The Seoul of Success

How South Korea’s Can-Do Spirit Can Lift the Machining Industry

By Kang Ho Lee, General Manager, Grundfos Pumps Korea, Ltd.

By Kang Ho Lee, General Manager, Grundfos Pumps Korea, Ltd.

Chances are good that you recognize brands like Hyundai, Kia, Samsung, LG and Daewoo – or you own their products. It was not so long ago that nobody outside of Korea had heard of them. The success story behind these companiesillustrates the bigger saga of South Korea’s success over the last half century, where we started with nothing and grew to one of the world’s largest trade markets.

The Korean machining industry must remember this story when facing new challenges today.

The Miracle
South Korea – and particularly Seoul, on the great Han River – lay in ashes at the end of the Korean War in 1953. Our small country had become one of the world’s poorest. We lacked natural resources, we were short in food and supplies and we suffered from overpopulation. The World Bank reported in 1961, “Korea’s prospect for development is anything but bright.”

But the Korean people have what we call a “Can-Do” spirit. If we dream something, we believe we can do it – and then we get it done. When we became one of the world’s poorest countries, we wanted to rebuild our nation, and we achieved it.

Fifty years ago, our leaders in business and politics drove the change. They set us on a course for growth by way of education, industrial development and export. We started with nothing, and by 2011, we became the ninth country in the world to reach more than $1 trillion in trade. We call it “The Miracle on the Han River.”

Business guru Peter Drucker once said, “We can hardly mention the history of economic growth of the 20th century without mentioning South Korea.”

The Little Giant
Today, South Korea ranks No. 1 in the world for shipbuilding and LCD displays. We are second globally in semiconductors, and our automotive and steel industries rank fifth and sixth, respectively.

In the global machine tool market, South Korea ranks fifth – about half the size of the German market and one-third of Japan’s. You can call us “The Little Giant.” Our machine tool companies supply mainly the domestic market, helping the Hyundai’s and Kia’s and Daewoo’s to keep growing.

Broadly, our industries face some new challenges today. One of these is energy – to break our complete dependence on foreign imports of oil and gas. Another is our currency rate. We have a lot of foreign money coming into Korea due to our high trade. As I write this, the problems in Greece and the euro zone have caused our currency – the Korean won – to lose nearly 3% of its value in the last month alone. Our domestic suppliers are suffering.

Thanks to the Can-Do Spirit, Korea is finding solutions to these challenges. Our industries are beginning to invest heavily in renewable energy and sustainable solutions. Samsung C&T signed a Global Green Cooperation Agreement with Grundfos in October 2011 for using and developing sustainable and energy-efficient products for modern construction. Some of these solutions are on display at the EXPO 2012, which opened in May in Yeosu, Korea.

In terms of foreign exchange, we are working very hard to increase our reserves for more stability. We are also trying to increase Foreign Direct Investment in South Korea, encouraging companies to build factories here.

The Sandwich problem
The Korean machining industry has its own challenge. It has what you might call a sandwich problem, where Korea is in the middle of forces from above and below. On the top, we feel the pressure from Germany and Japan with high quality, well-known brands. Underneath is China with its competitive positioning and relatively cheap products.

To get out of this sandwich, our local machine tool companies must remember the Can-Do Spirit. Currently, Korean companies manufacture machines of a lower technical standard, sold mainly to the local market. To compete with foreign companies, Korean manufacturers must improve product quality by going with the most advanced, global suppliers, like Grundfos. Ours will help to lift their own product quality with longer lifetimes, higher efficiency and lower operation and maintenance costs.

In competing against lowest cost, it is important for the machining industry to understand the concept of Life Cycle Costs (LCC). On average, energy costs result in 85% of a normal pump system’s LCC. Switching to highly energy-efficient pump technology can lead to LCC savings of up to 50%. While high-efficiency motor technology can cost a little more on the initial price tag, the payback period for this difference is usually 2 years or less. After that, the savings by using the higher quality equipment is just “money in the bank.”

Small, local competitors with limited resources serve the Korean machine tool pump market today. With our Asian Machining Industry Business Competence Centre (MIBC), we can improve our customers’ channel to the global market and help them differentiate from the competition.

In November 2011 in Chungsuk, one of our three Korean factories, we launched our new MTA immersible pump range for filtering systems, dedicated to the “dirty side” of machining processes.

We are here to add value to the Korean machining industry – to help lift it above its current challenges. Remember the Can-Do Spirit! Remember the Miracle on the Han!

When Grundfos Korea opened 23 years ago, it had nothing. About eight years ago, we made a goal to double our sales revenue within four years. We believed we could do it. And we did that, helping us to become the largest pump company in our market. We achieved that because we believed we could do it. The Korean machining industry can do it, too.