Manufacturing in Korea

Manufacturing has driven Korea’s rapid economic development, transforming it into a global industrial giant. It is one of the world’s largest shipbuilders, fifth largest car maker, and sixth largest steel maker.  Advanced manufacturing and services dominate the economy, employing the majority of the population. Among its main manufactures are mobile phones, consumer electronics, household whitegoods, cars, ships and steel, all of which are exported around the globe. As an advanced manufacturing economy, Korea imports large quantities of natural resources such as coal, iron ore and oil.

Korea is an attractive destination for high-end manufacturing thanks to its highly skilled workforce, world-class infrastructure, advanced research and development, and strategic location for Asia and
the Pacific. But businesses interested in setting up manufacturing operations in Korea should bear in
mind that it is not a low-cost destination. The Korean Government actively encourages foreign investment 
in manufacturing and offers various incentives. Free trade, free economic and foreign investment zones offer specific incentives for high-tech manufacturers to set up in their locations.

However, Korea’s services sector has long lagged behind its dynamic world-class manufacturing sector in efficiency and effectiveness. Manufacturing-led development has siphoned capital, talent and other resources away from services.

A joint venture with a Korean business is a popular option for foreign businesses wishing to establish manufacturing operations there; be it to produce a product for the Korean market or export to third countries. Another option is to engage a contract manufacturer. Contract manufacturers provide engineering and manufacturing services to companies and brands that do not want to own and operate their own factories. They are typically experts in manufacturing and can quickly adopt your products into their manufacturing lines and schedules. In engaging a contract manufacturer, make sure you have robust quality control mechanisms in place and perform due diligence.

Manufacturing Labour laws:

  • Companies shall maintain a minimum ratio of senior citizens employed to total employees (2% for the manufacturing industry)
  • Korea’s Minimum Wage Law: Wages increased at an average annual rate of 4.6 per cent in the manufacturing industry between 2009 and 2014, compared with 3.3 per cent in financial services. The Government’s policies are broadly aimed at creating more equality between services and manufacturing, by increasing tax incentives for the former to the same level as in manufacturing.

Want to learn more? Explore our other South Korea information categories or download the Korea Country Starter Pack.