South Korean ICT small and medium-sized enterprises, new hiring 'paused' in 2024

The recruitment market for small and medium-sized enterprises in the domestic information and communication technology sector has actually stalled in 2024. Out of ten companies, almost none are hiring new employees, and on the front lines of operations, finding people has become a bigger burden than securing funds.

According to the “2025 ICT Small and Medium Enterprise Status Survey” released on the 10th by the Korea Venture Business Association, the Ministry of Science and ICT, and the Korea Institute of Information and Communication Industry Promotion, among 2,500 surveyed small and medium-sized enterprises, 98.5% reported not conducting any new recruitment in 2024. This percentage has increased by 1.0 percentage point compared to a year ago. The survey was conducted from September to November last year across 11 ICT industries, including gaming, software, and electronic components. The reasons behind the recruitment freeze are not solely due to economic slowdown. The biggest difficulty cited by companies in their actual operations is “ensuring necessary personnel” (50.2%), followed by sluggish sales (35.0%), interest rate fluctuations (23.0%), development of new technologies and products (21.3%), and fundraising (18.8%).

In particular, the hardest-to-recruit talent on-site are mid-level managers who handle both practical and managerial responsibilities. Among the levels facing labor supply and demand difficulties, section chiefs and team leaders account for the highest proportion at 89.4%; acting managers follow closely at 84.9%. The proportion of respondents citing difficulty in recruiting new employees is 23.8%, while senior executives account for 1.9%. By occupational category, experts and related professionals have the highest share at 89.6%; management personnel come next at 69.4%, and service staff at 19.3%. This indicates that the ICT industry is not merely facing a personnel quantity shortage but is encountering greater difficulties in securing skilled labor capable of understanding technology and leading projects. Despite few new hires, the phenomenon of labor shortages remains severe, which can be explained by many companies delaying or abandoning recruitment due to their inability to promptly find talent at the required level.

Regarding financing structure, ICT small and medium-sized enterprises rely more heavily on the banking system than on policy-based finance. Among new external financing sources, “general financial institutions such as banks” account for the highest share at 77.0%; corporate bonds and unlisted stocks account for 20.9%; government policy funds and R&D funding only account for 0.8%. The average financing scale is 2.5B Korean won. Concerning difficulties in obtaining financing through financial institutions, the highest proportion cited “high financial costs, i.e., interest burden” at 24.0%; followed by “insufficient credit loans” at 16.9%, and “excessive collateral requirements and undervaluation of collateral” at 12.1%. On the other hand, 98.9% of surveyed companies reported difficulties in obtaining government policy-based financing. Reasons include “insufficient scale and limits of financing” (24.9%) and “difficulty passing review” (17.1%). Although policies have aimed to support innovative technology companies, the actual experience of enterprises is closer to “high thresholds and small scale.”

The financial condition of these companies shows a divergence between outward indicators and internal realities. In 2024, the number of employees in ICT SMEs is nearly 1M, at 999,431. Total assets amount to 297 trillion Korean won, an increase of 34 trillion won from the previous year; however, total capital decreased by 8 trillion won to 103 trillion won; total liabilities increased by 43 trillion won to 195 trillion won. As a result, the self-capital ratio dropped to 34.5%, down 7.7 percentage points; the debt ratio rose to 190.0%, up 53 percentage points. Total sales reached 193 trillion Korean won, down 26 trillion won; but total operating profit increased by 5.7 trillion won to 6.7 trillion won. Sales declined while profits increased, which can be seen as a result of cost adjustments or a focus on profitable operations. However, among companies established within 7 years, only 6.1% have broken even (i.e., revenue equals costs, escaping losses), with an average time to break-even of 1.8 years. This indicates that most startups are still in an unstable profit structure.

The entrepreneurial ecosystem also heavily depends on self-capital. Among companies established within 7 years, 95.7% are led by current CEOs who are founders; in the age group at founding, those in their 40s account for the highest at 41.8%. In terms of education, 77.5% graduated from regular universities, with 99.1% starting their businesses after graduation. The average time from deciding to start a business to actually establishing a company is 43.5 months, about 3 years and 7 months. In terms of startup funding, personal funds account for as much as 80.3%; followed by bank and non-bank loans (14.1%) and personal borrowing (13.3%). On the other hand, among companies that have adopted artificial intelligence, 92.0% use it for R&D and innovation activities; 51.2% utilize machine learning for data analysis. The biggest benefit AI has brought is “cost savings on manpower,” accounting for 77.8%. This shows that in an environment where hiring is difficult, AI is becoming a means of cost reduction and productivity enhancement. This trend is likely to continue in the future. If policy-based financial accessibility cannot be improved, small and medium ICT companies will have to continue relying more on bank loans; meanwhile, the dual pressures of sluggish recruitment and skilled labor shortages may accelerate the spread of efficiency-driven strategies centered on AI.