WASHINGTON—In advanced industries such as computers and electronics, motor vehicles, and machinery and equipment, South Korea’s economy is 77 percent stronger than the relative global average, ranking second behind only Taiwan, according to a new report from the Information Technology and Innovation Foundation (ITIF), the leading think tank for science and technology policy.
But South Korea has been losing global market share in recent years, as its performance has been declining sharply relative to the size-adjusted global average, ITIF found in its Hamilton Index.
“A nation’s economic and national security increasingly depends on how well it performs in the global competition for market share in a select group of advanced industries,” said ITIF President Robert D. Atkinson, who led the new study. “For South Korea, the period of miracle growth is over. The question now is whether it can remain competitive in China’s shadow.”
Using the latest data available from the Organization for Economic Cooperation and Development (OECD), ITIF’s Hamilton Index ranks 40 countries on their performance in 10 advanced and strategically important industries: IT and information services; computers and electronics; pharmaceuticals and biotechnology; machine equipment; electrical equipment; motor vehicles; other transportation equipment; chemicals; fabricated metals; and basic metals.
To assess nations’ performance relative to the size of their economies, ITIF uses an analytical statistic known as a “location quotient” (LQ), which measures any region’s level of industrial specialization relative to a larger geographic unit—in this case, a nation relative to the rest of the world.
South Korea’s LQ in computers and electronics was 4.23, meaning it was more than four times stronger than the global average based on the size of the South Korean economy—ranking 3rd out of 40 countries studied. (See figure 2 below.)
Based on the size of its economy, South Korea performed above the global average in 8 out of the 10 advanced industries in ITIF’s index. As a result, its overall LQ was 1.77 (meaning 77 percent stronger than average), ranking 2nd highest out of the 40 countries studied. (See figure 1 below.)
However, South Korea’s relative performance declined more than any other country in ITIF’s index from 2012 through 2020—dropping by 37 percentage points, from an LQ of 2.12 to 1.77.
South Korea’s global market share in advanced industries declined from 4.1 percent of global production in 2017 to 3.4 percent of global production in 2020. In the same period, China increased its market share from 23.6 percent of global production to 25.3 percent.
China now produces more value-added output than any other country in the 10 industries that comprise ITIF’s index—and it produces more than all other countries outside the top 10 combined.
Along with the new Hamilton Index report, ITIF also released three interactive data visualization tools that are freely available for media, researchers, and the public to use as reference. They include:
An industry-focused visualization tool showing how the 40 covered nations compare in gross output, relative output (LQ), and global market shares in each of the 10 covered industries plus the composite Hamilton Index.
A country-focused visualization tool that breaks down how each of the 40 covered nations and other multinational groupings perform.
A momentum visualization that weighs how nations’ and multinational groupings’ output and relative performance has changed over time.