[Reporter’s Notebook] Elevator Companies Driven to Bankruptcy Crisis Amid Association’s Neglect

Photo by Asia Economy DB

[Asia Economy Reporter Kim Heeyoon] Elevator maintenance company A, located in Yeongdeungpo-gu, Seoul, is recently going through the process of closing down. This is due to a management crisis caused by large corporations no longer involving them in joint subcontracting projects, as these corporations have established subsidiaries and absorbed partner companies. The company’s CEO explained, “Large corporations ranked first and second in market share are each establishing maintenance subsidiaries and absorbing partner companies, creating a structure where small and medium-sized enterprises (SMEs) cannot survive, leaving us with no choice but to close down in this desperate situation.”

The Ministry of the Interior and Safety expanded the number of certified parts to 20 and made safety certification mandatory for complete elevator products through the 2019 amendment of the Elevator Safety Act. Even when using the same parts, companies must obtain safety certification from scratch, causing certification costs to rise from tens of millions to hundreds of millions of Korean won, increasing the burden on elevator SMEs. The certification fees incurred last year amounted to approximately 14 billion won, most of which were paid by SMEs.

Additionally, the “two-person team” regulation, implemented in March last year, requires at least two people to be deployed simultaneously during elevator inspections, delivering a critical blow to SMEs. Although the regulation was introduced to enhance safety, most of the approximately 800 maintenance companies in Korea are SMEs with only 5 to 10 inspection staff, making it difficult to realistically comply. On-site complaints have also emerged, stating that working with two people causes communication issues, making smooth operations harder than ensuring safety. A representative of an elevator maintenance company appealed, “Considering that the inspection cost per unit is 50,000 to 100,000 won, it is difficult to cover labor costs, let alone manage the company.”

According to the Korea Elevator Safety Agency, elevator malfunctions last year reached about 17,000 cases, the highest since statistics began. Elevator malfunctions, which used to occur 2,000 to 3,000 times annually, increased to 2,134 cases in 2018 and 8,256 cases in 2019, showing an upward trend. Experts diagnose that despite the introduction of various regulations, they have not been effective in preventing accidents.

Voices from the field claim that the Korea Elevator Association fails to represent these difficulties at all, exacerbating the challenges. A representative from an elevator manufacturer said, “Even as elevator SMEs are pushed to the brink due to strengthened safety certification systems, the association just watches without taking action. The domestic elevator market is dominated 85% by large corporations and 15% by domestic SMEs, but over 90% of the workforce is employed by SMEs. Due to the association’s neglect, companies are being driven to the edge.” During last year’s National Assembly Public Administration and Security Committee audit, there were calls for urgent improvement of the certification system, which operates centered on the profit structure of inspection agencies.

According to the industry, the Korea Elevator Association consists of five large corporations and about 330 SMEs. However, the board of directors is made up of 20 large corporation employees and external personnel and only five SME representatives, making it difficult to truly represent the difficulties faced by SMEs on the ground.

While the association ignores the absorption and integration of SMEs by large corporations and the difficulties of its SME members, the elevator industry ecosystem is collapsing. As the association, established to resolve polarization between large and small companies and promote mutual cooperation, fails to fulfill its role, member companies on the brink are refusing to pay annual fees and hastening their withdrawal. The collapse of an ecosystem with broken industrial balance is only a matter of time. Without realistic countermeasures and efforts at the association level, SMEs will go bankrupt, leaving only large corporations to survive. To simultaneously ensure safety and industrial promotion, as seen in advanced elevator countries such as the United States, Europe, and Japan, government regulatory reforms reflecting the voices from the field are urgently needed.