As the domestic IT industry develops, the concentration of talent, development, and investment in the software (SW) sector is intensifying. While market activity is particularly strong in IT platforms, developers in AI, web, and app development are seeing their salaries soar, while embedded developers and hardware developers are receiving comparatively poorer treatment.

According to recent analysis in the electronics industry, while SW concentration is intensifying, HW and embedded SW development is insufficient.

Among the 23 companies currently listed as domestic unicorn companies in the first half of 2022 selected by the Ministry of SMEs and Startups, most of them, including Musinsa, Socar, Yanolja, and Zigbang, are platform-based, and there are no companies that produce hardware output.

■ Wage Gap Between SW and HW Developers, Embedded Developers Rank 23rd

Hardware and firmware developers lamented that the rising salaries of IT developers, especially those at big tech companies, were a reality that had nothing to do with them.

According to the '2022 Applicable SW Engineer Average Wage Announcement' published by the Korea Software Industry Association, embedded SW developers ranked 23rd out of 29 IT occupations with an average hourly wage of 32,661 won. The highest average hourly wage was 69,564 won for infrastructure architects, followed by business analysts, IT consultants, and software architects.

Some have pointed out that while many IT startups are operating in areas like Gangnam and the Digital Complex while paying high rents, these are mostly purely software-based companies that operate their businesses through software services and national projects without any actual products.

This phenomenon is interpreted as being due to the relative ease of starting a business in the software sector compared to the hardware sector. Because the hardware manufacturing industry requires greater capital, it's difficult to readily launch a business in this sector.

■ Domestic outsourcing → China → Southeast Asia subcontracting, SW·HW partnership

The domestic development environment is increasingly shifting to outsourcing software and embedded development to reduce unit costs. Domestic embedded companies are also reportedly dependent on subcontracting from large corporations to generate revenue rather than launching their own solutions or products, resulting in poor treatment for developers.

Even small and medium-sized enterprises and startups are outsourcing development to China and Southeast Asia to minimize unit costs. Vietnam has been mentioned as a promising IT outsourcing destination for several years, and some companies are even reportedly looking to Bangladesh.

In the industry, while the IT platform sector has turned to overseas outsourcing due to rising developer salaries and a shortage of skilled workers, there has been much criticism that China's manufacturing quality has significantly improved in relation to hardware development in IT manufacturing. As quality levels rise despite lower unit prices, Chinese products are encroaching on the domestic market.

■ No robot manufacturing capabilities… Still dependent on Japanese motors

VD Company dominates the domestic serving robot market with a 70% share. VD Company imports and distributes serving robots from the Chinese company Pudu Tech. Furthermore, it's reported that most serving robots distributed in the domestic market are Chinese-made, with domestic companies merely modifying the exterior and providing after-sales service and distribution.

Korea is also considered to be significantly vulnerable in terms of domestic production of robot parts. Core components such as motors and reducers are used in robot drive, and over 60% of these components are dependent on Japan. Motors, reducers, and control modules are core technologies that account for 70-80% of robot manufacturing costs.

Last year, it was revealed that three domestic massage chair manufacturers outsourced an average of 94% of their production to China, sparking controversy. Since the motor is a key component of massage chairs, the dependence on overseas suppliers for related products is expected to be even higher.

As China's manufacturing infrastructure was utilized in this way, technology leakage and the accumulation of manufacturing know-how occurred, and China's manufacturing capacity continued to increase.

In a global trend, Google manufactures semiconductor chips, while Nvidia provides software solutions. Global companies are blurring business boundaries by offering full-stack solutions, from hardware to software. Experts argue that balanced development between software and hardware is necessary to address this trend.

The importance of embedded and firmware developers will continue to increase in cutting-edge industries such as semiconductors, robotics, and IoT. Accordingly, it appears necessary to improve developer treatment and establish a virtuous cycle in the domestic hardware development and manufacturing ecosystem to strengthen the weakening domestic hardware and embedded development capabilities.