Korea’s ICT Services Market Dominated by Foreign Companies

While Korea has excellent ICT infrastructure, its ICT service market is dominated by foreign companies.

Although Korea’s information communication technology (ICT) infrastructure is one of the best in the world, a recent report points out that Korean ICT services market is dominated by foreign companies.

The report says that Korea’s advanced ICT infrastructure provides a good playground for foreign companies amid a chronic shortage of domestic ICT human resources.

“The Korean ICT service market including the Korean cloud and platform market is already led by global foreign companies,” the Federation of Korean Industries said in the report on July 30. “As Korean ICT companies are small, their sales per company are only one-third of the world average.”

In April 2019, Korea commercialized 5G services for the first time in the world. Telecom experts predict that 5G networks will account for 67 percent of Korea’s overall mobile networks five years later, the highest in the world. Korea is also ranked first in the world in terms of the internet service speed and optical cable penetration (OECD, in 2018) and second in terms of e-government (the U.N, in 2020).

However, Korean companies’ ICT utilization was below the OECD average. The proportion of Korean companies which used ICT technology in transactions (taking and giving orders) and customer management and supply chain management through the internet is lower than the OECD average. The proportion of companies that place orders via computer networks was 46 percent for OECD countries on average but 41 percent for Korean companies. In receiving orders through IT networks, the Korean average is 15 percent, lower than the OECD average of 22 percent.

In addition, the proportions of companies that utilize ICT technology in the cloud and big data sectors were also lower than the OECD averages of 31 percent and 12 percent, respectively. This means that Korean companies did not make good use of their excellent ICT infrastructure.

Although the cloud and platform markets are promising industries expected to grow fast, the Korean market has been already dominated by global companies such as Amazon and Google.

Korean ICT companies were also small compared to the global average. Their average revenue per company was 271 billion won, slightly more than one-third of the world average of 795 billion won, and about one-twelfth of the average of 3.3 trillion won of U.S. companies, which ranked first in the world.

R&D spending per Korean company was also one third of the global average and one-fifth of of the U.S. average.

The technological level of Korea’s ICT industry was also lower than that of its major competitors. According to the Institute for Information & Communications Technology Planning & Evaluation (IITP), the average technology level of Korea’s 26 ICT sectors as of 2018 was 84.5 percent of the U.S. level, behind Europe’s 92.9 percent, Japan’s 88.9 percent and China’s 86.1 percent.

Korea’s technology gap with the first-ranking United States reached 1.4 years with 13 of its 26 ICT technology sectors ranking lower than all of the four major competitors — the United States, Japan, China and Europe.