Martial Arts: "Expansion of Reshoring in the US, Japan, and Germany... South Korea Must Respond by Supporting Manufacturing Innovation"

[Asia Economy Reporter Suyeon Woo] As reshoring expands mainly in advanced countries such as the United States, Japan, and Germany, there is a claim that South Korea should actively induce reshoring through manufacturing innovation support.

The Korea International Trade Association's Institute for International Trade and Commerce made this claim in a report titled "Manufacturing Technology Innovation and Reshoring in the Era of the 4th Industrial Revolution," released on the 8th. According to the report, 4th Industrial Revolution technologies have contributed to creating an environment where reshoring?companies relocating production bases previously moved overseas back to their home countries?can expand by bringing manufacturing innovation and reducing production costs.

Such cases are particularly prevalent in the United States, Europe, and Japan. In the U.S., the number of reshoring companies increased significantly from 95 in 2010 to 886 in 2018, and in Europe, 193 companies chose reshoring between 2016 and 2018. Japan saw 7,633 companies return from overseas between 2006 and 2018.

Countries where reshoring has been active, such as the U.S., Germany, and Japan, are advanced manufacturing powers ranking within the top 30 in technology innovation-related indicators. Regarding the ratio of research and development (R&D) to gross domestic product (GDP), Japan ranked 5th, Germany 7th, and the U.S. 9th globally. The proportion of high-tech patents among total patents was also high, with Japan 4th, the U.S. 5th, and Germany 21st, indicating that manufacturing technology innovation has promoted reshoring.

Furthermore, the higher the technological level of companies, the greater the domestic job creation effect from reshoring. Between 2010 and 2019, 67% of all jobs created by reshoring in the U.S. were in high and medium-high technology sectors.

Number of Korean Returnee Companies by Year / Source=Korea International Trade Association, KOTRA

Meanwhile, South Korea ranks 2nd globally in R&D intensity relative to GDP, 6th in the proportion of high-tech manufacturing exports, 3rd in the share of high-tech patents, and 2nd in the Information and Communication Technology (ICT) industry development index, showing a higher level of manufacturing innovation than major countries. However, the number of reshoring companies in South Korea has stagnated since 2019, and exports of intermediate goods for final product manufacturing at overseas production bases have expanded significantly since 2011, indicating that reshoring outcomes are relatively insufficient compared to major countries.

Senior Researcher Naeyoung Kang of the Korea International Trade Association emphasized, "Multifaceted support from both the government and companies is necessary to make manufacturing innovation the foundation of reshoring," adding, "In particular, besides tax reductions and employment subsidies for U-turn companies, support for manufacturing process innovation using ICT technology is needed."

Researcher Kang continued, "Successful smart manufacturing process implementation requires a paradigm shift through the high value-added transformation of the overall manufacturing ecosystem," and added, "Moreover, expanding R&D investment and cultivating highly skilled personnel at the government and corporate levels, as well as supporting technology development for small and medium enterprises through industry-academia-research collaboration, are important."

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