R&D Suffers from COVID-19... 80% Face Disruptions

[Asia Economy Reporter Junho Hwang] The pandemic of the novel coronavirus disease (COVID-19) has spread its impact to corporate research and development (R&D) activities. While most companies expect disruptions in their R&D, the most immediate measure they are considering is reducing the hiring of research personnel. There are calls for government measures such as easing the cash burden rate for government R&D funding and extending project periods to prevent the downsizing of R&D.

R&D Faces Crisis of Collapse Due to COVID-19

The Korea Industrial Technology Association announced the results of the 'Survey on Corporate R&D Activities in Response to the COVID-19 Crisis' on the 19th.

The majority of companies (79.8%, 1,189 companies) reported being negatively affected by COVID-19. Accordingly, 47.7% of companies plan to reduce their R&D investment compared to the beginning of the year. Additionally, 41.3% said they plan to reduce the hiring of researchers.

By company size, small and medium-sized enterprises (SMEs) appear to be more severely impacted. 34.4% of large companies and 36.2% of mid-sized companies said they would reduce their R&D investment and hiring plans. 48.2% of SMEs responded that they would cut back on R&D investment. In particular, 13.1% stated that R&D investment would decrease significantly. Regarding research personnel, 41.6% of SMEs expected to reduce hiring.

Specific damages caused by COVID-19 were identified as restrictions on domestic and international collaborative activities. Due to limitations on domestic business trips, 58.9% reported disruptions in R&D activities. Responses indicating disruptions caused by restrictions on overseas activities such as technical seminars reached 39.1%.

Furthermore, 42.7% of surveyed companies reported having experienced suspending or downsizing R&D projects due to deteriorating business conditions or lack of funds. Other difficulties included disruptions caused by shortages of materials and components used in research and development (35.8%) and gaps in research personnel due to self-quarantine or infection of affiliated researchers (26%).

Restrictions on Domestic and International Collaborative Activities

Although companies are experiencing or expecting negative impacts from COVID-19, it appears they have not devised significant countermeasures. About 65.2% of responding companies said they are responding mainly by 'reducing business trips and face-to-face meetings.'

Companies unanimously agreed on the need for government support policies. They requested easing the cash burden rate for companies participating in national R&D support projects (72.8%), temporary extension of project periods (64.6%), and allowing changes to research plans (4.0%). Furthermore, given the reduced capacity for investment due to management difficulties such as decreased sales, they called for short-term support measures such as R&D funding support (67.8%) and increasing the tax credit rate for R&D expenses (58.9%).

For the mid- to long-term, they suggested expanding social problem-solving R&D development projects where the government bears the costs and companies conduct R&D (55.3%), and establishing a comprehensive platform to support non-face-to-face R&D collaboration online (51.3%).

Machanghwan, Executive Vice Chairman of the Korea Industrial Technology Association, emphasized, "It is necessary for the government to take active and swift action, including reflecting support measures that companies can feel in the second supplementary budget, to ensure that growth engines are not cut off," and he stressed, "We need to start discussing ways to build digital-based R&D collaboration platforms so that R&D can operate even in situations like this."

This content was produced with the assistance of AI translation services.