Modularisation Development Path in the Auto Parts Industry: Comparison of Korea and Japan

Modularisation provides new challenges for the automobile industry. Following the trend, this study empirically compared the cases of Korea and Japan. This study finds out the characteristics of modularisation dynamics in Korea which are different from those of Japan. The results show that modularisation of Korean automobile industry is shifting to modularisation in inter-firm system which outsources the subsystem to the outside suppliers, based on modular (open) supply chain (organizational) architecture unlike Japan. Typically, mega suppliers such as Hyundai Mobis produce module systems and OEMs purchase them. Also, mega suppliers make an effort to develop module systems. On the other hand, modularisation of Japanese automobile industry is shifting to modularisation in OEM production which insources the sub-system and assembles the customized parts. Japanese 1st tier suppliers develop and provide the customized parts and Japanese OEMs purchase the parts from the 1st tier suppliers and assemble complete car as a whole. Thus, while Japan is based on integral organizational architecture in supply chains and modular product architectures of parts, Korea is based on modular organizational architecture in supply chains and integral product architecture of module.