Three Major New Industry Mid-sized Companies Achieve Sales and Export Growth Despite COVID-19

Korea Federation of Medium-sized Enterprises 'Survey on Management Status of Medium-sized Enterprises in the 3 Major New Industries (BIG3)'

[Asia Economy Reporter Kim Cheol-hyun] Among the three major new industry sectors?future cars, system semiconductors, and biohealth?mid-sized companies recorded high performance this year despite the pandemic situation. This is evaluated as a firm demonstration of their capabilities as key drivers of the Korean economy in the post-COVID era.

On the 22nd, the Korea Federation of Mid-sized Enterprises announced the results of a survey on management status such as sales and investment, conducted from October 7 to November 25, targeting 150 mid-sized companies that responded they are engaged in the three major new industries (BIG3) of future cars, system semiconductors, and biohealth, out of 4,635 mid-sized companies.

The average sales generated by mid-sized companies in the three major new industry sectors increased by 9.4% year-on-year to KRW 147.67 billion, and the average export amount rose by 15.8% to KRW 58 billion. The 2021 investment plan for the new industry sector was KRW 14.49 billion per company on average, an increase of KRW 300 million compared to this year’s actual investment. In particular, biohealth mid-sized companies announced plans to expand investment by an average of KRW 1.39 billion.

By sector, system semiconductor mid-sized companies showed the most remarkable growth this year. The average sales were KRW 271.86 billion, and the average export amount was KRW 189.08 billion, increasing by 15.9% and 22.7% respectively compared to the previous year. System semiconductor mid-sized companies also had the highest proportion of export companies among the three major new industries at 84.0%. The export volume of KRW 189.08 billion far exceeded the average export amount of KRW 58 billion for the three major new industries, driving the overall performance increase. The average investment plan for 2021 was KRW 32.54 billion, slightly down from this year, but the proportion of mid-sized companies planning investments exceeding KRW 10 billion reached 60%, significantly higher than future cars (19.7%) and biohealth (47.7%).

The average sales of mid-sized companies in the future car sector were KRW 84.52 billion, and exports were KRW 34.94 billion, rising by 10.6% and 11.8% year-on-year respectively. The 2021 investment plan averaged KRW 7.53 billion, a decrease of KRW 160 million compared to this year, but an increase of KRW 940 million compared to 2019. Companies planning investments exceeding KRW 10 billion accounted for 19.7%, anticipating large-scale R&D in new fields such as lithium-ion batteries, battery packs, and new material car bodies.

The average sales of mid-sized companies in the biohealth sector were KRW 193.36 billion, and exports were KRW 25.96 billion, showing increases of 3.8% and 1.1% respectively year-on-year. The 2021 investment plan averaged KRW 17.03 billion, and despite the impact of COVID-19, it is expected to be the only sector among the three major new industries to increase investment compared to the previous year. Biohealth mid-sized companies identified high-level core technology development (25.0%), large-scale facility investment capability (25.0%), and possession of skilled industrial workforce (25.0%) as roles that differentiate mid-sized companies from small businesses.

Among the three major new industry sectors, mid-sized companies commonly cited 'securing investment funds' as a major difficulty. Especially, future car mid-sized companies, who ranked securing investment funds as their top challenge, unanimously expressed the urgent need for R&D funding support for future car transition to respond to rapid changes in the global production system. System semiconductor mid-sized companies pointed to 'R&D (28.0%)' as their biggest management difficulty, citing insufficient R&D tax credits and securing research personnel, while biohealth mid-sized companies identified 'government regulations (20.5%)' such as barriers to entering national projects and the 52-hour workweek system as the greatest obstacles restricting entry into unexplored fields. The most needed government support for mid-sized companies in the three major new industries was surveyed as 'tax benefits including tax credits (44.0%)', 'training and supply of specialized technical personnel (18.0%)', and 'market development such as exports and public procurement (16.0%)' in that order.

Vice Chairman Ban Won-ik emphasized, "Despite the COVID-19 situation, sales and exports of mid-sized companies in the BIG3 sectors rose together, and their investment intentions for 2021 have not diminished," adding, "We must actively support them with effective policies reflecting the characteristics of each sector so that the investments and quality jobs created by mid-sized companies in response to industrial growth can revitalize our economy."