By Robert D. Atkinson
Nations are in a fierce win-lose competition for global market share in advanced, traded-sector technology industries, because winning enables not only prosperity, but economic and national security ― especially for allied nations where China's gain often comes at their loss. Over the last quarter century Korea's advanced-industry performance has been superlative and lags only behind Taiwan.
The Hamilton Center on Industrial Strategy at the Information Technology and Innovation Foundation recently examined national changes in global shares of output in seven advanced industries: pharmaceuticals; electrical equipment; machinery and equipment; motor vehicle equipment; other transport equipment; computer, electronic and optical products; and information technology and information services. These industries are globally traded, technologically complex and key to national and economic security.
It should come as no surprise that Korea has shown remarkable progress. Its global share of advanced industries increased by 65 percent from 1995 to 2018, from 2.5 to 4.1 percent. Korea went from having an advanced industrial economy that was just 10 percent of the size of the United States' advanced industrial economy in 1995 to one that was 18 percent the size in 2018 (the latest year data is available). In 1995 Korea's computer and electronic products output was just 14 percent America's output. By 2018, it was almost half of America's (46 percent).
Indeed, Korea's progress was especially pronounced in computers and electronics, where Korea now produces almost 11 percent of global output, up from around 4 percent in 1995. This has been enabled by leading firms such as LG, Samsung and SK. Korea is also strong in electrical equipment. However, Korea remains relatively weak in software and IT information industries and pharmaceuticals.
Interestingly, while Korea gained global market share between 1995 and 2018 in computers and electronics, electrical equipment and motor vehicles, it lost share in other transportation equipment, which includes shipbuilding, aerospace and pharmaceuticals. The former is presumably due to China's subsidized dominance in shipbuilding. Interestingly, given the rise of the Korean motor vehicle industry, its global share declined from 2006 to 2018, peaking in 2015 at 3.8 percent. Over the same period, China's global market share increased from 9.5 percent to 24.8 percent.
Korea's performance in Hamilton Index industry sectors
Advanced industries make up a very large share of Korea's economy: more than double the global average. And their share has increased 56 percent since 1995 (from 11 percent to 17 percent of Korean GDP). Korea's relative global market share in the computer and electronics sector is a whopping 5.4 times larger than the global average, up from a little more than double in 1995. In contrast, the pharmaceutical and IT and other information services industries are underrepresented compared with the global average, with the former seeing declining share since 1995.
When compared with other leading nations, only Taiwan has a greater share of its economic output coming from advanced industries. Korea's advanced industries make up 2.1 times more of its economy than the global average. This is compared to China's share in advanced industries which is 34 percent higher than the global average, Japan's 43 percent and Germany's 74 percent. While U.S. advanced industry output is five times larger than Korea's, America is 55 percent less specialized in advanced industries as is the Korean economy. In other words, these industries make up more than double the share of Korea's economy than they do in the United States. Also of note, while the Indian economy has 27 times more population than Korea's, Korea's advanced industry output is 16 percent larger.
Korea should be proud of its success in building world-leading advanced industries. But as they say in investing, past success is no guarantee of future success. This is particularly true given that the top industries in Korea are also the top ones in China (electrical equipment, computers and electronics and machinery) and ones that the Chinese government has targeted for continued global expansion. This means that Korea cannot afford to rest on its laurels. It must continue to ensure that government policies support advanced industry growth in Korea.
Robert D. Atkinson (@RobAtkinsonITIF) is the president of the Information Technology and Innovation Foundation (ITIF), an independent, nonpartisan research and educational institute focusing on the intersection of technological innovation and public policy.
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The Hamilton Center on Industrial Strategy at the Information Technology and Innovation Foundation recently examined national changes in global shares of output in seven advanced industries: pharmaceuticals; electrical equipment; machinery and equipment; motor vehicle equipment; other transport equipment; computer, electronic and optical products; and information technology and information services. These industries are globally traded, technologically complex and key to national and economic security.
It should come as no surprise that Korea has shown remarkable progress. Its global share of advanced industries increased by 65 percent from 1995 to 2018, from 2.5 to 4.1 percent. Korea went from having an advanced industrial economy that was just 10 percent of the size of the United States' advanced industrial economy in 1995 to one that was 18 percent the size in 2018 (the latest year data is available). In 1995 Korea's computer and electronic products output was just 14 percent America's output. By 2018, it was almost half of America's (46 percent).
Indeed, Korea's progress was especially pronounced in computers and electronics, where Korea now produces almost 11 percent of global output, up from around 4 percent in 1995. This has been enabled by leading firms such as LG, Samsung and SK. Korea is also strong in electrical equipment. However, Korea remains relatively weak in software and IT information industries and pharmaceuticals.
Interestingly, while Korea gained global market share between 1995 and 2018 in computers and electronics, electrical equipment and motor vehicles, it lost share in other transportation equipment, which includes shipbuilding, aerospace and pharmaceuticals. The former is presumably due to China's subsidized dominance in shipbuilding. Interestingly, given the rise of the Korean motor vehicle industry, its global share declined from 2006 to 2018, peaking in 2015 at 3.8 percent. Over the same period, China's global market share increased from 9.5 percent to 24.8 percent.
Korea's performance in Hamilton Index industry sectors
Advanced industries make up a very large share of Korea's economy: more than double the global average. And their share has increased 56 percent since 1995 (from 11 percent to 17 percent of Korean GDP). Korea's relative global market share in the computer and electronics sector is a whopping 5.4 times larger than the global average, up from a little more than double in 1995. In contrast, the pharmaceutical and IT and other information services industries are underrepresented compared with the global average, with the former seeing declining share since 1995.
When compared with other leading nations, only Taiwan has a greater share of its economic output coming from advanced industries. Korea's advanced industries make up 2.1 times more of its economy than the global average. This is compared to China's share in advanced industries which is 34 percent higher than the global average, Japan's 43 percent and Germany's 74 percent. While U.S. advanced industry output is five times larger than Korea's, America is 55 percent less specialized in advanced industries as is the Korean economy. In other words, these industries make up more than double the share of Korea's economy than they do in the United States. Also of note, while the Indian economy has 27 times more population than Korea's, Korea's advanced industry output is 16 percent larger.
Korea should be proud of its success in building world-leading advanced industries. But as they say in investing, past success is no guarantee of future success. This is particularly true given that the top industries in Korea are also the top ones in China (electrical equipment, computers and electronics and machinery) and ones that the Chinese government has targeted for continued global expansion. This means that Korea cannot afford to rest on its laurels. It must continue to ensure that government policies support advanced industry growth in Korea.
Robert D. Atkinson (@RobAtkinsonITIF) is the president of the Information Technology and Innovation Foundation (ITIF), an independent, nonpartisan research and educational institute focusing on the intersection of technological innovation and public policy.
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