Smart Factory Policies and SMEs’ Productivity in Korea

This study focuses on the demand sector of smart factories, especially policies related to the introduction of smart factories by small and medium sized manufacturers. As will be explained later, discussions focusing on SMEs are important because the gap in capacity and resources between large corporations and SMEs is very large and most large corporations in Korea are already pushing the full utilization of smart factories on their own. This study attempts to review the Korean policies to support SMEs in introducing smart factories and to improve the industrial ecosystem surrounding smart factories. By introducing the policies in English, we hope that overseas readers will better understand Korea’s smart factory policies and the issues that were contemplated in the policymaking process. Furthermore, we also hope the the policies could be reviewed and discussed internationally as an exemplary case or best practice for SME policy.This report is organized as follows. It starts with a discussion of productivity and the digital transformation in Chapter 2. It examines the trend of declining productivity growth worldwide and in particular the fact that the productivity gap between large corporations and SMEs is a common phenomenon widely found in most countries. In addition, in order to cope with the weakening trend of productivity growth, this report examines how countries around the world are designing policy initiatives to respond to the mega-trends surrounding the digital transformation.Next, in Chapter 3, the report looks at the importance of the manufacturing industry in Korea and the environmental changes that threaten the competitiveness of the Korean manufacturing industry. In addition, it finds that Korean manufacturing SMEs not only have a very low level of productivity compared to large companies but also have a very low level of digitalization.Chapter 4 introduces the smart factory policies of Korea. The representative policy of the Korean government to increase the productivity of manufacturing SMEs is the policy to expand smart factories. This chapter explains the background and progress of this policy and examines detailed support programs for SMEs.Various issues emerged when promoting the policy to expand smart factories across Korea. In Chapter 5, this study explores the direction of policies defining and measuring smart factory development levels, the results of the introduction of smart factories, the appropriateness of setting quantitative targets for smart factory expansion, various methods of supporting the introduction of smart factories, and the fostering of the smart factory supply base are analyzed.Lastly, Chapter 6 summarizes the main conclusions of this study