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The Catch-Up Process in the Korean Steel Industry

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Varieties and Alternatives of Catching-up

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Abstract

This chapter examines how South Korea’s steel industry caught up with the Japanese steel industry technologically by focusing on the relationship between the phases of innovation, the speed of technological catch-up, and institutions. Two large waves of innovation occurred in the industry after World War II. Korean steel companies succeeded in accelerating the catching-up process by concentrating their investment at specific phases of each innovation cycle. In the first wave of innovation, South Korea concentrated its investment on the construction of integrated steelworks by establishing the state-owned monopoly firm, POSCO. In the second wave, the market entry of Hyundai Motor Group through vertical integration and POSCO’s countermeasure allowed for developing high-quality steel sheets, which further pushed forward the catching-up.

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Notes

  1. 1.

    Tanaka also has regarded Gwangyang Work as a sophisticated version of the mass production system developed by Japanese companies, which focuses on the factory layout (Tanaka 2008).

  2. 2.

    Kawabata called the mass production system developed by Japanese companies after World War II ‘a second-generation integrated production system’. The system of development and production of high-quality steel was based on the same major facilities as those of the second generation, but realized flexible production. So Kawabata called this new system ‘generation 2.5’ (Kawabata 2012).

  3. 3.

    However, for some grades of steel sheet, the amount required by automobile affiliate companies of the Hyundai Motor Group is too small for the steel affiliates to manufacture profitably. So the group does not plan to develop and manufacture all the grades of steel sheet which its automobile affiliate companies need (Interview at Hyundai Motor Group on 25 November 2010).

  4. 4.

    POSCO has organized Early Vendor Involvement activity with over 10 automakers, including the Hyundai Motor Group.

  5. 5.

    Interview at the Oppama Factory of Nissan Motors on 21 May 2009.

  6. 6.

    Recently, some automobile makers have begun to review the degree of usage of high-tensile steel in their models in order to reduce costs. The model for whose production Nissan Motors moved to Thailand in 2010 was designed so that it could be manufactured with high-tensile steel of relatively low strength. This enabled POSCO to increase the amount of steel sheet sold to Nissan.

  7. 7.

    As for the development of FINEX, see Song and Song (2010) and Lee and Park (2010).

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Authors and Affiliations

  1. Institute of Developing Economies (IDE-JETRO), Chiba, Japan

    Makoto Abe

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Editors and Affiliations

  1. IDE-JETRO, Interdisciplinary Studies Center, IDE-JETRO, Chiba, Japan

    Yukihito Sato

  2. Area Studies Center, IDE-JETRO , Chiba, Japan

    Hajime Sato

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Abe, M. (2016). The Catch-Up Process in the Korean Steel Industry. In: Sato, Y., Sato, H. (eds) Varieties and Alternatives of Catching-up. IDE-JETRO Series. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-137-59780-9_5

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  • DOI: https://doi.org/10.1057/978-1-137-59780-9_5

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  • Publisher Name: Palgrave Macmillan, London

  • Print ISBN: 978-1-137-59779-3

  • Online ISBN: 978-1-137-59780-9

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