Japan Compared to South Korea’s Chemical Industry

The table below shows for Japan and South Korea data and information for several areas I judge to be useful in comparing Japan’s to South Korea’s chemical industry:

area	Japan	Korea
chemical sales as % global chemical sales (recent)	4.0%	3.3%
chemical sales billion USD (recent)	149	120
chemical sales per population (japan population - 126.8 million; south korea population - 51.5 million	1,175	2,331
financial - foreign direct investment billion USD	10	4 to 5
financial - m&a activity billion USD (recent)	21	9
financial - operating profit margin (recent)	6.7%	4.5%
innovation - bloomberg innovation index	6th from top	first
innovation - global innovation index	55 (13th from top)	56.6 (12th from top)
innovation - world economic forum global competitiveness index	5th from top	15th from top
innovation - world bank's human capital index	0.84	0.84
innovation - r&d (% of sales) (recent)	6.0%	3.0%
innovation - r&d billion USD (recent)	9	3
production: clusters - largest - names and square kilometer sizes	ichihara, chiba prefecture - 23 square km; kashima, ibaraki prefecture - 18 square km; mizushima, okayama prefecture - 13 square km; total - 54 square km	daesan - 14 square km; ulsan - 45 square km; yeosu - 28 square km; total - 87 square km
production: ethylene production (metric tons) (recent)	6,530,000	8,200,000
trade: chemical exports billion USD (recent)	95	49
trade: chemical exports % of chemical sales	64%	41%
trade: chemical exports to china as % of chemical sales	7.8%	13.4%
trade: chemical exports to china billion USD	12	16.1
trade: chemical imports billion USD (recent)	70	27
trade: chemical  imports % of chemical sales	50%	23%

The areas are grouped into five categories: chemical sales; financial; innovation; production; and trade.  The data and information shown were obtained by Internet searching.  The data and information are believed to be approximate values only.

Chemical Sales:  The one outstanding divergence in country chemical sales is that South Korea’s sales per person is about twice Japan’s (2,331/1,175 = 2).  This suggests that South Korea has more effective/efficient chemical production.

Financial:  Japan’s chemical industry operating profit margin is higher than South Korea’s, suggesting a more profitable chemical industry.   This is likely related to Japan’s greater emphasis, over a longer period, on the higher margin, specialty chemical sector versus the basic chemical sector.   The higher research and development (r&d) expenditure as a percentage of sales (see data under innovation) is consistent with a greater emphasis on specialty chemicals.  South Korea has in recent years begun to emphasize in its planning special chemical sector development.  The larger foreign direct investment (fdi) and merger and acquisition (m&a) amounts for Japan reflects Japan’s greater chemical sales.

Innovation:   The various indexes (e.g., human capital and innovation) are not substantially differentiated between Japan and South Korea, although surprisingly South Koras has moved to first in the most recent update of the Bloomberg Innovation Index.  Under innovation, what is distinctive is Japan’s higher r&d expenditures as a percentage of sales (see the above comments under financial for more on this.)

Production: Somewhat surprising is South Korea’s significantly higher production of ethylene, likely reflecting South Korea’s emphasis earlier in its history (1950s – 80s) on its basic chemical sector building refinery and cracker capacities.  Also, with respect to production, South Korea has put an emphasis on cluster development resulting in a world-class cluster at Ulsan.  This emphasis seems to be the result of a strong government planning process to create a globally-competitive chemical industry.

Trade:  Japan seems to be more active in chemical trade with other countries, e.g., its chemical exports is 64% of its chemical sales versus 41% for South Korea.  However, an important plus for South Korea is the greater chemical exports to China compared to Japan (13.4% of chemical sales for South Korea versus 7.8% for Japan), a significant point with China being such a huge potential trading partner as its economy continues to grow.