How Japan Quake Will Impact Korean Business

Korea's industry is expected to feel the ripple effects from the devastating earthquake and tsunami in Japan on Friday. Some automakers will probably have problems as they use Japanese parts, and Korean electronics firms are highly dependent on Japanese components. According to the Korea Trade-Investment Promotion Agency, industrial parts worth US$38.1 billion were imported from Japan last year, accounting for 25 percent of total parts imports.

But some sectors may benefit. The domestic electronics, semiconductor and auto industries may be able to take some of the global market from their Japanese competitors or take a break from fierce competition for the time being, pundits say. And once Japan starts rebuilding, Korean builders and steel companies could make inroads into the Japanese market.

◆ The Auto Industry

Production at Renault Samsung and GM Korea is expected to hit a snag. Renault Samsung depends entirely on Nissan for six-cylinder engines and imports some of the core parts for the four-cylinder engines from Japan. GM Korea imports transmitters for the Chevrolet Spark and the old Lacetti for the Eastern European market.

But the Hyundai-Kia Automotive Group is likely to suffer very little damage and may even benefit in the global market now that Japanese carmakers including Toyota halted production, according to the Hyundai Securities Research Center.

◆ Semiconductors and Displays

The electronics and LCD sectors are also likely to benefit as the world’s No. 3 non-memory chip maker Renesas Electronics has stopped production and ports and roads in Japan suffer disruptions. Toshiba, which dominates more than 30 percent of the global market is highly likely to experience problems exporting products, probably causing chip prices to bounce back after sharp fall since last year.

The oil refining and steel industries may also benefit as five plants in Japan have halted operation. "The impact on the steel industry there will be relatively small," an industry insider said, "but once Japan starts rebuilding, Korean construction firms are expected to see exports to Japan rise."

◆ Airlines, Shipping and Travel

Airlines and travel companies here are nervous since the earthquake hit Japan ahead of the peak seasons. Some 3 million Japanese tourists accounted for 35 percent of foreign visitors here in 2010. Japan may be off the list of travel destinations for Korean holidaymakers for the time being.

"Korean Air offers about 70 daily services on Japanese routes," an airline industry insider said. "Domestic airlines are expected to be hit hard since they have a high proportion of services between the two countries."
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