The Ministry of SMEs and Startups said on the 28th that it uncovered numerous cases of fraudulent receipt of subsidies in the "Smart manufacturing support project for micro manufacturers" and began sanctions, including referring cases for investigation and clawbacks. It will also push for a full overhaul of the project structure.
The project was introduced in 2020. It aims to boost productivity by adopting smart equipment and software in micro manufacturers' production processes. The application competition rate rose from 1.8 to 1 in 2021 to 5.57 to 1 in 2025. Sales and employment at participating corporations also increased. In 2023, sales rose 25.7% and employment 9.1%, and in 2024 they increased 10.9% and 6.7%, respectively.
However, as the scale of support expanded rapidly, lax management surfaced. The budget grew from 3 billion won in 2020 to 98 billion won this year. A joint inspection by the Ministry of SMEs and Startups (MSS) and related ministries found fraudulent receipts at 112 of the 1,887 corporations supported in 2024 (about 6%).
In particular, many cases were uncovered in which some supplier corporations led the entire process and induced misconduct.
The main types were "price padding and kickbacks." Suppliers padded equipment prices and then returned part of the difference in cash. Seventeen related supplier corporations were referred for investigation.
Purchases disguised as equipment leases were also uncovered. After receiving subsidies under lease contracts, parties actually signed sales contracts, or they purchased equipment before the project and later drafted lease contracts. Four supplier corporations and nine micro manufacturers were referred for investigation.
Cases of manipulating equipment operation data were also identified. In some instances, false data were transmitted to make it appear as if equipment at closed business sites was operating normally. Sixteen related supplier corporations were referred for investigation.
The Ministry of SMEs and Startups (MSS) initiated administrative sanctions against the 112 corporations where fraudulent receipt was confirmed, including clawbacks of subsidies and restrictions on participation in government support programs. Violating corporations will be barred from participating in support programs for up to five years. The full amount fraudulently received will be recovered, and additional monetary sanctions of up to five times the amount will also be imposed.
An additional in-depth investigation is also underway for 1,530 corporations supported in 2025.
The Ministry of SMEs and Startups (MSS) will also push to restructure the project. To improve the supplier-centered structure, it will mandate capability assessments and allow only vetted corporations to participate. It will also disclose participation histories and post-management levels to strengthen reputation mechanisms in the market.
It will also tighten eligibility for micro manufacturers. Applications will be limited to corporations with an average sales of at least 200 million won over the past three years, and the self-pay ratio will rise from 30% to 40%.
The evaluation method will shift from document-centered to video and interview-based. It will also introduce AI-based business plan similarity analysis and a system to detect multiple applications from the same IP.
The equipment support method will shift from leasing to purchasing. The post-management period will be extended from two years to five years. It will also verify price appropriateness through submission of cost data and external validation.
In the post-management stage, it will directly collect equipment operation data based on the Internet of Things (IoT). It plans to verify whether operations are underway through unannounced inspections and quarterly data submissions.
At the same time, it will introduce a dedicated coordinator system to support the project from planning to operation. The Ministry of SMEs and Startups (MSS) said it aims to block fraudulent receipt in advance and enhance the project's effectiveness through this.