By Choi Sung-jin
Korean manufacturers’ competitive edge has fallen behind those of China and Japan, a recent report shows.
Until a few years ago, Korea was compared to a sandwich between high-tech Japan and low-cost China. However, the nation is now at the bottom of manufacturing competitiveness in Northeast Asia, according to the report by NH Investment and Securities.
The report compared the financial conditions and corporate competitiveness of the KOSPI 200 (Korea), CSI 300 (China), and Nikkei 225 (Japan) companies, excluding financial services firms.
As a result, it found that the operating profit ratios of 182 Korean manufacturers stood at 5.7 percent in 2014, meaning they made a profit of 57 won by selling goods worth 1,000 won, marking the drop of a percentage point of 0.9 from 6.6 percent in 2013, and far lower than the 8.4 percent in 2010.
The operating profit ratio of 176 Japanese manufacturers was 7.1 percent, up sharply from 4.6 percent in 2010. The profit ratio of 147 Chinese manufacturing companies was also higher than that of Korea, with 6.1 percent. Just the year before, in 2013, operating profit ratios of Korean manufacturers were the highest of the three countries, averaging 6.6 percent compared with 6.3 percent for both Japan and China.
In 2014, Korean manufacturers also placed third of the three Northeast Asian nations in managerial efficiency, as measured by return on equity, or ROE.
Korea’s average ROE was 7.4 percent, lagging behind China’s 8.7 percent and Japan’s 8.5 percent. The ROE of 7.4 percent means they made a profit of 74 won on every 1,000 won invested by shareholders.
“Given these performance figures were compiled before the slump of three major industries critical to Korea – steel, shipbuilding and automobiles – began in earnest last year, the competitiveness gap may have widened even further by now,” said Chung Jong-hyuck, head of the brokerage’s corporate analysis team.