The Case of Electronics and Pharmaceuticals

Transcription

1 The Case of Electronics and Pharmaceuticals Si un April 29 th, 2015 Santiago de Chile

2 Introduction Display Panel Industry Case study of Samsung Display Co., Pharmaceutical Industry Case study of Boryung Pharmaceutical Company Final Considerations

3 Motivation and drivers of MNCs to include SMEs in their supply base Analysis on governance structure within a value chain Incentives and challenges for SMEs to participate in GVC Government policy to evaluate where assistance is required

4 Research area: two export clusters-- Electronics and Pharmaceuticals Electronics: Korea is traditionally strong Pharmaceuticals: small but gradually growing Methodology: interviews, company reports, literature review

5 General description of the Industry Knowledge and capital intensive Strong vertical operation structure: from electronic components to finished products Exists cycle of the final products

6 Strong growth Stagnant period New paradigm Flexible, transparent LED 3D Tablet PC OLED

7 Polarizer Colour filter Glass (or plastic) Organic materials Liquid crystal Glass Polarizer Back Light Unit LCD OLED

8 Materials Components Panel maker Set maker Array glass substrate Colour register TAC Film, PVA Film Compensation film Protective/release film Colour filter Polarizer LCD Panel maker (Samsung Display, LG Display) Laptop PC LCD PC monitor LCD TV Reflecting plate, Light guide plate, Diffusion plate, Prism Driver IC BLU (CCFL, etc.) Small LCD monitor

9 World s leading producers Two dominant global players: SDC, LGD 45% share in the world s display panel market Strategically important sector in Korean economy 3.4% of total GDP in 2013 Employed 127,000 people US$ 34 billion in exports

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11 Latin America Asia North America Eastern Europe

12 Paju Cluster: 26 thousand employees, LG subsidiaries including LG Display and related firms, 450million m2, Tangjeong Cluster: 197 companies related to display panel industry are clustered and producing more than 54% of domestic the production.

13 Employees: 31,000 Annual Sales: 21,191.6 USD (mil) Business Description: Develop and manufacture liquid crystal display boards and display panel components for use in the consumer, mobile and IT sectors Subsidiary of Samsung Electronics, with which creating a strong industrial cluster Manufacturing plants in Korea, China, Slovakia, and soon in Vietnam

14 Back Light Unit(BLU): light source of LCDs (belongs to a module assembly) Accounts for 25% of LCD panel production cost. Simple process and low value added content. SDC is purchasing BLUs from about 20 companies.

15 Supplier Capital (USD, Mil) b Number of employees b Major products E-Litecom BLUs for mobile phones, medium-sized liquid crystal modules (LCM) Samjin LND BLUs for TVs, LED lamps, mould frame Display Tech LCD modules for mobile phones Kumho Electric Fluorescent lamps, LED lamps, LED parts (CCFLs, BLUs) Inzi Display Company Limited Top chassis for panel modules, BTM chassis for BLUs Reygen BLUs for TVs and monitors, light guide panels (LGPs) Fine DNC Top chassis, bottom chassis for LCD/LED TVs Korea Computer INC Modules for LCD TVs and mobile phones, LED surface-mount technology (SMT) for laptops Notes Delivers to Samsung, LG and Apple Contractor of Samsung Display. Deliver product for SESL (Samsung Electronics Suzhou LCD), SAMAX (Samsung Mexicana) LG and Samsung partner; also exports to Japan and Taiwan Province of China. LED-SMT for laptop is exported to China first and then indirectly delivered to Samsung Display. A-Tech Solution Mould frames, LED lamps, LGPs for TVs

16 For Samsung Display Reducing production cost Flexible management and reduce the risks against volatile cycles of final products and technology change For BLU suppliers Securing steady demand Ensuring timely payments Improving its image and credibility Overcome the issue of limited capital(r&d, human capital)

17 For Samsung Display Leaking knowledge non disclosure agreement, short duration of contract For BLU suppliers Competitive market: few purchasers, large number of suppliers High dependency and limit of sales growth Low value added component, and weak bargaining power for the price

18 Material and Component Technology Plan, 2012(Ministry of Trade, Industry and Energy, MOTIE) R&D capacity building for SMEs Display Shared Growth and Cooperation Committee, 2014(MOTIE) Semiconductor Research Corporation model: universities and research institutes conduct research, MNCs and government invest, remove hurdles for SMEs Technical Support Centre for Touch Panel Industry in Daegu, 2014(MOTIE) supports manufacturing processes: product design, certification, pilot production and also marketing, and networking

19 General Description of Industry Technology intensive with high value added each time a new drug is patented. High initial capital investment and technology intensity: process from discovery to approval accounts almost 70% of the total cost and takes long time. High regulations of governments for the sake of citizen s health.

20 Development of new drugs, production of synthetic raw materials within value chain Korea Importing large volumes of drugs, repackaging for final consumption in the local market

21 Discovery Synthesis Of substance Clinical test Approval Manufacturing Sales University Big pharmaceutical company Venture company Big pharmaceutical company Big pharmaceutical company Public research institute University Public research institute Venture company Venture company CRO (Chemical service) CRO (Clinical test) CMO (Manufacturing) Local company

22 World s 15 th largest producer behind Mexico and Brazil Small but growing market participation 270 companies producing final pharmaceutical products, 300 companies for drug substances Technology capability: half way between developing and developed economies(more generic drugs or commercial product than developing new drugs) High dependency on foreign contract research organizations(cros) Development of 32 new drugs since 1988

23 Exports Imports (USD, Million) 3,917 3,881 4,418 4,915 5,083 1,139 1,391 1,530 1,753 2,

24 Substance Finished product

25 Ecuador 1 Uruguay 3 Uruguay 2 Argentina 14 Chile 6 Brazil 38 Argentina 1 Chile 8 Ecuador 9 Peru 3 Colombia 13 Peru 8 Colombia 14% Brazil 51 Mexico 22 Mexico 7 Substance Finished Products

26 JW Pharmaceuticals Daewoong Pharmaceuticals Export of Imipenem (a type of antibiotic, API) to Brazil from 2005 onwards. Received the Good Manufacturing Process approval by the Brazilian Health Surveillance Agency (ANVISA) in Export of the final antibiotic product to Brazil in collaboration with TARGO. In 2013, it exported their in-house developed product Nabota (a botulinum toxin formulation) to 15 Latin American countries(bolivarian Republic of Venezuela, Colombia and Mexico, etc). LG Life Sciences It sold their diabetes treatment, Zemiglo, to the Mexican pharmaceutical company Stendhal. Dong-A Holdings It established a local subsidiary (Dong-A Participações Ltda.) in Brazil in 2013 and sold its products to Latin America through this subsidiary. Green Cross It has been exporting GC Flu to Colombia, Guatemala, Nicaragua, Paraguay and Peru.

27 Employees: 1,000 Annual Sales: US$ 312 Million Business description: Manufacture and sell pharmaceutical products Specialized in producing medicines for hypertension and antiviral treatment. Developed its new hypertension drug Kanarb in 2010 and export to LACs from then.

28 R&D: Develop: Boryung s central lab(5% of total revenues) Clinical test: Contract Research Organizations developed countries such as Quintiles and Covance(UK), Harland(Switzerland). Manufacturing: Drug substance supplied by SMEs, and also developed countries Sales(distribution and marketing): Partnership with local companies such as Stendhal in Mexico and Ache in Brazil

29 Incentives for participating in value chain Creation of trust for other potential buyers Regular and timely payments Challenges for cooperating with MNCs High dependency and low bargaining power Regulatory barrier: needs to attain certification of good management practices and approval from Ministry of Food and Drug Safety

30 Bio Korea International Convention Fairs, to resolve the difficulties in marketing Medistar Initiative, KOTRA(Korea Trade-Investment Promoting Agency) provides market research, interpretation services, training, matchmaking with potential buyers, network services and marketing, global partnering service, and R&D Homologation Agreements with foreign countries reduce institutional barriers Eg. Ecuador

31 Opportunities * Stable demand * Improve credibility * Transfer knowledge/skills * Little negotiating power * Probability of being isolated * Institutional and technological barrier Struggles

32 MNC s predominant role in global value chain MNC s intents to reduce dependency on foreign suppliers Open innovation strategy of MNCs that encourages SMEs participation Government s focused support to strengthen material and part industry which involves large number of SMEs. Display Panel Industry Yet, small participation of MNCs in global value chain Majority SMEs supply ingredients Government s overall support to increase the export of the product, from reducing trade barriers to financing R&Ds. Pharmaceutical Industry