05-04-2018

S. Korea’s ‘Big Three’ Shipbuilders Hit Record Low in R&D, Workforce

The shipbuilding industry is gradually picking up this year. However, there are growing concerns that South Korea’s “big three” shipbuilders will see their future competitiveness weaken as they have been carrying out a large-scale restructuring and struggling to cut costs due to poor earnings for the past few years. With competition with the largest competitor China having been intensified, South Korean companies still hold a lead in terms of technology but their gap between China will be narrowed in the near future because they are recently cutting down their research and development (R&D) investments. In addition, South Korean shipbuilders are highly likely to secure skilled workers in the future as their workforce hit a record low, according to market experts.

According to industry sources on April 3, a combined amount of R&D investments by the nation’s big three shipbuilders – Hyundai Heavy Industries Co., Samsung Heavy Industries Co. and Daewoo Shipbuilding & Marine Engineering Co. (DSME) – came to 206.7 billion won (US$195.74 million) last year, down 42 percent from 356.1 billion won (US$337.22 million), showing the decrease for four years in a row since 2013. The amount of R&D investments by the three last year reached a 13-year low after 202.6 billion won (US$191.86 million) in 2004. Hyundai Heavy, which made the biggest R&D investment among the three, spent 90.7 billion won (US$85.74 million) that was less than half of 203.4 billion won (US$192.89 million) at the previous year. Samsung Heavy decreased its R&D investments 25.1 percent to 69.2 billion won (US$65.62 million) last year, while DSME cut down 22.6 percent to 46.7 billion won (US$44.29 million). The three companies spent 522.6 billion won (US$495.59 million) on R&D in 2013, which was more than twice that of last year.

In fact, the shipbuilding industry is also worried that it is undermining a future potential for survival now. Some say that the domestic shipbuilders need to increase their spending on R&D despite lower profits because stronger environment regulations have led to a growing demand for eco-friendly ships and information technology (IT) advances make the competition for smart ship development more competitive.

The size of the three shipbuilder’s workforce also reached an all-time low. The number of their employees totaled 37,410 last year, down nearly 20 percent from 46,235 in 2016. The figure has dropped for the third consecutive year since 2014. The total number of the three shipbuilder’s workers fell to some 30,000 for the first time last year.

Some industry sources also say that the three shipbuilders are having too many employees compared to their sales but skilled workers can leave the firms in the process of cutting down the workforce. As a matter of fact, Japan handed over the leadership in the shipbuilding industry to South Korea and China as it lost a considerable amount of key skilled workers in the process of carrying out a large-scale restructuring in the past. Another problem is that the big three shipbuilders are not hiring young talent. As the three firms haven’t carried out open recruitment for new employees for the past two to three years on financial grounds, the shipbuilding industry as a whole is losing its vitality.

Source: Business Korea

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