Small and mid-sized and venture companies have become a growth engine for South Korea’s economy amid the economic downturn at home and abroad. The number of venture companies surpassing 100 billion won (US$88.14 million) in sales last year reached a record high and showed the highest increase in the past five years.
According to a survey on venture with 100 billion won of sales in 2016 conducted by the Ministry of SMEs and Startups (MSS) and the Korea Venture Business Association (KOVA) on September 25, the number of venture companies that posted sales of 100 billion won (US$88.14 million) in 2016 was 513, up 39 companies from 474 a year ago, reaching a record high since statistics were compiled first in 2005. The survey tracked those with sales of over 100 billion won (US$88.14 million) in 2016 among 61,310 firms that received a venture certification more than once and are in business after the introduction of venture certification system in 1998.
A total of 58 companies newly entered the venture 100 billion won club, up 3 from 55 at the previous year and 42 companies reentered the club. Also, 61 venture firms with the sale of 100 billion won (US$88.14 million) in 2015 failed to join the club last year due to the slowdown in sales. This shows that companies are showing a slower growth rate than before due to the global trend of low growth. By industry, the number of venture firms in the health care, precision, optical instrument manufacturing and detergent and cosmetics manufacturing increased from 7 to 11 last year.
The combined sales of venture firms with the sales of 100 billion won (US$88.14 million) also grew by 6 percent from 101 trillion won (US$89.03 billion) in 2015 to 107 trillion won (US$94.31 billion) last year. However, the number of companies with the sales of over 1 trillion won (US$881.45 million) dropped from 6 in 2015 to 4 in 2016 as the economy at home and abroad failed to recover due to the recession in the shipbuilding industry and lack of orders received.
The number of small and mid-size companies with the sales of 100 billion won (US$88.14 million) went up by 37 from 184 in 2015 to 221 in 2016, while that of strong mid-size companies increased by only 2 from 290 to 292 over the same period. Thirty seven out of 39 companies which had higher sales, or 94.9 percent, were small and mid-sized companies. The number of venture firms also grew by 20 from 74 to 94.
Venture firms with the sales of 100 billion won (US$88.14 million) also created more jobs. The average number of their employees amounted to 385.4 in 2016, up 7.4, or 1.9 percent, from 378 in 2015. The total number of employees increased from 179,172 to 193,490.
In addition, venture firms with the sales of 100 billion won (US$88.14 million) showed a sharp upturn in business performance with their efforts to innovate technology, including research and development (R&D) investment. Their operating margin and debt ratio stood at 8.1 percent and 80.2 percent, respectively, last year, showing the improvement from 7.5 percent and 81 percent. The figures are better than conglomerates with 6.1 percent and 85.9 percent and small and mid-sized companies with 6 percent and 147.4 percent. Leading technology innovation, the average R&D costs and number of industrial property rights owned by venture firms with the sales of 100 billion won (US$88.14 million) grew by 20.9 percent and 4.4 percent from 4.3 billion won (US$3.79 million) and 90 in 2015 to 5.2 billion won (US$4.58 million) and 94 in 2016. On the other hand, the average exports and ratio of exports to sales per company dropped from 52.9 billion won (US$46.63 illion) and 24.9 percent in 2015 to 48.8 billion won (US$43.01 million) and 22.9 percent in 2016 due to the global economic slump.
The sales dependence of venture firms with the sales of 100 billion won (US$88.14 million) on conglomerates is decreasing. About 30.1 percent of companies had more than 50 percent of dependence on conglomerates in terms of sales in 2010 but the figure went down to 23.1 percent in 2015 and the percentage of companies that have less than 50 percent of dependence in terms of sales increased from 69.9 percent to 76.9 percent.