"Policies to Incentivize Smart Manufacturing Investment for SMEs and Mid-sized Companies Needed... No Investment Expected Otherwise"

"Urgent Need for Exploring and Linking Policies to Stimulate Voluntary Investment Incentives"

[Asia Economy Reporter Moon Chaeseok] A report has been released stating that policy efforts are needed to encourage small and medium-sized enterprises (SMEs) and mid-sized companies to voluntarily invest in smart manufacturing innovation.

On the 12th, the Korea Institute for Industrial Economics and Trade pointed out that although the smart manufacturing system established with government participation contributes to increased sales and employment, it does not lead to voluntary investment by companies.

The institute suggested that the government should find policies to stimulate companies' voluntary investment incentives and support reducing demand uncertainty. It emphasized that the government must provide technological and innovation systems as well as a concrete roadmap.

First, it was pointed out that the structural constraints on companies' voluntary investment incentives prevent them from leading to tangible outcomes such as product innovation and operating profit.

Domestic subcontracting B2B SMEs and mid-sized companies have absolutely low bargaining power and are in a position where they must achieve results in smart manufacturing that can reduce delivery prices through manufacturing cost reduction, defect rate reduction, and lead time shortening.

If innovation outcomes are absorbed by demand companies in the form of delivery price reductions rather than by the SMEs and mid-sized companies themselves, their voluntary investment incentives are correspondingly constrained.

The problem is that most SMEs and mid-sized companies participating in the smart factory support project remain at the basic level of the value chain, such as automatic aggregation of production process and performance information.

Even when participating in the smart factory support project, they do not proceed to product innovation or discovering new demand sources, so operating profits are not increasing.

Jiminwoong, a research fellow at the Korea Institute for Industrial Economics and Trade, said, "As long as the current ecosystem conditions continue, domestic SMEs and mid-sized companies will have limited incentives to voluntarily introduce or advance smart manufacturing systems," adding, "This is because the return on investment is structurally uncertain."

Meanwhile, since 2014, the government has supported 12,660 companies related to smart factories. The goal is to distribute 30,000 smart factories by 2022.

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