rowan is assistant provost for curriculum and assessment, professor of political science and faculty athletics representative at Chicago State University, where he has served for 21 years. Write to him at browan10@yahoo.com.