South Korea Becomes Taiwan's No. 2 Auto-parts Supplier

South Korea overtook Germany for the first time in 2004 to become the second-largest supplier of imported auto parts for Taiwan, according to a report compiled by the Metal Industries Research and Development Center (MIRDC) on commission from the government-sponsored Industrial Technology Intelligence Services (IT IS) project.

The island's top-five auto-parts import sources in 2004 were, in order, Japan, South Korea, Germany, China, and Thailand. Statistics released by the Taiwan Transportation Vehicle Manufacturers' Association (TTVMA) show that Taiwan imported NT$4.59 billion (US$137.01 million at NT$33.5:US$1) worth of auto parts from Korea that year, up a whopping 88.7% from 2003. The MIRDC report attributes the growth to increasing sales of South Korean automobiles on the island.

In the first eight months of 2005 these imports amounted to NT$3.45 billion (US$102.99 million). Most of the imports were automatic transmissions, pressed sheet-metal body parts, and brake systems and parts.

The report notes that South Korea's exports of auto parts to China are also soaring, largely because Korean carmakers such as Hyundai and Kia have set up auto plants there. These auto-parts exports totaled US$1.73 billion in 2004; in the first half of 2005 they reached US$1.24 billion, up 41.6% from the corresponding period of the previous year.

South Korea's auto industry has recovered rapidly from the restructuring that was forced by bankruptcies during the financial crisis that began in 1997. In 2004 the country turned out about 3.47 million automobiles, of which 68.5% were exported.

The South Korean original equipment manufacturing (OEM) and aftermarket auto-parts sectors have both done well in the past three years, scoring annual double-digit growth. Together, the two sectors reported a production value of about US$32 billion in 2004, up 13.7%.

The strong performance of both automobile and parts manufacturing in South Korea, notes the MIRDC report, is due to the fact that the country offers products that have a higher quality than Chinese products at prices that are lower than Japan's. Numerous tier-one auto-parts companies, including Viesteon, Delphi, Bosch, and Denso, have recognized these advantages by setting up production facilities in Korea.

The top-three auto-parts manufactures in South Korea today are Hyundai Mobis (a key supplier to Hyundai and Kia), Mando (a supplier of brake, steering, suspension, and modular systems), and Halla Climate Control (a maker of automotive air-conditioner systems and parts.

Imports of South Korean Auto Parts into Taiwan

Unit: NT$ million

Category of Parts	Jan.-Aug. 2004	Jan.-Aug. 2005	Growth
Other parts and accessories	838.21	1,020.80	21.8%
Transmissions	418.61	353.59	-15.5%
Other Pressed Parts	230.93	297.60	28.9%
Brake Calipers, Servers, and Parts	105.91	123.73	16.8%
Steering Wheels, Columns, and Racks	89.39	883.50	-1.2%
Bumpers and Parts	43.11	60.91	41.3%
Total	3,385.53	3,457.29	2.0%