KOREA, Your global link to SUCCESS

- Chemical Industry in Korea and Investment Cases -

September 19, 2018

Yongsoo PARK

Key Industry Investment Promotion Team

KOTRA Invest KOREA

Korean Chemical Industry

Government Policy

Investment Cases

KOTRA Services

Korean

Chemical

Industry

• Industrial Position

• Export

• Import

• Value Chain

• Ethylene Production

• Chemicals Production by Category

• Investment Trend of Petrochemical

Companies

USD 92.1 billion (20.6%)

The chemical industry accounts for the majority of Korean production and export

Added-Value(‘16) Employment(’16) Export(‘16)

550,000 (18.4%) USD 75.6 billion (15.3%)

Others

Chemical

92.1billion

Automobile

Semi-conductor

Machinery

Display

Steel Fabric

Others

Chemical

550,000

Automobile

Machinery

Fabric

Shipbuilding Others

Chemical

75.6billion

Automobile

Semi-condu

ctor

Machinery

Mobile

Fabric Semi-conductor

Steel

Shipbuilding

Steel

1970s-1980s 1990s-2000s After 2000s

Construction, Fabric, Shoes Electronics, Automobile Semi-conductors, Displays,

Batteries

4th Industrial Revolution

Drones, 3D Printing

PVC, Synthetic Materials, Synthetic Rubber(shoes)

High-purity/Fine Chemicals Synthetic Resin(PE, PP), Synthetic Rubber(Tyre)

Light-weight/Multifunctional Materials, AI, Machine-

learning

Lead the growth of other industries, and closely associated with upstream/downstream industries

Industrial Position

① Semiconductor ② General Machinery ③ Automobiles ④ Petrochemicals ⑤ Ships ⑥ Wireless Communication Devices ⑦ Steel ⑧ Petroleum Products ⑨ Automotive Parts ⑩ Displays 11 Textile 12 Home Appliances 13 Computers

5

Export of Chemical Products

78.2% of Exports

• In 2017 Korea’s exports surged by 15.8% to a record $573.7 billion from a year earlier

• The record-high export was driven by a significant growth in semiconductor exports, which

soared by 57.4% to $97.7 billion due to the high demand for memory chips

• Rising oil prices helped boost exports of petroleum products and petrochemicals by 32.4%

and 23.6% respectively

57.4%

10.1%

3.8%

23.6%

23.1%

-14.5% 19.9% 32.4%

-9.5%

9.0%

-0.5%

-22.2%

9.2%

6

Item Amount

($ billion) Growth

(%)

Semiconductor 41.2 12.5

Semiconductor Manufacturing Equipment 19.3 120.4

Petroleum Products 15.1 26.0

Wireless Communication Devices 13.3 0.4

Computers 11.7 19.4

Automobiles 10.9 4.1

Fine Chemicals 9.9 21.9

Textile 9.2 7.9

Steel Plate 7.9 13.4

Measurement and Analysis Instruments 7.3 10.4

Agricultural chemicals and Pharmaceuticals 6.8 2.5

Industrial electric devices 6.6 14.5

Aluminum 6.4 19.2

Import of Chemical Products

• In 2017 brisk domestic production and exports of Korea helped drive up its imports by 17.8%

to $478.4 billion

• Inbound shipments of capital goods increased by 33.2% as imports of semiconductor

manufacturing equipment more than doubled

Demand industries(Electronics, Automobile, etc.) are closely associated with the chemical industry.

Crude Oil

Naphtha Ethylene

Propylene, etc. Base Materials

(Organic Solvents)

Dyes, Pigment, Adhesive, etc.

Automobile, Electronics,

Batteries, etc.

Synthetic Resin (PE, PP) Plastic

Tyre/Rubber Synthetic Rubber (SBR,

BR)

Synthetic Fiber Materials (TPA,EG)

Automobile, Electronics,

Construction, etc.

Synthetic Fiber Clothing, Fabric, etc.

Partner companies (Catalyst, Additives, Facility maintenance, Logistics, other supply-related)

1 Petrochemical 1 Fine Chemical

3 Rubber/Plastic

2

3

• Enormous facility investments needed

• Few partner companies exist

• Some large companies

(Hankooktire, Nexentire)

• Mostly SMEs with sales under USD 500mil

Petrochemical – Conglomerates-oriented 1 Fine Chemical – SMEs, A variety of

products 2 Rubber/Plastic – SMEs-oriented 3

Medium-sized Small

1b 0.5b 100m 50m

1 6 9 5,000 40

Value Chain of Chemical Industry in Korea

Production capacity by Korean company

Rank Company 2015 2016 2017 Year

share(%)

1 LG Chem 2,200 2,200 2,200 24.4

2 Lotte Chemical 2,100 2,100 2,100 23.3

3 YeoChun NCC 1,910 1,910 1,950 21.7

4 HanwhaTotal 1,090 1,090 1,095 12.2

5 SK Global Chemical 860 860 860 9.6

6 Korea Petrochemical 470 470 800 8.9

Total 8,630 8,630 9,005 100

30.259 18%

24.162 14%

17.630 10% 9.005

5%

7.339 4%

6.535 4%

75.704 45%

Production capacity by country

USA

China

Saudi

S Koera

Iran

India

etc.

(Unit : 1,000 ton)

Ethylene Production

500

700

900

1.100

1.300

1.500

1.700

1.900

0

2.000

4.000

6.000

8.000

10.000

12.000

14.000

16.000

2012 2013 2014 2015 2016 2017

[Production trend]

Ethylene Synthetic Resine

Synthetic Fiber Synthetic Rubber

(1,000 Ton) Year Ethylene

Synthetic Resin

Synthetic Materials

Synthetic Rubber

2012 7,975 11,966 8,387 1,006

2013 8,327 12,568 8,143 1,037

2014 8,248 12,543 7,687 1,009

2015 8,275 13,110 7,138 978

2016 8,524 13,450 6,822 893

2017 8,793 13,886 7,232 858

AAGR (`12~`17)

2.0% 3.0% -2.9% -3.1%

Chemicals Production by Category

Types 2016 2017 2018.6(p) Year

Change(%)

New product line 1,245 764 999 30.7

Expansion 2,013 2,661 2,490 -6.4

Maintenance 1,185 1,057 1,145 -1.4

Automation 100 88 84 -3.7

Energy & Environment 180 245 259 5.4

R&D 465 580 602 3.9

Etc. 844 702 631 -10.1

Total 6,037 6,508 6,512 0.1

(USD million)

Investment Trend of Petrochemical Companies

Government

Policies

• Vision and Strategy

• Development of 10 Core

Chemicals for 5 Major Industries

• Increase Production Capacity of

High-value Chemicals

3 major Petrochemical

Complex Renaissance

Ulsan

Daesan

Yeosu

Portfolio Diversification toward

Cutting-edge Chemical Industry

Win-win Cooperation within Chemical

Industry

A leap from wide-use petrochemicals to advanced chemical industry

Vision and Strategy

Displays

5 Demand Industry

Semi-conductors

Electronics

Automobile

Energy

Major Companies

LG Display Samsung Electrics

Samsung Electrics SK Hynix

LG Electrics Samsung Electrics

Hyundai

LG Chemical Samsung SDI

10 Chemical & Materials

Optical Films Luminescent dyes

Photo chemical Precursor

Adhesive Flexible PCB

Complex Materials Coating, Film

Li Battery Solar films

5 Industries and 10 Core Materials

Strengthening collaborative R&D with conglomerates

• Encourage conglomerates to participate in collaboration with SMEs from the product development stage

• Concentrate R&D budget on 10 core materials, giving plus points for partnership R&D between demand company and material supplier

Conglomerates Capital, HR

SMEs Specialty

Technologies

Secure material sourcing & domestic demand

Secure technology competitiveness & market

Co- R&D

• Ex) SKC developed 10 sorts of semi-conductor materials by co-development with SMEs like Dongjin semichem, D&F, E&F technologies. (Feb, 2015)

Establishing complementary relationship in markets & technologies between large fine chemical companies and SMEs

Development of 10 Core Chemicals for 5 Major Industries

Strengthening R&D and production capacity of high-value chemical materials

Synthetic Resin

Polyethylene Polypropylene

Polystyrene Poly Vinyl Chloride

Synthetic Rubber

BR, SBR

Synthetic Materials

Terephthalic acid

Others NaOH

High-value products Extensive-use

High-functional PE Engineering Plastic

(Polyimide)

ABS CPVC

SSBR, EPDM

PIA

KOH

SAP

Companies

Government

• Extend R&D investments up to the level of advanced countries (3%)

0,57

1,3 3,4

LotteChemical

HanwhaChemical

LG Chem

3,8 3,3 2,3

BASF Dow Chem Mitsui

• Strengthening R&D of high-value materials (USD 200mil by 2022)

• Commercialization of high-functional specialties by improving earthquake-proof, fire-proof, eco-friendliness

Improving global competitiveness of petrochemical industry

• Reconstruction for secure supply of high-quality raw materials, creating domestic jobs, and sustainable export - World-class production efficiency through expanding the facilities and continuous business reorganizations

Maintain high the NCC efficiency through continuous investments

- Diversify raw-materials other than petroleum for the sake of cost competitiveness and easing the tax burdens

Stable procurement of condensate, gas materials Mitigate customs for Naptha

Companies

Gov’t Support change of product facilities for common products to ones for high-value products

Increase Production Capacity of High-value Chemicals

Investment

Cases

• Solvay

• Gestamp

• Umicore

• Mitsubishi Chemical

• Unilever

Ewha·Solvay Research&Innovation Center

• Solvay Korea was established in 1975

• 5 administrative sites in Korea

- Solvay Korea - Solvay Silica Korea Co., Ltd - Solvay Fine Chemicals Korea - Solvay Korea Co., Ltd - Solvay Specialty Polymers Korea Company Ltd • Investments in Korea - Established a global head office of specialty chemicals GBU * GBU(Global Business Unit) - R&I center in Ewha Woman’s University

• Growing platform with large customers such as Hankook Tire, LG Display • Rapid growth of high-tech industry • Outstanding workforce

Why Korea?

Solvay

• Gestamp Kartek

- Employees : 202

- An auto parts manufacturer

• Investments in Korea

- Kartek Corporation established, 1995

- Joint Venture (60% of equities), 2007

- 100% acquisition, 2009

57 67

89

119 115

2013 2014 2015 2016 2017

• Financial Highlights (Sales) (USD million)

Gestamp

Umicore RBM Korea (Rechargeable Battery Materials)

Ordeg (Automotive Catalysts)

• Established in 1999, located in Cheonan City

• Produces cathode materials for lithium-ion rechargeable

batteries since 2000

• Research & Technology Center, 2005

• Oversees Umicore’s battery materials research since 2008

• 3 sites, all in Cheonan City

- Umicore Korea (Site1)

- Umicore Materials Korea (Site2)

- Umicore Materials Korea (Site3)

• Established in 1985, located in ‘Onsan National Industrial

Complex’, Ulsan City

• Specialized in manufacturing catalysts

• Leading the automotive catalyst industry through continued

technology development at R&D center in Songdo with the

headquarter of business unit of Automotive Catalysts in Hanau.

• 3 sites

- Seoul Office

- Onsan Plant

- Songdo R&D Center

Umicore

Product Scale Site

MMA1 90,000t/year Chungnam Province Seosan City Lotte Chemical factory

MAA 16,000t/year

HEMA 11,000t/year

MMA2 105,000t/year Jeonnam Province Yeo-su City Lotte Chemical factory PMMA 110,000t/year

• Facility

50% 50%

• LotteMCC was established in August, 2006

• Joint Venture between Lotte Chemical(Korea) and Mitsubishi Chemical(Japan)

• Manufacture and sale of MMA and PMMA

Designated as a business accompanying

high technology

• Financial Highlights (USD million)

Mitsubishi Chemical

540 560

411 414

572

14 23 53 56

154

0

100

200

300

400

500

600

700

Sales Operating profits

2013 2014 2015 2016 2017

• Established in 2009

• Own brands : AHC, Dr.MJ, Shara Shara, Vivito etc.

Acquired Carver korea in 2017 (USD 2.6 billion) → Expected to create strong synergy together with global network of Unilever

45

472

2014 2017

• Financial Highlights (Sales)

(USD million)

“South Korea is the 4th largest skincare market in the world and is also a source of global beauty trends, with the term ‘K-Beauty’ becoming a globally-used shorthand for sophisticated skincare that is widely exported. Carver has a very strong position in this space, and it will therefore strengthen Unilever’s expertise in the Asian beauty market, and its Beauty & Personal Care category globally.”

Unilever

KOTRA

Services

• GAPS

(Global Alliance Project Series)

• IKMP

(Invest Korea Market Place)

22

Joint Research & Development

Startup Investment

Joint Venture

Strategic Sourcing

Co-Marketing Universities

Research Institutes

Startups

Corporations

Global Corporation

• Customized program for global corporations who are keen to establish business partnerships with Korean companies or R&D institutes

• New opportunities to invest in Korean startups and companies, perform joint R&D activities, purchase products, and build co-marketing partnerships

GAPS(Global Alliance Projects)

Track1

Track5

Track3

Track2

Track4

23

IKMP(Invest Korea Market Place)

• As of April 2018, 260 companies and development projects uploaded

Industry # Industry #

ICT 65 Business Services 25

Bio/Healthcare 27 Contents 17

Automotive/Machinery 26 Energy /Environment 15

Consumer products 21 Chemicals /Materials 4

Banking 16 Aviation 2

Electronic/Electric 18 Logistics 3

Development Projects 18 Robot 3