Korea Leads in ICT Infrastructure, but ICT Services Dominated by Foreign Companies

[Asia Economy Reporter Changhwan Lee] South Korea's ICT (Information and Communication Technology) infrastructure is among the best in the world, but the actual utilization of ICT technology by domestic companies is low, and most of the ICT service industry is dominated by foreign companies.

The Federation of Korean Industries (FKI) released a report titled "Current Status and Implications of Korea's ICT Industry" on the 30th, revealing these findings.

According to the report, South Korea was the first in the world to commercialize 5G, the fundamental infrastructure of the 4th Industrial Revolution, in April last year, and the share of 5G in mobile networks is expected to reach 67% over the next five years, the highest level globally. Additionally, South Korea ranks first in average internet speed, first in fiber optic cable distribution, and second in e-government evaluation, making it a leading ICT infrastructure powerhouse in terms of distribution and accessibility.

However, in terms of corporate ICT utilization, South Korea falls below the OECD (Organisation for Economic Co-operation and Development) average. Korean companies have a lower proportion of firms using ICT technology for internet-based transactions (orders and procurement), customer management, and supply chain management compared to the OECD average.

Furthermore, in promising fields of the 4th Industrial Revolution such as cloud computing and big data, the proportion of companies utilizing these technologies is lower than the OECD average, indicating that domestic companies are not effectively leveraging the excellent ICT infrastructure.

Compared to ICT manufacturing sectors such as semiconductors and equipment, South Korea's ICT service industry, including software and platforms, shows weaker competitiveness. Although the cloud market is a promising industry expected to grow rapidly, the domestic market is already dominated by global foreign companies. Many platform markets in various domestic sectors are also occupied by global foreign firms.

Meanwhile, Korean ICT companies are analyzed to be small-scale not only compared to major competitors such as the United States, China, and Japan but also relative to the global average. The average revenue per Korean ICT company is 271 billion KRW, slightly more than one-third of the global average of 795 billion KRW, and about one-twelfth of the U.S. companies' average (3.3 trillion KRW), which ranks first worldwide.

R&D expenditure per Korean company is also one-third of the global average and one-fifteenth of the U.S. level. Particularly in the software and service industry sector, the average revenue per Korean company is 119 billion KRW, which is one-quarter of the global average (523 billion KRW) and one-twentieth of the U.S. level (2.3 trillion KRW), making it even smaller than the overall ICT industry.

The technological level of South Korea's ICT industry also lags behind major competitors. According to the Korea Information and Communication Planning and Evaluation Institute, as of 2018, the average technology level across 26 ICT fields, with the leading country, the United States, set at 100%, ranks as follows: U.S. (100%) > Europe (92.9%) > Japan (88.9%) > China (86.1%) > South Korea (84.5%). The technology gap between South Korea and the leading U.S. is approximately 1.4 years.

Among the 26 ICT technology fields, there are 13 areas where South Korea is inferior to all four major competitors?the U.S., Japan, China, and Europe?including core drivers of the 4th Industrial Revolution such as artificial intelligence, cloud computing, and big data.

Yoo Hwan-ik, head of the Corporate Policy Office at the Federation of Korean Industries, stated, "For South Korea, which possesses excellent ICT infrastructure, not to become a playground for global foreign companies, it is essential to improve the institutional framework related to the ICT industry and actively reflect industry opinions."

He added, "To strengthen ICT industry competitiveness, it is necessary to improve the educational environment to solve the chronic shortage of industry personnel," and emphasized, "Measures to improve the startup environment are needed to foster innovative ICT service companies."

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