Next Year's Government Smart Factory Construction Budget Cut by One-Third... Only Samsung Can Be Trusted

Samsung Electronics Surpasses 3,000 Supported Companies from 2015 to 2022

Estimation of the Economic Ripple Effects of Smart Factories (Office of Assemblyman Yoon Kwan-seok)

[Asia Economy Reporter Park Sun-mi] Amid the government’s smart factory establishment and advancement project budget being cut by two-thirds next year, Samsung Electronics is expected to continue its existing smart factory support projects as planned.

According to the government and industry sources on the 13th, Samsung Electronics announced the start of the 2022 smart factory support project only in September due to delays caused by COVID-19. Approximately 270 companies are scheduled to receive support for the 2022 fiscal year. It is expected to take at least until the first half of next year to complete the support work for the target companies.

Since 2015, Samsung Electronics has launched a smart factory establishment support project based on the philosophy of “sharing together and growing together is the path to becoming the world’s best,” providing Samsung’s manufacturing innovation technology and successful know-how to enhance the competitiveness of domestic small and medium-sized enterprises (SMEs) and mid-sized companies and to create jobs. From 2018 to this year, Samsung and the Ministry of SMEs and Startups have each invested 10 billion KRW annually, totaling 100 billion KRW, in customized smart factory construction. Samsung has additionally invested 10 billion KRW to develop the program by operating sales channel support such as discovering domestic and overseas buyers, global promotion, and educational programs.

Including the approximately 270 companies Samsung Electronics plans to support this year, the cumulative number of supported companies from 2015 to 2022 exceeds 3,000.

However, the smart factory support budget jointly invested by Samsung Electronics and the Ministry of SMEs and Startups is set to end this year. The amount of funds to be jointly invested and the number of companies to be supported for the 2023 fiscal year have not yet been decided with the Ministry. The plan will be detailed according to the Ministry’s future budget.

The industry is concerned about the government’s budget reduction trend for smart factories. The government has drastically cut the smart factory-related budget from 319.2 billion KRW this year to 105.7 billion KRW next year. Although Samsung Electronics actively contributes funds to support SMEs in building smart factories, if the government budget itself shrinks, the burden on private companies increases. As a result, during the National Assembly inspection held last month by the Industry, Trade, and SMEs Committee, there were repeated criticisms regarding the significant reduction in the smart factory establishment and advancement project budget.

Park Young-soon, a member of the Democratic Party of Korea, said, “SMEs that have introduced smart factories have shown clear improvements in productivity, quality enhancement, cost reduction, and delivery compliance, with increases in employment and sales and decreases in industrial accidents.” She added, “Many SMEs are eager to adopt smart factories. The smart factory establishment and advancement project is a popular policy with competition rates ranging from a minimum of 2:1 to a maximum of 8.1:1, so it is hard to understand why the project scale is being drastically reduced instead of expanded.”

Yoon Kwan-seok, also from the same party, estimated that “the economic losses expected due to the 203.2 billion KRW budget cut for the smart factory project next year will amount to production of 9.1776 trillion KRW, added value of 3.053 trillion KRW, employment of 34,566 people, and jobs of 26,199 people.” He emphasized, “Even if 30,000 smart factories are created by this year as originally planned, it accounts for only 5% of the entire manufacturing industry in Korea. Considering the manufacturing industry's share in the gross domestic product (GDP), more support for SMEs is necessary.”

The reason SMEs are eager to establish smart factories is due to their clear effectiveness. According to a survey by the Korea Federation of SMEs in March, SMEs that introduced smart factories showed 37.6 percentage points higher operating profit, 11.4 percentage points higher sales, and 3.2 percentage points higher number of employees compared to those that did not. In the case of Busan-based SME ‘Donga Plating,’ which received smart factory construction support from Samsung Electronics, despite being a 3D industry plating company that young people tend to avoid, more than 70% of the total employees are in their 20s and 30s due to the effect of expanding automated processes.

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