Input 2021.01.29 12:06 | Revision 2021.01.29 13:49
Accommodation and restaurants 18.5%↓, transportation and warehouse 14.2%↓ service production decreased by 2.0%
Limit increase in mining industry to automobile 10.2%↓, oil refining 5.4%↓
According to the December and annual industrial activity trends of the National Statistical Office on the 29th, all industrial production decreased by 0.8% compared to the previous year. Production in the mining industry increased 0.4% year-on-year, but the service industry decreased 2.0%. Among the service industries, accommodation and restaurants (-18.5%), transportation and warehouses (-14.2%), and arts, sports, and leisure (-33.0%), which are greatly affected by the COVID-19 quarantine measures, saw a significant decline.
In the mining industry, ICT production such as semiconductors increased by 13.0%, but the increase was limited as automobile production decreased by 10.2%. The decline in automobile production continued every year at -1.3% in 2018 and -0.9% in 2019, but last year the decline further expanded due to the Corona 19 shock.
Last year, the automobile industry was directly shocked by the contraction of demand due to the corona, the damage to the supply chain due to the US-China conflict, and the spread of protectionism. In addition, domestically, the high cost structure created by the monopoly and the loss of competitiveness due to failure of innovation seem to have acted as negative factors.
According to the Korea Automobile Industry Association, Hyundai Motor Company and Kia sold a total of 1.34 million units in the domestic market last year, accounting for 83% of the market share. Even including Imports, Hyundai and Kia’s domestic market share is 71%. The unions of Hyundai Motors and Kia are receiving high wages by repeating strikes almost every year, and the management steadily raises the sales price and cuts the cost of supplying parts, passing the cost on to consumers and partners. As of 2017, Hyundai Motor and Kia’s R&D investment amounted to 4 trillion won, which is 25% of Volkswagen in Germany and 40% of Toyota in Japan. The ratio of R&D to sales is only 2.8%, which is significantly lower than that of Volkswagen (5.7%) and Toyota (3.6%).
The sluggish oil refining sector also seems to have had an effect on the sluggish production of the mining industry. Oil refinery shipments decreased by 5.4% compared to the previous year. In 2019, it also decreased by 1.6% from the previous year, but the decline in 2020 was even greater. Petroleum products were first hit by a decline in global oil demand, such as jet fuel and transport oil, due to the movement restrictions of major countries to combat COVID-19. In addition, it seems that the trend of each crude oil producer having their own refining facilities is also affected.
On the other hand, ICT production such as semiconductors, electronic parts, and computers increased 13.0%. The increase in ICT production was 11.8% in 2018 and 4.8% in 2019, which has been increasing over the years, but the increase in production this year was larger. This is because semiconductors have benefited from the impact of Corona 19 and the fight over technological supremacy between the US and China.
The production range of internet and game related service industries also increased. Among the information and communications industries that include game developers and suppliers, the publishing industry saw an increase of 8.1% last year. This is a 2.6 percentage point increase from 5.5% in 2019. The postal, telecommunications and information service industries also increased production by 3.3% and 6.7%, respectively. This is due to the increase in’non-face-to-face’ activities. The real estate (5.6%) and finance and insurance (14.0%) industries also increased production. This seems to be the effect of the active transaction due to the surge in the price of assets such as real estate and stocks.