Overseas Production by Korean ICT Companies Remaining at High Level

The Bank of Korea said in its report on June 26 that Korean ICT companies are currently increasing their overseas production ratio and this trend is negatively affecting the country’s domestic economy.

According to the report, the ratio reached 79.3% in 2015, when the average of the country’s manufacturing sector as a whole was 18.7%. For reference, the percentage was 30.7% in 2014 in the case of Japan.

Overseas production by South Korean ICT companies began to increase in the mid-2000s. Its purposes include market penetration and cost reduction. At that time, their favorite destinations included Vietnam and China. The trend has expanded to cover important components since 2010. Specifically, the ratio reached 76.3% in 2011, 81.7% in 2012, 80.6% in 2013, 79.2% in 2014 and 79.3% in 2015. During the period, the percentage remained below 40% on the part of Japanese ICT companies.

The report pointed out that this trend is leading to the lack of decent jobs in the local ICT sector, simplified industrial structures and weakened regional manufacturing foundations, negatively affecting the stable growth of the domestic economy and adding to a sluggish domestic demand. The report also mentioned that domestic investment by the ICT companies has been on the decline since 2012 as well.