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Koreas Green Growth Strategy & Case study
- Based on Samsung SDI-
Course: Sustainable Development, Business & Society
Professor Eric Britton [email protected]
Course Date : June. 9th -11th, 2011
Submitted
By
Youngji LEE ([email protected])
July.18th, 2011
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Sustainable Development, Business & SocietyYoungji LEE
Course; June 16th`-18th, 2011International MBA program, ISG Paris
Abstract
To pursue the sustainable development of the world and to suggest a new national
development paradigm which creates new growth engine and job with green technology and
clean energy, Korea government announced the National strategy for Green Growth up to
2050. Also, it suggested ten policies, which pushed many companies to shift their business
model and infrastructure. For example, Samsung SDI has shifted core business model and
infrastructure from its display industry to renewable energy, SDI has continued to pioneer and
become a world leader for Koreas new energy industry in the world market of secondary battery
in 2010. As seen above, three strategy for Green Growth and ten policies were reviewed and case
in the business field that could be affected by the policies in Korea were suggested in this paper.
Also, based on the analysis of case for green technology policy, this paper proposed
recommendations for the government and companies to solve more tasks and urgent problems of
Green Growth strategy.
ii
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Sustainable Development, Business & SocietyYoungji LEE
Course; June 16th`-18th, 2011International MBA program, ISG Paris
TABLE OF CONTENTS
Page
Executive Summary ................................................................................................ o
Introduction.. 1
What is Green Growth?........................................................................................... 1
Green Growth Strategy and Policies....................................................................... 2
Mitigating Climate Change............................................................................... 3
Creating growth engines for the future ...................................................... 4
Improving the quality of life through better air quality ............................. 5
Case : Secondary Battery in SAMSUNG SDI........................................................ 6
Samsung SDI ............................................................................................. 7
Business Description....................................................................... 7
Corporate Strategy........................................................................... 7
SWOT Analysis .....................................................................................7
Strengths & Opportunities................................................... 7
Weakness & Threats............................................................ 9
Key Competitors ............................................................................ 10
Summary ........................................................................................... 11
Recommendation .............................................................................. 12
LIST OF REFERNCE AND BIBLIOGRAPHY.. 13
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Executive Summary
In 2008, August 15th, on 60th anniversary of the founding of the nation, Lee, Myung Bak,
President of Korea put forward Low Carbon, Green Growth as the core of the Republics new
vision of Korea for next 60 years. Green Growth refers to sustainable growth that supports to
reduce greenhouse gas emission and environmental pollution1. Also, it becomes a new national
development paradigm which creates new growth engine and job with green technology and
clean energy. For the vision, Low Carbon/Green Growth, the government announced in July
2009 the National strategy for Green Growth up to 2050, which includes mitigating climate
change, creating new engines for economic growth, improving the quality of life and 10 policies
for driving the market and industry. Such environmental policies can create new markets for
low-carbon technologies and equipment. Also, Korean government established a mid- and long-
term roadmap in May 2009. A pan-ministry and agency execution plan to maximize synergy for
short term commercialization in 2010 and 2011 or of which development effective results: next
generation secondary batteries, LED lighting/display, green IT, high efficiency solar cell, green
car, smart grid, future nuclear energy, fuel cell.
Especially, the world market of secondary battery is forecasted to be expanded to 1,790
billion in 2030,an average annual 15% growth compared to in 2007 based on the expansion of IT
units convergence, eco-friendly electric cars, and renewable energy. Also, Korean companies
such as Samsung SDI, developed and exported lithium-ion batteries as high-end products to the
advanced countries since 2004, so they converted the trade to profit since 2004 and made it as
the emerging strategy of exports which reached the average annual growth of 66%.
As Samsung SDI has shifted core business model and infrastructure from its display industry
to renewable energy, SDI has continued to pioneer and become a world leader for Koreas new
energy industry. Nowadays, the next lithium ion battery business in Samsung SDI is rapidly
extending its territory over digital mobile devices, Electric Vehicles and ESS (Energy Storage
Systems).
However, Samsung SDI must focus on high-levels of automation for its lithium-ion battery
plants. To maintain strong profit margins, it needs to maintain its high-tech edge on battery R&D
and production to avoid competing head-on with China on mass production and to cope the
original technology.
1 OECD Multiligual Summaries Towards Green Gorwth
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I. Introduction
In 2008, August 15th, on 60th anniversary of the founding of the nation, Lee, Myung Bak,
President of Korea put forward Low Carbon, Green Growth as the core of the Republics new
vision of Korea for next 60 years. Green Growth started as the strategy model for Korea, but
now this concept becomes global because OECD MCM (Ministerial Council Meeting) adopted it
and researched for two years.
The world now face two challenges; i) expanding economic opportunities for a growing global
population and ii) addressing environmental pressures that, if left unaddressed, could undermine
our living standard. Growing concerns about the environmental unsustainability of past
economic growth patterns and increased awareness of a potential future climate crisis have made
it clear that the environment and the economy can no longer be considered in isolation.
In this context, Korea is one of the countries which proclaim and pursue the Green Growth for
sustainable development of the world and suggests three strategies and major 10 policies.
According to government strategies and policies, many Korean companies have tried to pursue
sustainable development business and to obtain the green technology as a new growth engine for
companies and Korea. Among various green technologies, secondary batteries industry is
anticipated to make a sharp increase in the future.
Therefore, this paper will be reviewed what the Green Growth in Korea and its policies which
have a great effect on the sustainable development and business field. Especially, government
policies in Korea are more important than in other countries and most of all business
environment are under the government control, so reviewing the government strategy and
policies is first priority . Then, one of cases for green technology based on Korean green growth
policies in the business like Samsung SDI will be reviewed in order to assess those policies and
the international environment for dominating the market in advance in the world and to suggest
some recommendation for the Korea government.
II. What is Green Growth?
Green growth is the pursuit of economic growth and development, while preventing costly
environmental de
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gradation, climate change, biodiversity loss, and unsustainable natural resource use2.Also,
Green Growth aims to combine mutually supportive economic and environmental policies. On
the other hand, Korea Green Growth refers to sustainable growth that supports to reduce
greenhouse gas emission and environmental pollution3. Also, it becomes a new national
development paradigm which creates new growth engine and job with green technology and
clean energy. Furthermore, Green technology puts together information and communications
technology, biotechnology, nanotechnology and culture technology, and transcends them all.
Korean government intends to make all-out investments to boost the use of new and renewable
energy from the current 2% to more than 11% by 2030 and, ultimately, to more than 20% by
2050. R&D investments in green technology is going to be increased more than two times, so it
is projected for Korea leading powerhouse in the green technology market. For entering the age
of an environmental revolution which mean that an age of new energy is now being opened
leaving behind the era of wood, coal and oil.
III. Green Growth Strategy and Policies
In order to implement the vision, Low Carbon/Green Growth, the government announced in
July 2009 the National strategy for Green Growth up to 2050, which includes mitigating
climate change, creating new engines for economic growth, improving the quality of life and 10
policies for driving the market and industry.
Strategy1. Mitigating climate change
Climate change is one of the key challenges facing the world in the 21st century with
serious environmental and economic implications. In august 2009, the Korea government
presented the options of cutting greenhouse gas (GHG) emissions by 21%, 27% or 30% relative
to the projected level in 2020
4
. Therefore, Korea has implemented polices to combat climatechange such as a voluntary agreement system in business sector. The companies that take part in
this program sign agreements with the government specifying their voluntary energy
conservation and greenhouse gas(GHG) emissions reduction targets, as well as their timelines
and strategies. In return, the companies can acquire qualification for low interest-rate loans on
energy-saving facilities, tax benefits and technical support. Thus, the government launched a
2www.oecd.org/greentrowth3
OECD Multiligual Summaries Towards Green Gorwth4Randall S. Jones and Byungseo Yoo., Koreas green growth strategy; Mitigrating Climate Change and Developing NewGrowth EnginesOECD Economics Department workingpapters. No.798
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pilot project of mandatory negotiated agreements on energy use in 2010. It includes 38
companies, which cover 41% of total energy consumption in the industrial sector.
On the other hand, Korea government has already suggested the three energy-efficiency
programs for electronics and appliances; Mandatory energy-efficiency standards and labeling
(1992), The high-efficiency appliance certification (1996), Standby electricity reduction program
(1999). For example, 23 items are currently subject to energy-efficiency standards, including
refrigerators, air conditioners, washing machines and dishwashers, which require them to
achieve at least a minimum level of efficiency in order to be sold. Also, a total of 46 items are
subject to the high-efficiency appliance certification, including converters, LED lighting systems
and oil-fired hot-water heaters. The Korea government grants labels for 20 home electronic and
office equipment products, such as televisions, microwaves, computers and printers, which meet
the official standard.
Since 2005, the government has been operating a voluntary carbon market called Korea
Certified Emissions Reductions (KCERs), which is open to firms that that have reduced CO2
emissions by more than 500 tones a year through improved energy efficiency and production
processes and investment in renewable energy development. Revenue from environmental taxes
in Korea increased from 2% of GDP in 1994 to 2.5% in 2008, thus surpassing the OECD
average, which actually decreased slightly over the same period.
In Korea, there is pricing greenhouse gases (GHG) which has several advantages. For example,
it minimizes the cost of reducing emissions by equalizing the marginal abatement cost across all
individual emitters for any reduction objective. Furthermore, in the long run, market-based
instruments provide incentives for companies to develop new technologies which will lower
future abatement costs. New technologies, such as carbon capture and storage, can never bedeveloped and deployed on a large scale without such a price signal.
Strategy 2. Creating new growth engines for the future
Environmental policies can create new markets for low-carbon technologies and
equipment, so those policies affect on employment positively. For example, green jobs can be
more concentrated in more labor-intensive sectors, such as renewable energy, recycling, public
transport and construction. The Korea government announced in July 2009 the Five-Year Plan
(Table 1) for Green Growth. So, the Five-Year Plan suggest that 2% of GDP per year over the
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period 2009-13 will be spent, completely financed by the central government budget except for
8.5 trillion won (0.8% of GDP).
Table 1. The Five-Year Plan for Green Growth (2009-13)5 Trillion own
The other key factor of the most important things to minimize the cost of addressing the
climate change problem is Technological change. In the Five-Year Plan, the government plans to
expand its R&D investment in green technologies from 2 trillion won in 2009 to 3.5 trillion won
by 2013, making a cumulative amount of 13 trillion won, which could boost green R&D from
16% of the governments total R&D spending in 2009 to 20% by 2012. Also, R&D will
concentrate on 27 core technologies (Table 2) which were announced in January 2009 as new
growth engines for Korea. The government has selected 27 major technologies in consideration
of their contribution to economic growth, reduction of carbon emissions, environmental
protection, and strategic importance. The Korean government established a mid- and long-term
roadmap in May 2009. A pan-ministry and agency execution plan to maximize synergy for short
term commercialization in 2010 and 2011 or of which development effective results: next
generation secondary batteries, LED lighting/display, green IT, high efficiency solar cell, green
car, smart grid, future nuclear energy, fuel cell, CCS(carbon capture and storage) and enhanced
water treatment.
5Ministry of Strategy and Finance and Presidential Committee on Green Growth
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Strategy 3.Improving the quality of life through better air quality
Air quality in Korea is one of the worst among OECD countries6, so cutting greenhouse
gas(GHG) emissions is important projects. Furthermore, recent studies have found that climate
change and air quality are closely interrelated with respect to the sources, atmospheric processed
and environmental effects, reflecting the fact that fossil fuel combustion is a major sour of both
air pollution and GHG.
Table 2. Core green technologies7
6 Kim, J. and K. Kang (2009), A Case Study of the Innovation Impacts of the Korean Emission Trading System for NOxand SOx Emissions, prepared as a contribution to OECD (2010e).
7 Presidential Committee on Green Growth (2009a), National Strategy for Green Growth and Five-Year Plan, Seoul (in
Korean).
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IV. Cases : Secondary Battery in Samsung SDI
Korea anticipates that the green growth technology field such as solar power generation and
secondary batteries has potential for further development in the business sector. Among those,
secondary batteries provide energy with no environmental consequences and can be used
repeatedly for notebook computers, desktops, mobile phone, MP3 players, digital cameras, and
other electronics through recharge. Presently small secondary batteries for mobile equipment
lead the market, but demand for larger secondary batteries used for electric cars or power storage
is forecast to make a sharp increase.
Moreover, the world market of secondary battery is forecasted to be expanded to 1,790
billion in 2030(Figure 1) ,an average annual 15% growth compared to in 2007 based on the
expansion of IT units convergence, eco-friendly electric cars, and renewable energy. Also,
Korean companies developed and exported lithium-ion batteries as high-end products to the
advanced countries since 2004, so they converted the trade to profit since 2004 and made it as
the emerging strategy of exports which reached the average annual growth of 66%.
$ millions,%
Figure 1. World & Domestic Production Forecast8
Korean companies have secured high technological prowess and is now at the top in terms
of international market share. Therefore, Samsung SDI enters into the field for the first time in
11 years after 2010, surpassing Japan SANYO, boarded the world first. LG chemical after the
SANYO in Japan is ranked third in the world. Lithium ion battery market share of global
secondary battery is the main market share market 76%.
8www.gtnet.go.krGreen technology Information Portal
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Samsung SDI
1. Business description
Samsung SDI Co., Ltd. (Samsung SDI) is a Korea-based leading manufacturer of display and
energy products. The company is engaged primarily in the research and development, and
manufacture and marketing of a wide range of digital products. Samsung SDI focuses on
developing superior quality display panels and energy storage systems. The company operates its
business through four operating divisions, namely, PDP division, Battery division, Mobile
Display division and CRT division. The product portfolio of the company includes plasma
display panels, CRT displays, vacuum fluorescent displays and lithium-ion batteries.
2. Corporate strategy
Since 2000, Samsung SDI started to develop lithium ion battery (LIB) technology as a new
business division and achieved world #1 rank in a very short period of time. Therefore, LIB
business became a successor to its already striving Display business. Through these sectors,
Samsung SDIs flagship business has been growing strongly and solidly. As Samsung SDI has
shifted core business model and infrastructure from its display industry to renewable energy, SDI
has continued to pioneer and become a world leader for Koreas new energy industry.
Nowadays, the next lithium ion battery business in Samsung SDI is rapidly extending its
territory over digital mobile devices, Electric Vehicles and ESS (Energy Storage Systems).
3. SWOT Analysis
1) Strengths & Opportunities
For the next 10 years at least, global capacity for lithium-ion batteries will be double the
amount needed to satisfy projected 2016 demand, because the Electric Vehicle(EV) and Plug-inelectric vehicle(PHEV) market will be 200,000 vehicles in 2015 and one million by 2020. A
global forecast by international management consultant form PRTM-estimating future sales of
electric vehicles and all other vehicles- is found in Figure 2. According to this forecast, by 2020,
sales of Hybrid electric vehicle (HEV)s, PHEVs and EVs will reach approximately 40 million
vehicles, representing roughly half of the total market. HEVs will continue to lead the way,
making up bulk of electric vehicle sales while showing a steady shift away from NiMH to
lithium-ion batteries.
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Figure 2. Global vehicle forecast, 2010-20209-.
Samsung SDI has secured the long development and production technology for small and
medium-sized lithium-ion battery business and has collaborated with Bosch which is theworldwide number one vehicle component manufacture and has a powerful influence in
European market. Also, it started the early HEV (Hybrid Electric Vehicle) battery business
through the CORBA system in the US.
The number of patents is an important measure used to determine the international
competitiveness in US in lithium-ion battery manufacturing. Samsung SDI has 415 patents in
US. Totally, Korea increased its proportion of lithium-ion battery patents filed in US from 11%
in 1998-2001 to 20% in 2005-2007.
Table 3. Top 10 applicants for lithium-ion battery patents in the United States10
There are strong possibilities for Samsung SDI to have additional contracts with automobile
companies besides BMW, so it can expect for momentum in the market. The SB Lomotive that is
a joint-venture company between Samsung SDI and Bosch can have a chance to collaborate with
other automotive companies such as Volkswagen and Daimler because batteries industry
9PRTM(2010). Paving the Way for Electric Vehicles10METI(2009b). Current Status and Initiatives for Battery Technology. Retrieved June 1, 2010.
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companies can be clustered as like other vehicle components.(Figure 3 & Figure 4)
Figure 3. Automobile manufacturers- rechargeable battery supplier structure(Europe)
Figure 4. Samsung SDI Customer share of the secondary battery
2) Weakness and Threats
China is a threat due to its lower labor and material costs. Certain battery components, such
as natural graphite anodes play a key role, but are low-cost and uniform, and relatively easy to
make. Such like commoditization of lithium-ion batteries can be mass-produced with low profit
margins. Plant in China typically use manually operated facilities for much of their battery
production
The US government and firms try to place a high priority on retooling the automotive
manufacturing sector for electric vehicles and are making the most of its research and innovation
strengths.The technology and level of batteries are recognized well, but the component part or materials
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are 70% dependent on imports and the domestic lithium battery parts and materials industry has
a large gap compared to advanced countries such as Japan. Moreover there are not no component
parts and materials original technology. Also, the price and safety for the secondary battery is a
very important factor of medium-grand batteries, which can be determined from the materials, so
the development of the fundamental material with a competitive price and safety is very
important for future growth of the secondary battery.
4. Key competitors A list of key competitors to the company.
Table 4 lists the major battery pack firms. Among them, LG Chem recently broke ground on
a $303 million, 650,000-sqaure-foot battery cell production facility in Holland, Michigan
through its U.S. subsidiary, Compact Power, Inc(CPI).11 On the other hand, SB Limotive
invested $ 500 million on the US, but the capacity to produce EV battery packs per year is
projected to 149,000 units until 2015, which will the third among the competitors. A123 recently
won important contracts to supply batteries for the Ford Focus PHEV, and for the Chevy Volt.
Also, A123 is constructing three plants in Michigan which will have the capacity to produce
approximately 120,000 EV battery packs per year in 2015
One of the leading battery firms is Johnson controls Inc., which has a joint venture with
French battery manufacturer Saft since 2006 and is setting up a $220-million plant in Holland
Michigan. This plant is projected to employ roughly 300 people and produce 10-15 million
battery cells per year12, which will be surpassed to SB Limotive (Samsung SDI & Bosch)
11
CGGC(Center on Globalization Government Competitiveness)(2010)Lithium-ion Batteries for Electric Vehicles;The U.S. Value Chain
12Goodell, Andrew and Peter Daining(2010). Obama Coming to Holland. Holland Sentinel. Retrieved July 15, 2010.
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Table 4. Key players production capacity for lithium-ion batteries; Europe, Japan, south Korea, United
states.13
V. Summary
Korea government announced in July 2009 the National strategy for Green Growth up to
2050, which includes mitigating climate change, creating new engines for economic growth,
improving the quality of life and 10 policies for driving the market and industry. Such
environmental policies can create new markets for low-carbon technologies and equipment.
Especially, the world market of secondary battery is forecasted to be expanded to 1,790 billion
in 2030,an average annual 15% growth compared to in 2007 based on the expansion of IT units
convergence, eco-friendly electric cars, and renewable energy. Therefore, Samsung SDI has
shifted core business model and infrastructure from its display industry to renewable energy, SDI
has continued to pioneer and become a world leader for Koreas new energy industry in 2010.
The National strategy for Green Growth in Korea has opened vistas for government and
many companies. Many countries, especially in Asia, are trying to create new markets for low-
carbon technologies and equipment. Also, pan-governmental supports of each country for
13 Deutsche Bank(2009). Autos &auto parts Electric Cars: Plugged in 2. From http://www.db.com
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developing R&D are highly competitive. Therefore, to continue the National strategy for Green
Growth as creating new growth engine and pursuing the sustainable development of the world,
Korea government must suggest more integrated policies for combining Korean companies into
a one to compete other countries competitors, and strongly push the companies follow the
government policies.
VI. Recommendations
Before giving recommendations for Samsung SDI, it should be suggested for pan-ministry
or pan-national firms, because secondary battery industry is very important not only for
individual company level but also national levels.
Secondary Battery development is one of the important green technologies that Korea
government implement as Green Growth strategy, because secondary battery industry is
increasing rapidly in the world as a new international species of trees industry. Also, secondary
battery is the key element to reduce greenhouse gases, which can make fuel vehicle replace
electric vehicle. Korea since 1999 expedites this field, with only 12 years will surpass Japan.
Moreover, Samsung SDI foray into the field for the first time in 11 years after last year,
surpassing Japan SANYO, boarded the world first. However, there are some recommendations
for fortifying weaknesses and threats of secondary batteries.
First of all, it is needed to foster relationships between government, research institutions and
industry to enable commercialization of technologies for coping with the US M&A of Korean
battery or material companies which have the highest growth potential. Especially, Samsung SDI
should establish a strategic alliance with LG Chem. for exploiting and dominating the US and
Europe market in advance.Secondly, Samsung SDI must focus on high-levels of automation for its lithium-ion battery
plants. To maintain strong profit margins, it needs to maintain its high-tech edge on battery R&D
and production to avoid competing head-on with China on mass production and to cope the
original technology. Also, to compete internationally, the lithium battery component part or
materials must be succeeded in domestically producing complete.
Lastly, Samsung SDI should demand the government to organize the infrastructure and to
buy some renewable energy source such as for ESS (Energy Storage Systems) in order to
develop the market and to expand the area of secondary battery industry.
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VII. References
CGGC(Center on Globalization Government Competitiveness)(2010) Lithium-ion Batteries for
Electric Vehicles; The U.S. Value Chain
Deutsche Bank(2009). Autos &auto parts Electric Cars: Plugged in 2. Fromhttp://www.db.com
Goodell, Andrew and Peter Daining(2010). Obama Coming to Holland. Holland Sentinel.
Retrieved July 15, 2010.
Kim, J. and K. Kang (2009), A Case Study of the Innovation Impacts of the Korean Emission
Trading System for NOx and SOx Emissions, prepared as a contribution to OECD (2010e).
METI(2009b). Current Status and Initiatives for Battery Technology. Retrieved June 1, 2010.
Ministry of Strategy and Finance and Presidential Committee on Green Growth
OECD Multiligual Summaries Towards Green Gorwth
Presidential Committee on Green Growth (2009a), National Strategy for Green Growth and
Five-Year Plan, Seoul (in Korean)
PRTM(2010). Paving the Way for Electric Vehicles
Randall S. Jones and Byungseo Yoo., Koreas green growth strategy; Mitigrating Climate
Change and Developing New Growth EnginesOECD Economics Department workingpapters.
No.798
www.oecd.org/greentrowth
www.gtnet.go.krGreen technology Information Portal
http://www.db.com/http://www.db.com/http://www.oecd.org/greentrowthhttp://www.gtnet.go.kr/http://www.gtnet.go.kr/http://www.db.com/http://www.oecd.org/greentrowthhttp://www.gtnet.go.kr/