"South Korea's R&D Investment Share in 6 Major New Industries at 30% of the U.S. Level"

[Asia Economy Reporter Dongwoo Lee] Recent data shows that in rapidly growing new industry sectors such as healthcare and ICT services, domestic companies' research and development (R&D) investments remain at a beginner level compared to global corporations.

The Korea Economic Research Institute analyzed the top 500 domestic and global companies by R&D investment last year by industry and found that the concentration of domestic companies' R&D in six major new industries was only 4.1%, about one-third of the 12.0% seen in global companies.

By sector, R&D concentration in all six new industry fields fell short of global companies. In particular, R&D concentration in IT services and software (1.3%) and internet and e-commerce (1.2%) companies was only around 1%, showing a significant gap compared to global companies at about 10%. Global companies' R&D concentration in IT services and software is 12.5%, and internet and e-commerce is 11.6%.

The six major new industries include pharmaceuticals, bio, life sciences, healthcare, IT services and software, internet and e-commerce, media and entertainment, and telecommunications services.

The absolute scale of domestic companies' R&D investment in new industries showed an even larger gap compared to global companies. In 2019, Hanmi Pharm, the top domestic investor in pharmaceuticals and bio, invested $170 million, which was only 1.3% of Roche's $13.19 billion investment, the world's top company.

Samsung SDS, the top domestic company in IT services ($60 million), did not even reach 1% of Microsoft’s $18 billion investment, the world’s top company. The Korea Economic Research Institute stated that the average R&D investment scale in the six new industries among the global top 500 companies ($2.47 billion per company) is 100 times that of the domestic top 500 companies ($25 million per company).

In fact, only 13 Korean companies were among the top 100 global R&D investors in the six new industries. Among the six industries, in three sectors (pharmaceuticals, bio, life sciences; healthcare; IT services and software), there was not a single Korean company in the top 100.

Domestic new industry R&D investment also lagged significantly not only behind global companies but also behind domestic traditional industries. The share of R&D investment in the six new industries among the top 500 domestic companies was only 8.0%, whereas for the global top 500 companies, the share was 41.0% of total R&D investment.

Looking at the top 500 R&D investors by major countries, the United States showed a 60.9% share of R&D investment in the six new industries, with new industry R&D investment exceeding traditional industries by 1.5 times, highlighting a stark contrast with Korea. Japan and China also had R&D investments in the six new industries accounting for 21.8% and 19.1% of their top 500 companies’ total, more than twice that of Korea.

Choo Kwang-ho, Director of Economic Policy at the Korea Economic Research Institute, said, “Korea has joined the ranks of technologically advanced countries in IT manufacturing sectors such as semiconductors, but still has a long way to go in new industries with a large service sector share such as healthcare and software. We need to strengthen global competitiveness in new industries, which will be key future growth engines, by improving the R&D investment environment through deregulation and expanded tax support.”

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