[Initial Insight] SMEs Must Enhance 'AI Literacy'

Kim Cheol-hyun, Deputy Director, Bio Startups and Ventures Division

Innaewaeyang (忍耐外揚) is a four-character idiom chosen by the small and medium-sized enterprise (SME) sector to describe the business environment in 2025. It means "to overcome difficulties by exercising patience." In fact, this meaning is not only applicable to 2025 but also aptly reflects the situation of the SME sector in any given year. Even looking at the four-character idiom selected for 2024 around this time last year shows this. "Unwaejangcheon (雲外蒼天)" means that beyond the dark clouds lies a clear blue sky, implying that a better future awaits after overcoming hardships, which aligns closely with the meaning of Innaewaeyang. This suggests that the SME sector has always been navigating challenges that require patience.

What is interesting is that the story behind Innaewaeyang indirectly reveals another challenge faced by the SME sector beyond its meaning. Innaewaeyang is not an existing four-character idiom. It was generated by the artificial intelligence (AI) chatbot GPT based on the current situation of the SME sector to forecast the business environment for the coming year. The Korea Federation of SMEs explained that they broadly collected candidate idioms using AI in line with the trend of digital transformation. Alongside Innaewaeyang, existing idioms such as Eungbyeonchangsin (應變創新), Geuksecheokdo (克世拓道), Wigi jihak (爲己之學), and Yeonggoseongsoe (榮枯盛衰) were nominated, with 36.4% of SME representatives choosing Innaewaeyang.

AI technology is permeating every aspect of our lives and bringing about change, and SMEs cannot avoid this trend. However, unlike the concise four-character expression AI used to describe the SME sector’s situation, the gap between SMEs and AI remains significant. According to a survey conducted by the Korea Federation of SMEs in the second half of this year targeting 300 SMEs, only 5.3% are currently applying AI. Only 16.3% of companies expressed a desire to adopt AI in the future, which is less than one-fifth.

The reason SMEs are so passive about adopting AI, which is a trend of the times, is that they consider it unnecessary. Most SME manufacturing company representatives met during reporting said, "AI is not necessary for our business." For example, an SME manufacturing medical devices is busy producing products in the factory and developing sales channels, so AI application may seem like a story for other countries. However, AI can also be used for tasks such as budgeting marketing expenses and responding to customer emails or calls. This allows handling increased workloads without hiring additional staff. This is one of the real cases where SMEs have improved productivity by utilizing AI. The areas where SMEs can apply AI range widely from production stages such as defect detection and defect rate analysis to market analysis, marketing, and future sales forecasting. While AI adoption is not without its downsides, this gap is emerging and could widen over time. The concern is that as AI technology rapidly advances, the polarization between SMEs and large corporations will become more pronounced.

It is well known that AI adoption is an unavoidable global trend across all industries. To prevent SMEs, the cornerstone of our economy, from losing global competitiveness, tailored support is necessary. This includes changing SMEs’ mindset toward AI adoption, economic support, and systemic support. Spreading AI among SMEs that are reluctant to change may also require a period of "Innaewaeyang." The work must start now by raising the AI literacy (the ability to understand and utilize AI) of SMEs.