KCCI: "45% of Companies Find Current Situation Harder Than COVID-19 Peak in March-April"

[Asia Economy Reporter Ki-min Lee] A survey revealed that half of the companies find their current situation more difficult than during the peak of the COVID-19 pandemic in March-April.

On the 21st, the Korea Chamber of Commerce and Industry (KCCI) announced the results of a recent survey of 308 domestic manufacturing companies on ‘Post-COVID Corporate Response Status and Policy Tasks,’ which showed that about 45.2% of manufacturing companies responded that their current business conditions have worsened compared to March-April. By industry, the highest responses indicating deterioration were in the order of automobile, steel, and shipbuilding, while pharmaceutical and machinery sectors were relatively less affected.

Companies cited exports (29.2%) as the biggest difficulty they are currently facing. This was followed by financial difficulties (27.3%), domestic sales (24.0%), procurement and production (8.8%), and employment retention (8.8%). Previously, in March, the KCCI’s COVID-19 task force identified difficulties in parts procurement, sales decline, and exports as the main challenges for manufacturing companies. This is interpreted as the real economy’s difficulties becoming more pronounced due to export routes being blocked by the global spread of COVID-19.

There were also some differences in the types of difficulties depending on company size and industry. Large companies cited ‘export difficulties’ (40.4%) as their biggest challenge, while small and medium-sized enterprises (SMEs) pointed to ‘financial difficulties’ (31.8%). The automobile and shipbuilding sectors identified ‘financial difficulties’ as the greatest challenge; semiconductor, electronics, and machinery sectors cited ‘exports’; and steel, pharmaceutical, and food sectors pointed to ‘domestic sales’ as their biggest difficulties.

Moreover, eight out of ten manufacturing companies expected their sales to decline this year. In particular, over 40% of respondents anticipated a sales decrease exceeding 20% this year.

As a result, 30.5% of companies are either implementing or planning changes to their management strategies post-COVID-19. By company size, 45.8% of large companies are preparing for strategic changes, while only about 23.8% of SMEs are seeking such changes.

Regarding areas of focus for management strategy changes, companies highlighted diversification of demand sources (31.9%), management efficiency (29.8%), business restructuring (15.9%), and diversification of domestic and overseas procurement sources (12.8%). By industry, automobile and pharmaceutical sectors focused on demand source diversification; semiconductor and machinery sectors emphasized management efficiency; and shipbuilding concentrated on business restructuring.

Regarding reshoring (the return of overseas enterprises to domestic operations), 94.4% of companies with overseas factories responded that they have no plans for reshoring. The main reasons cited for not reshoring were ‘low production costs at overseas sites’ (58.3%) and ‘entry into local markets’ (38.1%).

The KCCI emphasized that although the government recently announced policies to relax requirements and strengthen support for returning companies, broad and bold reshoring policies that can offset the advantages of overseas operations are necessary to increase domestic jobs and strengthen the industrial ecosystem between large and small-to-medium enterprises.

Additionally, with the expectation that the digital economy transition in manufacturing will accelerate due to COVID-19, 66.9% of companies expressed intentions to pursue digital transformation. Companies responded that the primary areas for digital transformation would be the production stage (57.8%), distribution stage (15.5%), marketing (14.5%), and procurement (10.7%).

When asked about key policy tasks in the post-COVID era, respondents prioritized domestic demand revitalization (42.9%), export support (26.6%), deregulation (19.8%), and expansion of research and development (R&D) support (5.8%).

Kang Seok-gu, head of the Industrial Policy Team at KCCI, stated, “Although companies are currently facing significant difficulties due to COVID-19, it is time to consider new management strategies to turn this crisis into an opportunity. We must upgrade the competitiveness of traditional industries and provide policy support to expand new opportunities in promising sectors such as pharmaceuticals, food, and IT.”

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