Korean Companies Begin to Feel Overtaken by China... 57% Say "Caught Up in Technology Over 15 Years"

KCCI Survey of 370 Manufacturing Companies
Sharp Decline in Responses Saying "Korean Technology Leads China"
Korean Products Lag Behind in Price Competitiveness
85% Say "Chinese Products with Same Specifications Are Cheaper"
"Need for Innovative Support and Regulatory Improvement"

China, which has traditionally secured competitiveness by lowering prices rather than focusing on technology, is now rapidly overtaking South Korea in manufacturing through continuous innovation.

According to the recent "K-Growth Series: Korea-China Industrial Competitiveness Perception Survey and Growth Proposals" conducted by the Korea Chamber of Commerce and Industry, only 32.4% of domestic manufacturing companies surveyed said that their technological competitiveness was ahead of their Chinese competitors.

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Far more respondents said there is no difference in technological competitiveness between Korean and Chinese companies (45.4%) or that China is actually ahead (22.2%). In comparison, in a similar survey conducted in 2010, 89.6% of companies believed that Korean firms were more competitive than their Chinese counterparts. This means that over the past 15 years, about 57% of Korean companies have been caught up with or surpassed by Chinese technology.

Chinese products still have overwhelming price competitiveness. When asked about the relative unit price of their products, 84.6% of respondents said, "Our products are more expensive than those made in China." Only 13% said the prices were similar, and just 2.4% said Korean products were cheaper. More than half (53%) of the companies responded that "Chinese products are more than 30% cheaper than domestic products."

By industry, the response "Chinese products are more than 30% cheaper" was most common in the display sector (66.7%), followed by pharmaceuticals and biotechnology (63.4%), and textiles and apparel (61.7%).

According to Trade Map data from the International Trade Centre (ITC), a subsidiary of the World Trade Organization (WTO), the price of Chinese semiconductors (memory, HS code 854232) is about 65% of the price of Korean products, lithium-ion batteries (850760) are at 73%, steel plates (over 10mm thick, 720851) are at 87%, and textiles and apparel (cotton products, 610910) are at 75%.

Even in manufacturing speed, which has long been considered a strength for Korea, China is now slightly ahead. When asked to compare their own production speed with that of Chinese competitors, 42.4% of respondents said "China is faster," outpacing the 35.4% who answered "Korea is faster."

Regarding the impact of the growth of Chinese industry on the Korean industry within the next three years, 69.2% of respondents predicted that "the global market share of Korean industries will decrease." The same proportion (69.2%) also said that "the sales of Korean companies will decline."

The Korea Chamber of Commerce and Industry attributed the reversal in technological competitiveness to China's massive government-led investment support and flexible regulations. In contrast, Korea suffers from relatively insufficient government support, a closed regulatory environment that hinders growth, and a regressive incentive structure for growing companies. The Chamber pointed out that these issues need to be addressed.

In terms of methodology, the Chamber emphasized the importance of a "regulation zero testbed" and proposed the concept of a mega sandbox. China has designated Wuhan as a "pilot zone for intelligent connected vehicles," boldly relaxing regulations and accumulating massive amounts of data to lead the future mobility industry. The Chamber stressed, "It is time to utilize mega sandboxes to significantly ease regulations for all investing companies, regardless of size, at least in certain regions, in order to strengthen industrial competitiveness."

Lee Jongmyung, Head of the Industrial Innovation Division at the Korea Chamber of Commerce and Industry, stated, "To use a common saying, it's better to 'go all-in' than to 'spread out your bets (1/N).'" He added, "We must acknowledge that Korea's manufacturing competitiveness is relatively weakening and select areas where we can secure a comparative advantage to provide concentrated support." He also emphasized, "To prevent losing any more of the global pie, our companies need to invest more and enhance their technological capabilities, which requires a bold shift toward growth-oriented policies."