SMEs, the "roots" of Korean manufacturing, must open the "K-manufacturing 2.0 era" based on a field-centered AX (AI transformation) strategy.
ChosunBiz, the economic news outlet of the Chosun Media Group, held the "SME AX Leaders Forum" at the Shilla Hotel in Jangchung-dong, Seoul, on the 26th. The "SME AX Leaders Forum" is the first forum on the SME and startup sector hosted by ChosunBiz. The Ministry of SMEs and Startups, its affiliated agencies, SME CEOs, and AI experts took part to assess the current crisis facing SMEs and discuss AX strategies to drive innovation.
Kim Deok-han, managing editor of ChosunBiz, said in opening remarks, "Globally, innovation based on AI—namely AX—is emerging as a new keyword beyond digital transformation (DX)," and emphasized, "SMEs, the roots of Korean manufacturing, must adopt AI technology to drive innovative growth."
Minister Han Seong-suk of the Ministry of SMEs and Startups said in congratulatory remarks, "Taking into account the varying levels of DX among small manufacturing companies, we will be a reliable partner so the ministry can successfully achieve the AI transition of SMEs and startups, including by supporting tailored smart factory adoption."
Rep. Heo Seong-moo of the Democratic Party of Korea, a member of the National Assembly's Trade. Industry Energy. SMEs. and Startups Committee, said, "To respond to China's sweeping offensive in manufacturing, there is nothing but DX—and further, AX," adding, "We must strengthen the competitiveness of Korean manufacturing through large-scale smartification."
Rep. Jeong Jin-uk of the Democratic Party of Korea also said, "In the National Assembly, together with the government, we will establish the legal and institutional foundation so that small and medium venture companies can evenly enjoy the benefits of AI innovation."
◇ "SMEs should adopt AI strategically… 'master craft' techniques applied on the floor"
Jo Seong-bae, chairperson of the AI Science and Technology Committee at The Korean Academy of Science and Technology (KAST), regarded as a leading AI authority in Korea, delivered a keynote speech on "Korea's AI-based innovation strategy." He presented how to apply AI technology to Korea's waning manufacturing sector, particularly AX strategies for SMEs, the "roots" of manufacturing.
The chairperson said, "It is important for SMEs to have a strategic AX with a clear purpose that precisely recognizes their own difficulties and can resolve them," adding, "They must also set business goals and a return on investment (ROI)."
Cha Ji-won, executive vice president for AX at SK, who delivered the second keynote on "AI-based innovation on the manufacturing floor," said, "With AI, SMEs can now do work on the shop floor that they could not touch before," adding, "We can implement a master craftsperson's know-how with AI and spread it to SMEs."
Professor Bu Seok-jun of Gyeongsang National University presented findings based on a survey of 50 small and mid-sized companies in the Gyeongnam region. He said, "SMEs struggle with AX due to a lack of infrastructure," citing as an example a solution that detects manufacturing defects from noise inside a car. He said, "To tell what problem caused the in-vehicle noise and what needs to be replaced, existing infrastructure such as an anechoic chamber, vehicles, and computing equipment must be in place, but SMEs lack such infrastructure."
He also said, "For SME AX, we need a model that combines hardware and AI," adding, "To lower the initial investment costs related to SME AX, we need policies that go beyond short-term subsidies and ease the long-term cost structure."
◇ DX success stories of SMEs in autos, fashion, and food
Lively case studies from SMEs embarking on AX followed. Oh Gyeong-jin, CEO of Taelim Industrial, an SME that manufactures automobile steering systems, said, "When there is a risk that products made by SMEs could disappear from the market in five years, we cannot invest billions of won in that production line," adding, "We must introduce AI in line with the company's current objectives and growth direction." Taelim Industrial, selected as a "K-smart lighthouse factory" by the Ministry of SMEs and Startups, has introduced new technologies such as autonomous mobile robots (AMR), digital twins, a warehouse management system, and safety sensors on the production floor to boost productivity.
Im Dae-bin, CEO of the apparel manufacturing SME AIDIMODE, said, "By shifting our way of working from analog to digital, we handled a 25% increase in delivery volume with a similar workforce," adding, "We will further improve efficiency at the planning stage using AI going forward."
Amid the K-food boom, a digital transformation case from a food SME was also presented. Baekje, which produces convenience foods such as tteokguk and noodles—traditional Korean dishes—introduced automation systems in processes including aging, freezing, drying, and thawing. CEO Kim Cheol-yu said, "Sales increased by about 34% in four years after building the automation system," adding, "We are leading the globalization of K-food by exporting our products to overseas markets such as the United States and Japan."
◇ SME business succession strategies also discussed... Importance of planning gifts and inheritance in advance
They also discussed one cause of the crisis facing Korean SMEs—aging CEOs and employees—and business succession strategies. Tateishi Miwako, director of the Business Succession and Revitalization Support Department at the Organization for Small & Medium Enterprises and Regional Innovation, Japan, shared the state of SME business succession and policies in Japan, which is facing succession issues ahead of Korea. The organization is an entity under Japan's Ministry of Economy, Trade and Industry that implements and operates SME support policies.
Director Tateishi noted, "In Japan, closures and shutdowns have been steadily increasing as managers age," adding, "In 2024 alone, 63,000 corporations shut down or closed, and half of them were profitable corporations." She said, "In a survey of corporations slated for closure, about 30% cited 'lack of a successor' as the reason." The explanation was that despite sufficient profitability, some have no choice but to opt for closure or shutdown because the review of business succession is delayed or there is no successor.
Kim Byung-guk, executive director at the Business Succession Support Center of Samjong KPMG, stressed the use of Korea's special gift tax regime for business succession. Kim said, "To support smooth business succession at SMEs, the government has refined related systems and is offering various benefits, including easing the burden of gift and inheritance taxes and allowing deferred payment," adding, "It is important to map out inheritance plans in advance."
He said, "Not all family business stock donations qualify for the special business succession regime; only the proportion attributable to 'business-related assets' in the gifted amount is eligible for the preferential 10% rate," adding, "For efficient succession, non-business assets should be dealt with through mergers, partitioning, or sales before the gift."