Korean Components and Materials Companies Riding Boosters

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Saturday, May 9th, 2009

Booster I, Sharp Electronics shakes hands with BLU

BLU, an LCD component manufacturer, will supply its products to Japanesebased Sharp Electronics. It is very meaningful for the small-sized company in that it gets credit from Sharp which demands high-end quality components for their products when it imports materials and components from outside Japan.

Hiromichi Tabata, Kim Young-hak, and Choi Ig-jong

President Hiromichi Tabata of CSK Venture Capital Co. LTD, Vice Minister Kim Young-hak of the Ministry of Knowledge Economy, and Executive Director Choi Ig-jong of Korea Development Bank

BLU emphasized the importance of the deal by saying that it is Sharp that approached them first for business. Sharp represents Japan's cutting-edge technology in the electronics industries, especially in the LCD area. An official of BLU said that it was like a miracle that we, a small company, came to supply critical components to such a prominent company as Sharp.

Sharp has so far used LCD modules manufactured by Japanese companies in Japan. It is the first time for Sharp to turn their eyes from inside to outside for the purchase of the components. Sharp is learned to evaluate BLU, a small but strong company, by its skills and products. Sharp was also very satisfied with the competitiveness of the price BLU had set. The contract will also serve as a breakthrough for small Korean companies to work with Japanese buyers.

Some say that the contract was just a lucky incident due to the high exchange rate of the Japanese yen, which means the more Japanese components are used in production, the less competitive the price of the final product can be on the global market. In a sense, the explanation works. But leading Japanese companies like Sharp do not use components from any small companies abroad because they have to maintain their quality. They always demand their suppliers to keep the high quality of components and materials. After they scrutinize the suppliers' whole process of manufacture and quality, they decide to sign contracts. BLU signed the contract therefore it is noted as a high quality company.

Booster II, $100 million Mutual Fund between Korea and Japan

Korea and Japan will launch a mutual fund worth 100 million dollars to boost the component and material industries during the second half of the year. The money will be used to create an industrial complex for sake of related industries, thus causing more companies from Korea and Japan to join the joint investment.

Kim Young-hak, the vice minister of Knowledge Economy, announced on April 27 that Korean Development Bank and Japanese CSK Venture Capital exchanged a Memorandum of Understanding, or MOU, to come up with the fund. They added that both sides would invest 50% of the shares right after signing the contract. It will be invested not only into domestic component companies but also into Japanese businesses running in Korea. The Ministry explained that the total amount of the fund would reach US$100 million, even though the number had not been set up yet. It expected the mutual investment to stimulate cooperation between Korea and Japan, thus attracting more participants in the fund-raising.

To this end, the Ministry and the Korea Core Component Investment Association worked closely to connect Korea Development Bank with CSK. Vice Minister Kim said that the partnership between the two countries will be cemented through the cooperation to produce new technologies and new components. The Ministry will hold a road show in Tokyo and Osaka to explain Korean component industrial complexes across the nation.

Booster III, Parts and Materials Exclusive Zones in Competition to Satisfy Foreign Investors

President Lee Myung-bak has suggested establishing Parts and Materials Exclusive Zones in Korea for the mutual benefit of Japan and Korea to decrease the trading deficit and to garner developed technology. At the Korea-Japan Summit on January 13, 2009, President Lee announced the expansion of economic cooperation and personal exchange between the two countries. He said: “I will personally come forward to offer help to foreign companies in entering our parts-and-materials industry complexes.” Each Parts and Materials Exclusive Zone across the country offers almost the same incentives to foreign parts and materials companies that are seeking to join the cluster.

Gumi PMEZ

Parts and Materials Exclusive Zone of Gumi

Dear Foreign Investors: Know Your Rights

When a foreign company moves into a parts and materials industrial complex in any part of the country, it can use the land free for 50 years. This 50 year contract can be extended by another 50 years. This is only the beginning of the offer. The foreign company will be advanced by tax reduction. For the first 5 years, the company will be exempted from 100% of national tax including cooperation tax and income tax. After five years, 50% national tax reduction will be applied for another two years. Foreign companies don't have to worry about paying local taxes as well. Local taxes include acquisition tax, registration tax, and property tax.

Cash will be provided for up to 5 percent of the total investment, and an employment subsidy will be provided for up to 500,000 won for 6 months for each employee above 20. A training subsidy can also be provided to a foreign company which is up to 500,000 won for 6 months per person when training more than 20 new employees. The government's full support for the water supply, sewage, electricity, and gas facilities are guaranteed. In order to improve the living conditions of foreigners, facilities that include medical treatment, lodging, nurseries, and schools are accessible at Parts and Materials Exclusive Zones.

The Parts and Materials Exclusive Zones take care of company marketing as well. It supports product advertising and the authorization of patents to both domestic and international companies.

Although all of the benefits and incentives mentioned above are provided equally to the nation across Parts and Materials Exclusive Zones, each zone seems to show its own particular characteristics. On the IMAC 2009 floor, the Parts and Materials Exclusive Zones of Gumi, Iksan, and Cheonan nailed their identity with foreign buyers in different colors. The Korea IT Times categorized each zone with its own defined character for foreign investors to note before deciding which region to choose.

 

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