Appreciation of the won is hurting the peninsula's exports. But China may be in the same boat soon.
Compared to the currencies of other economically leading countries, the Korean won is the cheapest currency. One U.S. dollar is worth about 1,000 won. The largest bill is 10,000 won and it's worth only US$10. Visitors to Korea who change greenbacks to won receive a lot of bills.
I feel rich when I have Korean money.
The Korean won has consistently appreciated against the Japanese yen. One hundred Japanese yen were worth more than 1,000 Korean won in January of 2005. During February 2006, the exchange rate increased to about 800 won, surging 20% against the Japanese yen in one year. The won also appreciated about 6% against the U.S. dollar in the last few months.
Since major industries in Korea, including electronics, depend on exports, the currency strengthening has some of these industries worried. Major manufacturers who export will experience lost revenue because of currency appreciation.
Electronics giant Samsung Electronics had over US$8 billion in income for fiscal year 2005; however, the company expects a significant decline in income for the next fiscal year because of the remarkable Korean won appreciation. Income is shrinking at other exporting companies that now face serious financial situations. A newspaper reported that 35% of these companies continue to export to maintain their customer base even though they are experiencing huge losses. And 24% of these companies are not accepting any new export business.
The Korean industry, however, cannot survive without exports. In order to maintain their profitability, many companies are trying to reduce costs. For example, Hyundai Motors announced a salary cut for all of their managers.
Japan had similar problems during the 1970s and 1980s, but survived. The Korean electronics industry can survive because the players have learned from and studied the problems that Japan experienced. I expect the same fate - maybe a little worse - for China, because its exporting businesses grew too rapidly and they had no chance to learn from the history of capitalism.
Headlines
1. Sugihara SEI, a venture company in Japan, has developed the world's smallest wireless tag that contains a battery. Its size is 20 x 25 x 7 mm, with a weight of 5.8 grams.
2. Sharp will roll out the world's largest LCD panel in March, the PN-665, measuring 65". It's designed for business use, with a unit price of about $20,000.
3. Hitachi GST, a major hard disc drive manufacturer, has begun operation of a new manufacturing plant in Shintzen, China. The new plant will produce more than half of the company's products.
4. Shinshu University in Japan has developed the world's brightest organic EL devices. At 18.5 million cd/meter2, it is brighter than a halogen lump.
5. Nippon Steel Chemical, a major flex circuit material supplier in Japan, will expand its business of resist ink for LCDs for black matrix applications.
6. Fuji Denki Devices, a subsidiary of Fuji Electric, will install a new manufacturing line for the 2.5" disc substrate with vertical record system. The new line will produce 400,000 panels per month.
7. Rohm, a major component manufacturer in Japan, has co-developed (with Pioneer, Mitsubishi Chemical and Kyoto University) a new active matrix organic transistor display panel as the basic technology for flexible display.
8. Canon has shipped the first exposure machines for the eighth generation LCD manufacturing line at Sharp.
9. Asahi Kasei, a major chemical company in Japan, has developed a new copper base nano-conductive paste for low-cost high-density circuits.
10. Matsushita Electric Works, a major PCB materials supplier, has increased the selling price of copper laminate and epoxy prepreg 10~15%.
11. Shinkobe Electric, a major PCB materials supplier in Japan, will increase the selling price of copper laminate and epoxy prepreg 8~20% on April 1. This is the fourth price increase since August 2005.
12. Ube Industry, a major polyimide material supplier in Japan, has unveiled a new porous polyimide film for the next generation direct methanol type fuel cell.
13. Hitachi Metals will build a new manufacturing plant for amolphous metal materials for transformer applications. PCD&M
Dominique Numakura is the founder and the president of DKN Research. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..
