"South Korea's Share of Global R&D Investment Declines... Impact of China's Technology Rise and Weak New Growth Investment"

"South Korea's R&D Investment Concentrated in ICT Products with High Dependence on Samsung Electronics"

[Asia Economy Reporter Jeong Hyunjin] It has been revealed that the status of Korean companies in global research and development (R&D) investment is wavering. This is due to the Chinese government actively supporting policy funds under the banner of technological advancement, coupled with sluggish investment in new growth sectors such as healthcare and ICT services domestically, causing Korean companies that led global R&D investment in the 2010s to fall behind.

On the 2nd, the Federation of Korean Industries (FKI) analyzed the EU Commission's R&D status data, specifically the report on the world's top 2,500 R&D companies since 2011. It confirmed that the number of Korean companies among these firms decreased by 24, from 80 in 2014 to 56 in 2019. In terms of R&D expenditure, their share dropped by 0.3 percentage points from 3.9% in 2014 to 3.6% in 2019.

(Data = Federation of Korean Industries)

The FKI stated, "Although Korea led the world with the highest R&D investment relative to GDP at 4.29% in 2014 since the early 2010s, this position is now unstable," and analyzed that "this is due to the rise of Chinese companies spearheaded by the Chinese government's 'Made in China 2025' national strategy established in May 2015, which emphasizes technological advancement."

According to the FKI, the number of Chinese companies among the world's top 2,500 R&D investors increased by 480, from 56 in 2011 to 536 in 2019. During the same period, Chinese companies' R&D investment grew at an average annual rate of 30.8%, and in 2019, China surpassed Japan's investment amount for the first time in history, becoming the world's second-largest R&D investor. They are pouring funds into R&D investment while receiving massive government subsidies.

Additionally, the concentration of Korean companies' R&D investment in semiconductors and other ICT products, along with high dependence on specific companies, is cited as another reason for the wavering status. Examining the industry composition of Korean, Chinese, and Japanese companies that entered the world's top 2,500 R&D firms in 2019, Korea's ICT product share was 58.9%, significantly higher than China's 30% and Japan's 19%. The FKI also pointed out that the low proportion of R&D investment in new growth sectors is problematic. In 2019, the R&D investment shares in the two major new growth sectors, ICT services and healthcare, were 23% and 17% for China and Japan respectively, but only 4% for Korea.

Furthermore, looking at the proportion of the top R&D investing company’s expenditure relative to the total R&D investment of domestic companies in 2019 among the four countries?Korea, the US, Japan, and China?the US (Alphabet) accounted for 7.5%, China (Huawei Investment & Holdings) 16.4%, Japan (Toyota Motor Corporation) 7.9%, whereas Korea (Samsung Electronics) accounted for 47.2%, revealing Korea's high dependence on R&D investment by specific companies.

Kim Bongman, Director of International Cooperation at the FKI, said, "Korea has joined the ranks of technologically advanced countries in ICT 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," adding, "It is necessary to avoid introducing regulations that damage corporate competitiveness and foster anti-business sentiment, improve the corporate R&D investment environment by expanding tax support for R&D investing companies, and strengthen global competitiveness in new industry sectors."

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