characteristics of industrial r&d in korea international workshop on research & innovation...
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Characteristics of Industrial R&D in Characteristics of Industrial R&D in KoreaKorea
International Workshop on Research & Innovation in South Korea
2003. 3. 4.
Jae-ik Choi, Ph.D.
Korea Industrial Technology Association1
ContentsContents
I. Current Status of Industrial R&D 1. Industrial R&D History 2. Features of Industrial R&D 3. Features of Industrial R&D Centers 4. Major Achievements
II. Industrial R&D Support 1. Tax Credit 2. Manpower 3. Financial Support
III. Problems & Policy Directions 1. Problems & Challenges of Korea’s Industrial R&D 2. R&D Trends in Industry 3. Policy Directions
IV. Government’s Policies to Attract Foreign R&D Centers 1. Foreign Direct Investments in R&D 2. Incentives for Foreign Direct Investments in R&D2
I. Current Status of Industrial R&DI. Current Status of Industrial R&D
3
1960~1960~70’s70’s
• KIST(1966), Ministry of S&T(1967) • Technology Development Promotion Law(1972)• KOITA(1979)
1980’s1980’s
• National R&D programs and Accreditation system of industrial R&D centers(1981)
• Industrial R&D support policy launched - Tax credit on R&D(1981), Military service exemption(1981), Cus
toms duties credit(1983)
1990’s1990’s
• Increase in the number of R&D centers• Venture Promotion Act(1996): Surge of Venture Companies’ R&
D centers
2000’s2000’s
• Industry becoming the core of NIS(10,000, 75% of national R&D)• Foreign R&D centers’ increase(134)
Industrial R&D History
4
76.2
124.895.1
2001
70.9
46.733.1
1990
65.4
13.99.1
1985
41.1
5.22.1
1981
144.3108.1
122.590.7
121.989.1
Total(A)Industry(B)
74.9%74.073.1B/A(%)
1995 2000 2002
R&D Investments by Industry in US 100million dollars
Features of Industrial R&D
14.8
13.7
Automobile
53.4
49.4
Electronics
83.4
77.1
Subtotal
Mechanical appliances
1.8
1.7
Food processi
ng
10.5
9.7
Chemical
15.2
14.0
Others
92.63.11.0Amount
1.0
Textile
3.3
Other manufactu
ring
100.0%
Total
in US 100million dollars
R&D Spending by Manufacturing Sector(2002)
5
2.51
2002
2.57
1997
2.51
1995
2.02
1991
2.372.15Korea
1995 2000Country
R&D Intensity of Industry(R&D/Sales)(%)
US
Japan
Germany
Korea
International Comparison
3.6%(1999)
3.99%(2002)
3.90%(1999)
2.51%(2002)
Features of Industrial R&D
6
Others(%)
BA(%)
MA(%)
Ph.D.(%)
By degree
B/A %
Industrial R&D personnel(B)
Total R&D manpower(A)
65,249(55.2)
61,437(55.2)
51,594(54.7)41,191(60)27,414(70.
8)14,280(75.
2)5,685(79.
3)
37,596(31.8)
33,288(29.9)
29,166(30.9)
20,450(29.8)8,822(22.8)3,594(18.9)612(8.5)
7,324(6.2)6,932(6.2)5,351(5.7)3,373(4.9)1,139(2.9)251(1.3)79(1.1)
62.2%62.2%59.0%53.5%54.9%45.8%34.6%
118,160111,29994,33368,62538,73718,9967,165
3,611(5.3)
128,315
1995
1,362(3.5)
70,503
1990
871(4.6)
41,473
1985
789(11.0)
20,718
1981
189,888178,937159,973
9,642(8.7)
2001
7,991(6.8)
2002
8,222(8.7)
2000
Korea’s R&D Manpower
Features of Industrial R&D
7
SMEs
Five or more BA or higher degree holders in science and engineering
- Two or more researchers for venture companies’ R&D centers
LARGE
Ten or more BA or higher degree holders
Manpower requirementsManpower requirements
Independent R&D facilities(including space and R&D equipments)
necessary for R&D activities
- Space should strictly be seperated by the wall
Physical RequirementsPhysical Requirements
Features of Industrial R&D Centers
Eligibility of Industrial R&D Centers
8
4,013
6,307
8,217
8,8638,927
2,9602,278
1,8621,5781,3501,113903708
545
842853803 883797
421 493 532 577 630 692 748782 800
9,8109,705
9,070
7,110
4,810
824 9661,2011,435 1,690
1,9802,270
2,6103,060
3,760
1836044552901521228253
81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03
SME Large
Total
Features of Industrial R&D Centers
Rapid Growth of Industrial R&D Centers
9
Concentrated on Electrics & Electronics(ICT) 5,573 / 57% of the total
Concentrated in the metropolitan areas 7,140 / 73%
Features of Industrial R&D Centers
SME research centers
8,927 / 91%
10
Market share - 5% (No.5)Steel
Market share - 33% (No.1)Shipbuilding
CDMA Mobile Phones - No.1ICT
DRAM - No. 1 since ’98Semiconductor
Market share – 5.5% (No.6)
Market Share in the Global Market
Automobiles
Competitiveness of Korea’s Major Industries
Major Achievements
11
II. Industrial R&D SupportII. Industrial R&D Support
12
Tax CreditTax Credit
ReserveReserve 3~5% of profit for future research and manpower development
Tax deduction of either 15% of research and manpower development
costs occurred in the taxation year or 50% of the excess of the average
research and manpower development costs for the last four years
Deduction of 7% of facility investment for R&D
80% deduction of custom duties imposed on research equipment
imported for R&D
Exemption of local taxes including acquisition and registration tax on
real estate for R&D
Income tax exemption for foreign R&D personnel
ReserveReserve 3~5% of profit for future research and manpower development
Tax deduction of either 15% of research and manpower development
costs occurred in the taxation year or 50% of the excess of the average
research and manpower development costs for the last four years
Deduction of 7% of facility investment for R&D
80% deduction of custom duties imposed on research equipment
imported for R&D
Exemption of local taxes including acquisition and registration tax on
real estate for R&D
Income tax exemption for foreign R&D personnel
Tax Credit
13
ManpowerManpower
Exemption from military service duties for young researchers
(MA & Ph.D degree) (2~3,000 a year) employed at accreditated
industrial R&D centers
Exemption from military service duties for young researchers
(MA & Ph.D degree) (2~3,000 a year) employed at accreditated
industrial R&D centers
Manpower & Financial Support
Financial SupportFinancial Support
Direct funding through national R&D programs Direct funding through national R&D programs
Loan from Public Funds : Science Technology Promotion Fund,
Information Promotion Fund
Venture Capitals : KDB Capital, Kibo Technology Advancing
Capital, Korea Technology Credit Guarantee Fund
Loan from Public Funds : Science Technology Promotion Fund,
Information Promotion Fund
Venture Capitals : KDB Capital, Kibo Technology Advancing
Capital, Korea Technology Credit Guarantee Fund
14
III. Problems & Policy DirectionsIII. Problems & Policy Directions
15
3~6 yearsUS • Japan25%NT
3~5 yearsUS • UK60%BT
2~3 yearsUS•Japan60~70%IT
40~50%
Korea’s Tech Level
US • Germany
Reference Country(100%)
4~5 yearsET
Time required to catch up
KISTEP(Korea Institute of S&T Evaluation & Planning)
Korea’s Technology Level : A comparison with Advanced Countries
Problems & Challenges of Korea’s Industrial R&D
16
020040060080010001200
Korea 86 85 86 81
U.S 942 952 919 1,028
Japan 371 320 353 379
China 554 578 615 731
1997 1998 1999 2000
Number of World’s Top Products by Country of Origin
KOTRA(Korea Trade-Investment Promotion Agency), Trade Focus
Problems & Challenges of Korea’s Industrial R&D
17
□ Accelerating Hollowing-out of Manufacturing Industries
- Approximately 65% of manufacturing firms are
planning or considering moving their production
plants overseas, while maintaining core R&D
operations at home(KOITA Survey)
Problems & Challenges of Korea’s Industrial R&D
18
R&D Drive Geared to the Development of Ten Technologies R&D Drive Geared to the Development of Ten Technologies
Focus on thedevelopment of ten growth industries
Utilization of Global R&D Resources, including Research Manpower, Information and Financial Resources
Utilization of Global R&D Resources, including Research Manpower, Information and Financial Resources
Global sourcing ofR&D Resources
Strengthening Int’l Tech Cooperation and Promotion of Off-shore R&D Activities - Large companies prefer collaboration with global companies while SMEs with domestic universities
Strengthening Int’l Tech Cooperation and Promotion of Off-shore R&D Activities - Large companies prefer collaboration with global companies while SMEs with domestic universities
Global Networking
R&D Trends in Industry
2004 Survey of Korean Industries - R&D Investment - Increase(53.5%), No change(41.2%) Decrease(4.5%) - R&D Manpower - Increase(51.1%), No change(45.8%) Decrease(2.6%)
2004 Survey of Korean Industries - R&D Investment - Increase(53.5%), No change(41.2%) Decrease(4.5%) - R&D Manpower - Increase(51.1%), No change(45.8%) Decrease(2.6%)
Enlargementof R&D Investments
& Manpower
19
□ Fostering Next Generation Growth Engines
○ Development of 10 New Growth Industries
― To plan and coordinate the development of the new growth
industries, special committee was established under the
National Science & Technology Council(NSTC)
○ Link advanced new technologies to the development of the
traditional industries
Policy Directions
20
10 Strategic Industries – Next Growth Engines(Examples)
Policy Directions
21
Next generation semiconductor
Next generation fuel cell
Future Automobiles
Intelligent Robotics
Digital TV/ Broadcasting
Next generation Mobile Communication
Intelligent Home Networks
Display
Digital contents/SW Solutions
Bio/New Medicine
□ Promotion of Basic Research
○ Increase the share of basic research in national R&D budget ― 19.5%(’03) → Over 25% by 2007
○ Upgrading university capability to a world-top level
□ Facilitating the Commercialization of Public R&D Results ― Tech. transfer to private sector ― Increase of the budget to support technology transfer from 1.1% to 3~5% of public R&D budget
Policy Directions
22
□ Rearing Core R&D Personnel
○ Fostering S&E Workforce ― S&T Graduate School ― Establishment of Northeast Tech. Management Graduate School
○ Promotion of Science & Engineering Education ― Strengthening special education for young talents ― Linking university education to research ― Funding support to Post-Docs studying abroad
○ Promotion of Job Creation for S&E Graduates ― Salary support for the Ph.Ds and MAs newly employed by SMEs ― Tech training given to SMEs’ R&D managers and researchers
□ Attract Foreign R&D Centers
Policy Directions
23
IV. Government’s Policies to IV. Government’s Policies to
Attract Foreign R&D CentersAttract Foreign R&D Centers
24
The number of R&D centers which invested more than 100,000 US dollars is 932 as of 2003. The number of 100% foreign-invested R&D centers is 134 as of 2003.
R&D center R&D center
By nation
56(41.8)
49(36.6)
16(11.9)
13(9.7)
USA
Europe
Japan
Others
By Industry
58(43.3)
35(26.1)
20(14.9)
21(15.7)
Electronics
Chemistry
Machinery
Others
Total 134(100.0) Total 134(100.0)
Foreign Invested R&D Centers in Korea
Foreign Direct Investments in R&D
25
•Pateur Research Institute concluded an agreement with KIST(2003) to set up a branch lab within KIST •Cavendish Research Center will also come to Korea
Financial SupportFinancial Support
CASH GRANT will be provided to new foreign investors who invest
over US$10 million dollars in high-tech industries or US$ 5 million
in R&D facilities (Comprehensive Plan to Attract Foreign Investment)
CASH GRANT will be provided to new foreign investors who invest
over US$10 million dollars in high-tech industries or US$ 5 million
in R&D facilities (Comprehensive Plan to Attract Foreign Investment)
Incentives for Foreign Direct Investments in R&D
Tax BenefitsTax Benefits
Income Tax & Corporate Tax – 100% deduction for the first seven
(7)
years and 50% for additional three (3) years
Acquisition• Registration • Property • Land Tax - 100% deduction
for the first five(5) years and 50% for additional three (3) years
Tariff • Special Excise Tax • VAT – 100% exemption within three(3)
years after the report of the R&D equipments is made
Income Tax & Corporate Tax – 100% deduction for the first seven
(7)
years and 50% for additional three (3) years
Acquisition• Registration • Property • Land Tax - 100% deduction
for the first five(5) years and 50% for additional three (3) years
Tariff • Special Excise Tax • VAT – 100% exemption within three(3)
years after the report of the R&D equipments is made
26
Special ZonesSpecial Zones
<Free Economic Zone><Free Economic Zone>Incheon Metropolitan City, Busan Metropolitan City and Gwangyang Incheon Metropolitan City, Busan Metropolitan City and Gwangyang City designated as Free Economic Zone wherein foreign companies and R&D cCity designated as Free Economic Zone wherein foreign companies and R&D centers are fully exempted from various taxes for three years and 50% of taxes fenters are fully exempted from various taxes for three years and 50% of taxes for additional two years.or additional two years.
<Industrial Complexes Exclusively for Foreign Investors><Industrial Complexes Exclusively for Foreign Investors>
Ochang 165,290 square meter(40.5 acre) → 495,870 square meter(121.5acre) : Ochang 165,290 square meter(40.5 acre) → 495,870 square meter(121.5acre) : Jinsa(330,580 square meter(81 acre) → 495,870 square meter(121.5acre) Jinsa(330,580 square meter(81 acre) → 495,870 square meter(121.5acre)
(75~100% Discount in Lease)(75~100% Discount in Lease)
< Free Investment Zone>< Free Investment Zone>
Easing existing regulationsEasing existing regulations
More than US $ 50 million for one company → More than US $ 30 million for seMore than US $ 50 million for one company → More than US $ 30 million for several companies(100% Discount in Lease)veral companies(100% Discount in Lease)
< Free Trade Zone>< Free Trade Zone>
Masan, Iksan, Gunsan and Daebul designated(100% Discount in Lease)Masan, Iksan, Gunsan and Daebul designated(100% Discount in Lease)
<Science Industrial Park><Science Industrial Park>14 Science Industrial Parks including Daedeok Science Town 14 Science Industrial Parks including Daedeok Science Town
<Free Economic Zone><Free Economic Zone>Incheon Metropolitan City, Busan Metropolitan City and Gwangyang Incheon Metropolitan City, Busan Metropolitan City and Gwangyang City designated as Free Economic Zone wherein foreign companies and R&D cCity designated as Free Economic Zone wherein foreign companies and R&D centers are fully exempted from various taxes for three years and 50% of taxes fenters are fully exempted from various taxes for three years and 50% of taxes for additional two years.or additional two years.
<Industrial Complexes Exclusively for Foreign Investors><Industrial Complexes Exclusively for Foreign Investors>
Ochang 165,290 square meter(40.5 acre) → 495,870 square meter(121.5acre) : Ochang 165,290 square meter(40.5 acre) → 495,870 square meter(121.5acre) : Jinsa(330,580 square meter(81 acre) → 495,870 square meter(121.5acre) Jinsa(330,580 square meter(81 acre) → 495,870 square meter(121.5acre)
(75~100% Discount in Lease)(75~100% Discount in Lease)
< Free Investment Zone>< Free Investment Zone>
Easing existing regulationsEasing existing regulations
More than US $ 50 million for one company → More than US $ 30 million for seMore than US $ 50 million for one company → More than US $ 30 million for several companies(100% Discount in Lease)veral companies(100% Discount in Lease)
< Free Trade Zone>< Free Trade Zone>
Masan, Iksan, Gunsan and Daebul designated(100% Discount in Lease)Masan, Iksan, Gunsan and Daebul designated(100% Discount in Lease)
<Science Industrial Park><Science Industrial Park>14 Science Industrial Parks including Daedeok Science Town 14 Science Industrial Parks including Daedeok Science Town
Incentives for Foreign Direct Investments in R&D
27
Improve Living Environment including Traffic, Housing, Medical Service, Education, Culture and Leisure
□ Encourage the establishment of foreign schools
- Expand tax benefits for donations made to foreign schools
- Process will be made easier to support foreign schools or other
necessary facilities
□ Physical facilities : Guest houses for foreign researchers, Cultural
centers, etc.
□ Deregulations on immigration processes for foreign researchers
Incentives for Foreign Direct Investments in R&D
28
□ Supply of qualified human resources
- Establish the Northeast Asian Technology Management
University to support qualified human resources to foreign
investors
- Allocate greater quotas of military service-exempted research
personnel to foreign investors
□ Establishment of one-stop service system
- 『 Korea Foundation for International Cooperation of Science
and Technology 』 (KICOS) and 『 Invest Korea 』
Other Incentives
Incentives for Foreign Direct Investments in R&D
29