South Korea's ICT R&D investment leads the overall industry... Reduced venture capital raises concerns

Last year, domestic information communication technology companies significantly increased their R&D investments, and in fact, ICT has led the technological investment trend across Korea’s entire industry.

The Ministry of Science and Technology Information and Communication and the Korea Information Society Development Institute released the “2024 ICT Company R&D Investment and Human Resources Survey” on the 29th, showing that the R&D expenses of domestic ICT companies were recorded at 64.61 trillion Korean won. This figure increased by 13.8% compared to the previous year, marking the highest growth rate in nearly six years. In terms of scale, this accounts for 60.6% of Korea’s total industry R&D expenditure of 106.7 trillion Korean won. This means that over half of the overall industry R&D funds are concentrated in the ICT sector.

In this growth trend, it is noteworthy that private funds, rather than government finances, played a leading role. Private and foreign sources accounted for 62.4 trillion Korean won, or 96.6% of the total, while government and public sources amounted to 2.2 trillion Korean won, remaining flat from the previous year. By industry, information communication broadcasting equipment companies, including advanced semiconductors, invested 59.5 trillion Korean won, accounting for 92.1% of the total, holding an overwhelming share. Software development and production industries invested 4.2 trillion Korean won, a relatively small scale, but this sector is increasingly recognized as strategically important with the spread of digital transformation and artificial intelligence.

Looking at company size, large enterprises invested 53.5 trillion Korean won, a 16.3% increase from the previous year, leading the overall growth trend. Small and medium-sized enterprises also invested 2.5 trillion Korean won, an 11.9% increase, continuing their commitment to technological accumulation. Conversely, R&D expenses for venture companies amounted to 5.2 trillion Korean won, a decrease of 0.3%. This is the first decline in venture R&D investment since the relevant statistics were compiled. Analysts believe this is mainly due to economic uncertainty, worsening financing conditions, and government budget cuts. If technology startups and early-stage innovative companies face funding pressures, it could weaken the vitality of the industry ecosystem in the long term, making policy responses increasingly necessary.

Regarding the nature of R&D, near-commercial development research accounted for 4.52 trillion Korean won, or 70% of the total. However, basic research also invested 850 billion Korean won, a 19% increase from the previous year, surpassing the 16.1% growth rate of applied research. This indicates that not only are development activities aimed at immediate product and service conversion strengthening, but the trend of securing original technologies is also being reinforced. The number of R&D personnel reached 225,900, an increase of 5,200 from a year earlier, representing 48.0% of the total 459,000 R&D personnel in the domestic industry. By industry, information communication broadcasting equipment companies employed the largest workforce at 161,000; in contrast, the software industry, relative to its investment scale, employed 57,000 people, which is analyzed as a sector with a high employment inducement effect.

The government plans to continue fostering growth by strengthening the discovery and investment in enterprise-led R&D projects, enabling venture companies and competitive small and medium-sized and core enterprises to sustain momentum. At the same time, the government has also expressed its commitment to cultivating talent in artificial intelligence and software fields. Although this trend indicates that future ICT investments centered on semiconductors and artificial intelligence may continue to expand, a long-term decline in venture capital could weaken the innovation foundation. Therefore, policies that balance concentrated investment with ecosystem sustainability will become particularly important.