Why Korea leads Asia in Industry 4.0 push

How Korea is introducing formidable strategies that will see artificial intelligence and big data play a big part in the manufacturing value chain in the so-called fourth industrial revolution.
Korea creates the world's first two-legged manned robot last year which could potentially put into manufacturing use
Korea creates the world's first two-legged manned robot last year which could potentially put into manufacturing use

It is clear that we are on the brink of a technological revolution that will fundamentally change the way we live, work, and communicate with each other.

The rapid advancement of new technology means the widespread application of next-generation technologies such as artificial intelligence, big data, internet of things (IoT), advanced robotics, and so on, is now within sight.

Still, getting first to this utopian prize (or dystopian nightmare, depending on your perspective) of a technology-driven economy requires bold and favourable government policies that seek to maximise a country's innovative and creative qualities and fosters the necessary research and development.

In that respect, South Korea is currently leading the way in Asia. 

“We are ready to let next-generation technology drive economic growth for the years to come,” Kim Jiwon, senior deputy director of intelligent information society bureau at Korea’s Ministry of Science and ICT, told FinanceAsia in Seoul. “The government is ready to support any changes brought about by such [a] transformation.”

Kim was speaking after South Korean President Moon Jae-in put technological development at the heart of his five-year economic plan in July.

The concept of a fourth industrial revolution – an intelligence revolution based on super connectivity supported by digital technologies – was included in Korea’s national agenda for the first time, extending former president Park Geun-hye’s policy of upgrading the economy through technological innovation.

Industry 4.0, which broadly refers to automation and big data application in the manufacturing process, will become a driving force for the Korean economy.

According to Kim, the government will support industry 4.0 by injecting state funds into new innovative industries, enhance overall competitiveness by introducing new technology in the manufacturing value chain, as well as increasing subsidies for small-and-medium enterprises (SMEs) in gradually transforming to an automated manufacturing process.

Korea is well-placed to lead Asia in the technology push because it has the region’s best infrastructure and investment appetite for developing digital technologies, Kim said.

The nation ranked first globally in the development of information and communications technology for two consecutive years in 2015 and 2016, according to the World Bank. It also has the world’s highest ratio of R&D investment to gross domestic product (4.23% in 2015).

Industry 4.0 is particularly important in driving Korea’s growth because the country has the highest share of manufacturing output to GDP among developed countries, said Kim Yongkuk, head of Invest Korea, the country’s national investment promotion agency.

Korea, a manufacturing powerhouse best-known for making of steel, automobile and electronics goods, generated 30.2% of its GDP from the manufacturing sector in 2014, according to World Bank data. That is higher than Germany, the very definition of modern manufacturing, at 23% and Japan at 17.7%.

SME and automation

In order to promote manufacturing automation across all industries it is essential to support SMEs, which form a large part of Korea’s manufacturing industry.

“Large conglomerates have started to adopt automation and intelligence technologies, but many SMEs are still lagging behind because of insufficient capital and know-how,” Invest Korea’s Kim told FinanceAsia.

One recent government initiative is to promote smart factory technology to local SMEs through a dedicated smart factory division under the Ministry of Trade, Industry and Energy, which has helped to train as many as 40,000 workers to operate automated manufacturing facilities.

Smart factories operate autonomously as the machines communicate with each other through sensors – reducing faulty products and waste.
With the support of IoT and artificial intelligence technologies, workers are connected to and in control of every part of the factory through smart devices – even when they are not at the site.

By 2025, Korea aims to establish 30,000 smart factories with full digitalisation and automation.

Job losses?

Artificial intelligence and manufacturing automation is often cited as a threat to employment. Some industry experts suggest the introduction of robots could imply fewer jobs available for human beings. It is an inevitable question often raised during Korea’s industrial transformation.

In response to public fears about robots taking over in the labour market, Kim from the Ministry of Science and ICT said it is easy to overlook the new jobs and functions that will be created through this transformation.

“Germany is expected to see a reduction of 750,000 jobs in machinery, retail, and food-related industries because of automation. But on the other hand, the process will create 1 million jobs in the information technology and services industry by 2030,” Kim told FinanceAsia. “Overall, people will be upgrading instead of losing their jobs.”

Manufacturing automation will transform Korea’s employment structure by placing more emphasis on high-value-added jobs, while reducing human exposure to unskilled, repetitive, or dangerous jobs, Kim said.

Naturally, the fourth industrial revolution will also create and expand new job functions that involve creativity and innovation. By 2030, Korea is expected to create 800,000 ICT-related jobs including data analysts, software developers, and robotics experts.

The development of robots and automated manufacturing process is expected to reduce Korea’s overall labour costs by 33% through 2025. And by 2030, the Industry 4.0 upgrade will create up to W460 trillion ($420 billion) of economic value – more than a quarter of the country’s GDP last year, according to the Ministry of Science and ICT.

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