| Securing Early Supply Stability for 100 Key Items
| Establishing a cooperation model between supply and demand firms
| Establishment of Competitiveness Committee, complete overhaul of special act

The materials, parts, and equipment industry is the backbone of the manufacturing sector. Leadership in the Fourth Industrial Revolution also depends on materials, parts, and equipment. Since the enactment of the Special Act on Materials and Parts in 2001, the materials, parts, and equipment industry has established a foundation for quantitative growth, leading to significant expansion in scale, including a threefold increase in production and a fivefold increase in exports.

However, due to a catch-up strategy focused on general-purpose products and compressed growth, the country has faced problems such as continued chronic dependence on foreign sources for key strategic items, increased global competition, and stagnation of added value. On top of this, Japan is imposing economic sanctions for political reasons, including export restrictions on semiconductor materials and the removal of South Korea from its whitelist.

In particular, while semiconductors are a foundational industry in Korea, the level of self-sufficiency is only 27% due to a focus on a stable supply chain.

Although Japan has a small market size, it has a structure that holds high market shares across numerous product categories through long-term technological accumulation. In contrast, while Korea has a large market, it has grown primarily through general-purpose products with relatively low technological difficulty. In 2018, the deficit in materials, parts, and equipment accounted for the majority of the total trade deficit of $24.1 billion at $22.4 billion, and Japan is the only country with a long-term trade deficit.

To address this situation, the government announced on the 5th that it has prepared 'Measures to Strengthen the Competitiveness of Materials, Parts, and Equipment' to resolve structural vulnerabilities in the materials, parts, and equipment industry, such as high dependence on specific countries, particularly Japan.

Since the second half of last year, the government has established a basic framework by gathering opinions from relevant demand and supply companies, associations and organizations, public research institutes, and private experts.

Although past policies established a foundation for quantitative growth, there were limitations, such as a lack of cooperation between supply and demand firms, a disconnect between technology development and production, and insufficient securing of technology for core strategic items due to a rigid R&D system.

This measure focused on establishing cooperation models between companies, promoting a ladder policy that leads from development to mass production, diversifying methods for timely intensive investment and technology acquisition, and providing package support that enables rapid production and facility investment.

There are three key points.

First is securing early supply stability for 100 items. The government selected 100 items from among Japan's strategic materials (1,194 items) and all materials, parts, and equipment items (4,708 items), taking into account national security and industrial importance, substitutability, technological level, dependence on specific countries, and the impact on production in key industries and new industries.

The goal is to stabilize the supply of 20 items that are immediately needed within one year, and 80 items that require a long time to develop within five years. The government has decided to make large-scale investments in key items by prioritizing and concentrating available budgets. Accordingly, 7.8 trillion won in government funds will be injected into the R&D sector and more than 2.5 trillion won into M&A.

The next step is to establish healthy cooperation models between supply and demand companies and between demand companies. The government has decided to provide package support, including funding, tax incentives, and deregulation, for four cooperation models, such as vertical cooperation between supply and demand companies regarding key items and horizontal cooperation among demand companies.

In addition, it was decided to significantly expand demonstration and mass production testbeds to connect the technology development of suppliers with the production stages of demand companies, and to introduce risk diversification systems such as reliability assurance, while strengthening comprehensive and customized support, including close support for private investment, increased supply of investment funds, and supply of specialized personnel.

Finally, it involves comprehensive support through a robust implementation system. To this end, it is backed by the establishment of a Competitiveness Committee and a complete overhaul of the Special Act on Materials, Parts, and Equipment to pursue extraordinary measures alongside one-stop troubleshooting.

A government-wide Materials and Components Supply Chain Response Support Center, led by the Ministry of Trade, Industry and Energy, will be established to provide a one-stop service for resolving difficulties. The process involves the Ministry designating reported issues as materials, parts, or equipment eligible for emergency support and assigning a dedicated officer for each category. A committee on the competitiveness of materials, parts, and equipment will also be established.

In a modern democratic nation with a clear separation of powers, Japan launched an economic attack on South Korea for the reason that the executive branch did not put the brakes on a decision by the judiciary. These sanctions by Japan are a blow not only to South Korea but also to numerous Japanese companies that supplied high-quality products to the country.

The government has decided to turn this crisis into an opportunity to strengthen the competitiveness of the materials, parts, and equipment industry. Japan has fired the signal for the localization of core materials, which had previously been advocated only in words.

The growing pains are inevitable. However, if we overcome them, it will strengthen our industrial structure. Now more than ever, the roles of the government and the National Assembly are crucial.