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The Structure of ICT Industries’ Global Value Chain:Evolution and Future Progress

Author Kim Jong-gi, Seo Dong-hyeok, Ju Dae-yeong,Choi Dong-won, Kim Jae-deok Date 2014.12.29 Page 266
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Korea’s manufacturing industry has been experienced a remarkable decline in their growth potential for several years recently. Although ICT industry, especially, has lead the rapid growth of Korean economy during the past decade, new upgrading for another decade is a significant and urgent goal for the continuous growth.

Korea’s ICT industry is required to appropriately respond to 'the increasing competitiveness' of the chinese industries and 'the changed global market demands' stemmed from the development of convergence technologies, deepening global competition, paradigm shift, aging society, environment-friendly atmosphere, and the drastic economic growth in the emerging countries. This is why Korea's industry needs to upgrade its GVC structure through the innovation of manufacturing sector and growth of the up-stream sector.

With the advent of the global era, global value chain(GVC) in the ICT industry is expanding for improving the industrial competitiveness. GVC structure of ICT industry is advancing in the direction giving importance to the intangible value chain such as product design, engineering, R&D, service. The industrial competitiveness increasingly become dependant on capability to
lead the value chain of the industry rather than to product and boost sales.

Korea’s ICT industry is recording global top rank in some sectors like memory semiconductors, display, digital TV, smart phone, secondary battery. Korea as a leading country of ICT industry, however, is less appreciated for capability of the high value-added
fields including software, design, R&D, branding. Considering that industrial growth in the future will be driven by a new wave of GVC and up-stream sectors, it is necessary for the Korea’s ICT industry to fuel renewed investment for the improvement of GVC production capability, combined with stronger export growth and development of high technological or smart components/parts.

With the focus on the expansion of globalization, this study analyzes the structure change of GVC in the ICT industry, and then the GVC level of the Korea’s ICT industry with the input-output table, some challenges faced by the industry. In addition, we evaluated the GVC status and capability in Korea’s ICT industry from industrial specialist survey. Finally the study suggest the strategies and policy measures to overcome the global hard competition and continue to grow.

Indicators of GVC evaluation are as follows: product planning/design, R&D(intangible value chain; input) intermediate product, final good(tangible value chain), distribution, marketing/sales, service(intangible value chain; sales). According to the investigation of GVC level, the GVC capability of Korea’s ICT industry is weak compared to the advanced countries. When compared with USA(100), that of Korea is 89.3, while Japan 90.9, Western European countries 88.9, China 79.8. Classified by sub-industry, GVC capability of audio/video devices is 89.3 and telecommunication product is 89.4, IT service sector 93.0, But SW and solution sector is estimated as only 81.7 which is the lowest level and that of IT component is 85.2 with the second lowest level among sub-industries.

From the estimation results, we also found that when assessed by GVC sector, assembly/manufacturing is the highest level as 3.14 in terms of five-point scale, followed by customer service 2.96. product planning/design, whereas, got the lowest score 2.40.

We would like to suggest some strategies to strengthen the dynamic GVC capability of the manufacturing industries for shifting toward the more value-added industry. It’s very important to upgrade the power of planning and design for new products and more valueadded high technological components in order to advance the GVC stage. Also, manufacturing industries should promote the ‘global star’ small firms and support the their participation in GVC so as to
make sure the growth opportunities and GVC capacity. In addition, building of Korean industrial complex in ASEAN, joint establishment of international institute for ICT cooperation between Korea and ASEAN, training system for cultivating the GVC-oriented manpower are necessary for Korean manufacturing to improve the GVC structure.

GVC in manufacturing sectors has become one of the crucial factors for sustaining their industrial global competitiveness. The shift to advanced smile curve in ICT industry will result in strong global demand for the “goods made by Korea”, which are expected to grow more than now with improved GVC structure.