Even the ‘World’s No.1’ Company Crumbles Under China’s Onslaught, Heightening Threats to Korea’s Manufacturing Base

22 out of 63 Korean SMEs in Deficit or Shutdown.
Over Half Have Fallen Short of Average Operating Profit in the Past Decade.
Undermined by China’s Low-Cost Offensive and Technological Catch-Up.

Two out of ten Korean small and venture firms that achieved global No.1 status in specific fields during the 2010s posted operating losses last year. Including those that exited business or were sold, more than a third of these companies now stand at the brink of survival. Analysts warn that shifting technological paradigms and China’s accelerating pursuit are pushing even global champions into existential jeopardy.

35% of Korean SMEs Face ‘Survival Crisis’

According to Statistics Korea and the Financial Supervisory Service on the 22nd, of the 63 small and venture firms officially certified by the government as global market share leaders in 2013, 11—or 17.5%—posted operating losses last year. Among these, 9 companies have been in the red for two consecutive years since 2023, while 7 have recorded losses in more than three of the past five years. Another 11 companies could not be tracked due to bankruptcy or sale. Profitability among the surviving profitable firms was also weak. Fewer than half—29 firms (46%)—achieved operating profit margins above the domestic manufacturing average of 5.6% last year. Only 18 companies (28.5%) managed margins above 10%.

Firms with deteriorating financial conditions either sold themselves or shut down. Starco (ship interior materials) and Far East Elecom (fluorescent lighting fixtures for ships), both once global No.1s amid the shipbuilding boom, were sold after the industry slumped in the mid-2010s. Shina Jeonggi, which commanded 30% of the global market for “guide shoes” used in aligning ship diesel engine parts, closed down entirely.

LCD-related firms are also struggling. Cham Engineering, once global leader in the laser repair market for LCD defect correction, has been mired in chronic deficits since the mid-2010s. LMS, a prism sheet maker for LCD brightness control, and Mirae Company, a manufacturer of FPD substrate edge polishing equipment, launched new ventures such as surgical robots but have yet to find a breakthrough. GigaLane, which held 60% of the global LED etching equipment market in 2012, continues its deficit streak.

China’s ‘Technology Farming’ Bears Fruit

At the root of Korean firms’ struggles lies China. Once called the “world’s factory,” China is now emerging as a leading technological powerhouse in advanced industries. Heavily backed by state support, Chinese firms are increasingly achieving results and moving to dominate global markets. Today, robots, artificial intelligence (AI), batteries, electric vehicles, and shipbuilding are all fields where China is indispensable. China’s AI, epitomized by DeepSeek as a challenger to ChatGPT, is already deemed capable of rivaling the United States.

Even in robotics, the emblem of advanced technology industries, China’s rise is striking. In a report, Yang Seung-yoon, analyst at Eugene Investment & Securities, noted, “What makes China’s robotics industry formidable is the acceleration of technology development fueled by massive capital, coupled with significant localization of core components, which translates into price competitiveness. Warnings are mounting in the U.S. and Europe not to fall behind China in robotics.” China’s industrial robot production soared from 33,000 units in 2015 to about 484,000 last year—an increase of 15-fold in a decade.

China’s advance is also reshaping key markets long dominated by Korean firms, such as batteries and shipbuilding. According to SNE Research, in the first quarter of this year, Korea’s three major battery makers saw their combined EV battery market share fall 4.5 percentage points year-on-year to 18.7%. By contrast, China’s CATL rose to 38.3% and BYD to 6.7%, consolidating their dominance. The notion that Korea still “leads China in technology” is becoming untenable.

Next Decade: Preparing to Nurture Advanced Semiconductors

China’s method of advancing its high-tech industries mirrors the approach once taken by Korea. The state identifies strategic sectors and then directs massive policy financing and institutional backing to accelerate their growth. A prime example is “Made in China 2025,” launched in 2015, the first phase of a 30-year plan. It targeted ten core industries, providing generous subsidies for R&D while shielding domestic firms in the home market.

“Made in China 2025” is widely credited with success. According to Bloomberg Intelligence and other analyses, of the 13 key technologies prioritized under the plan, China has attained global No.1 status in five, while rapidly catching up in others. Chinese solar panels now account for 85% of the global market, electric vehicles including hybrids 70%, and batteries over 60%. Market share is rising swiftly in pharmaceutical ingredients (30%) and AI (20%) as well. China’s high-speed rail network expanded from 19,000 kilometers in 2013 to 48,000 kilometers last year, a 2.5-fold increase, capturing more than 70% of global contracts.

Yet in advanced semiconductors and new materials, China has yet to surmount barriers posed by advanced economies. U.S. semiconductor export controls, initiated under the Biden administration, have slowed China’s march toward technological self-sufficiency. In response, Beijing is preparing a new long-term industrial strategy, focusing on nurturing advanced semiconductor industries over the next decade. This is viewed as a calculated move to secure future industrial supremacy, undeterred by the pressure of President Donald Trump’s administration, which has pledged a revival of U.S. manufacturing.