Local Firms Lag Behind in R&D
By Lee Hyo-sik
Staff Reporter
Despite the robust performance during the global economic slump, Korean companies are lagging far behind their overseas counterparts in research and development (R&D) investment, spawning fears that they will lose out in the post-crisis world.
Samsung, Hyundai, LG and other global Korean companies have emerged as winners from the worldwide economic slump over the past year, capturing greater global market shares and posting record-high earnings.
Besides the weakened local currency against the dollar and the demise of overseas rivals, aggressive R&D investment has been the main driver for their robust performance, which is said to have played a role in transforming domestic firms into world-class makers of various industrial and consumer goods.
However, contrary to this widely-held perception, Korean businesses continue to lag behind their foreign competitors in R&D spending, according to a report issued Tuesday by the European Commission, an executive body of the European Union.
The report said Samsung Electronics was the only Korean firm among the top-50 companies in R&D spending worldwide in 2008, ranking 24th. Its standing has continued to head downward over the past few years. In 2005, the world's largest memory chipmaker ranked ninth, but its position fell to 10th in 2006 and 12th in 2007.
Among 1,000 non-Europe based companies, 22 Korea-headquartered businesses put their names on the list. Samsung Electronics was the 16th biggest R&D investor, while LG Electronics and Hyundai Motor ranked 48th and 52nd, respectively. Hynix Semiconductor was the world's 136th-largest R&D spender, followed by Korea Electric & Power Corp. at 159th, POSCO at 196th and KT at 237th.
``In 2008, companies here were facing the greatest economic uncertainty of all time, which made them extremely cautious about R&D and other types of investment. Additionally, their earnings performance was deteriorating on plunging sales at home and abroad toward the year's end in the wake of the global financial turmoil. With Korean firms relying more heavily on overseas demand than competitors, their R&D spending fell at a much faster pace,'' Samsung Economic Research Institute research associate Park Sung-min said.
But Park projected that corporate R&D spending here will show an upward curve down the road, given the ongoing economic recovery and stronger-than-expected performance.
Toyota of Japan was the world's largest R&D investor in 2008, followed by U.S. software giant Microsoft, German automaker Volkswagen, Switzerland-based pharmaceutical giant Roche and U.S. carmaker General Motors.
The report said that despite the international financial market meltdown late last year, the combined global corporate R&D investment grew 6.9 percent last year from 2007. In particular, European companies invested 8.1 percent more in various R&D activities in 2008, higher than the United States' 5.7 percent and Japan's 4.4-percent increase.