26 日本情報経営学会誌　2018 Vol. 38, No.

■特別寄稿論文

Koreaʼs Manufacturing Innovation 3.0

Initiative
＊
Chungnam National University　Hee-Cheol MOON
＊＊
Chungnam National University　Jae-Eun CHUNG
＊＊＊
Cheju Halla University　Seok-Beom CHOI

Abstract : This study explains the current state of “Manufacture Innovation 3.0”, Korean strategy for the 4th
Industrial Revolution which focuses on Smart Factory. Since 2014, it has achieved some amazing results, but, still
needs to be improved to reflect the real SMEsʼ business environment. Hence, this study suggests the “Globalization
4.0 Initiative” as the new policy imperative of Korean government which induces Korean SMEs to participate in the
4th Industrial Revolution trends in global context.

Keywords : 4th Industrial Revolution, Manufacture Innovation 3.0, Korean SMEs, Smart Factory, Globalization 4.0

government launched an initiative for the 4th In-

1. Introduction
Korea has remarkable development history
which used to be considered as one of the world
competitive manufacturing powerhouse. Recent-
ly, however, Korea has experienced internal and
th
external economic crisis. Moreover, the 4
dustrial Revolution, a new technological trend in
the manufacturing industry is regarded as an-
other threat that might cause decrease of global
competitiveness of Korean SMEs (Small & Me-
dium Enterprises).
In 2014, to keep up with world trend, Korean
dustrial Revolution, termed “Manufacturing In-
novation 3.0”. This strategy has been projected
by motif of German strategy “Industrie 4.0”. It
has been implemented for the last 2 years and
had shown some positive results. Though, the
In- main participators are the major enterprises
and most of the Korean SMEs are still in crisis
of falling behind in world competition because of
insufficient policy consideration on SMEs.
Therefore, in this study, we would like to
discuss the state of Korean strategy, “Manufac-
turing Innovation 3.0” and suggest the necessity

＊Professor at International Trade, Chungnam National University, South Korea

＊＊Doctoral student at Graduate School of International Trade, Chungnam National University, South
Korea
＊＊＊Professor of International Trade, Cheju Halla University, South Korea

of upgrade of the initiative to promote Korean
SMEʼs innovation efforts considering the global
trends of the 4th Industrial Revolution.
2. Background of Manufacture Innovation
3.0 Initiative
2.1 Advent of the 4th Industrial Revolution Era
On January 20th, 2016, in Davos, Swiss, Klaus
Schwab, the chairperson of World Economy Fo-
th
rum declared that we are in the era of 4 Indus-
th
trial Revolution. The 4 Industrial Revolution is
regarded as a new paradigm in manufacturing
industry. Thatʼs because the general concept of
the 4th Industrial Revolution is about embedded
technologies of ICT and Manufacturing indus-
tries which is the main concept of Germanyʼs
new strategy, “Industrie 4.0”, suggested in 2011
for the first time.
However, ICT technologies including Big
Data, AI (Artificial Intelligence), and IoT (Inter-
net of Things) have been already applied in most
of industries and other fields beyond manufac-
ture industries where the CPS (Cyber-Physical
System) is applied mainly. It means that these
Figure 1　Industry 1.0 to INDUSTRIE 4.0
Source : Eurasia Online News (2016), “Industrial Rev-
olution : Advancement in AI Herald Big Changes
in Production”, https://eurasia-news-online.com/
2016/09/21/4th-industrial-revolution/, (access date :
2016.12.31)
Koreaʼs Manufacturing Innovation 3.0 Initiative 27
new technologies have influenced lots of changes
not only in industries but also in our lives.
According to prior research, the 4th Industri-
al Revolution has been coming naturally by fol-
lowing several previous industrial developments.
As seen in history, those industrial and tech-
nological revolutions have functioned as another
opportunity for development. It means that the
4th Industrial Revolution, eventually, will be real-
ity and exert strong influence on world econo-
my in the near future. It is considered that the
first player who establishes the standard for the
manufacturing system can achieve the best
competitiveness in world market. At this point,
most countries should be prepared for this kind
of paradigm shift in the near future, and those
countermeasures should be appropriate for each
domestic industrial status and circumstances.
2.2 Major Countries’ Strategies
Germany, which is the pioneer of the 4th In-
dustrial Revolution, has prepared long before for
this huge change. The German government sug-
gested their own strategy in the name of “High
Tech Strategy 2020 Action Plan”, that is known
as “Industrie 4.0” more widely, in 2011.
German strategy is focusing on their manu-
facturing ecosystem where major corporations
and SMEs are cooperating by applying IoT and
CPS. They planned to establish the fundamental
revolution that connects factories, customers
and R&D organically. This strategy is called as
“Smart Factory” in other word.
In 2015, German government adopted the
upgraded version of “Industrie 4.0”, called “Plat-
form Industrie 4.0”. In that upgraded strategy,
they recognized and mentioned the necessity of
collaboration of industry, institutes and universi-
ties under governmental supports.
The final goal of Germanyʼs strategy is to
28
Table 1　German Upgraded Industry 4.0 Strategy
Platform Industry 4.0
• Ministry of Economy,
Subject
• Ministry of Education
• Collaboration of Industry, Institutes and
Governance Universities with Governmental
Support
• Based on Existing Applying Strategies,
Core Tasks
• Subdivide into each practical field
• Deduction of Core Result from each
Objective practical field
• Presentation of result in IT Gipfel
Source : Soo-Hyun Baek (2016), “Smart Manufactur-
ing, Preparing for the 4th Industrial Revolution”,
Electronical World , Vol. 65, No. 2, pp. 44-48
construct “New global standard of manufactur-
ing industry” and realize the “Ubiquitous Mass
Customization” by the end of 2025.
United State is the second player which ad-
opted the strategy for the 4th Industrial Revolu-
tion. The U.S. government announced the need
of reformation in manufacturing industry ad-
vised by PCAST (Presidentʼs Council of Advi-
sors on Science and Technology) in the late 2011.
U.S. governmental strategy is named as “Ad-
vanced Manufacturing Partnership (AMP)”
which has been complemented later to AMP
Version 2.0. This strategy is also related to man-
ufacturing industry as German case, but they
approached differently with some different tech-
nology, including AI and Cloud service.
U.S.ʼs strategy has been specified by the suc-
cessful application case of “General Electric.”
Their strategic innovative model is described as
“Industrial Internet”. GE got success to be “Con-
nected Industrial Company”, They could control
the production system of factory facility and
manage manufacturing process by applying
Cloud and AI, named “Predix Platform”.
The Automatic Industrial Data system col-
lects the data from production process, and
Cloud Algorithm connects the data. Then, after
analysis using AI system, the production system
can be optimized by sharing the data. Thus,
USʼs Big Data system functions as core point to
make the “Industrial Internet” be realized.
Figure 2　GEʼs Industrial Internet : Predix Platform
Source : https://www.predix.io/ (access date : 2016.
12.31)
In this wise, the private enterprises are lead-
ing the USʼs strategy, of course under the sup-
port of government. In 2014, the 5 major corpo-
rations including GE established “Industry
Internet Consortium” to share the strategy and
build specific platform standard for international
manufacturing industry.
China and Japan, the major countries in
Asia, also started to be concerned about new
strategy for the 4th Industrial Revolution, appro-
priate for their own domestic status.
China, actually, has domestic and social prob-
lems need to be solved in advance. Thus, the
president of China, Xi Jinping, suggested 4 core
policies to achieve the goals for each section in-
cluding domestic problems and the 4th Industrial
Revolution, as seen in <Table 2>.
 Koreaʼs Manufacturing Innovation 3.0 Initiative 29

Those two policies, “Made in China 2025” carry ahead the 4th Industrial Revolution strate-
and “Internet Plus”, especially, are the main gy with the technologies of IoT, Big Data, AI
strategy of China to prepare for the 4th Industri- and Robot. The AI and Robot are connected by
al Revolution. Chinaʼs advantages, their powerful developed sensors and that advanced technolo-
and strong government, are expected to func- gy can be applied in the manufacturing system.
tion as pressure as well as huge supports for Every year, there has been held “Robot In-
development. novation Initiative Conference,” which is held by
collaboration of Industry, University, Institutes
Table 2　Chinaʼs Policy Issues and more than 1,000 corporations. Robot tech-
Policy Core Strategy nology, another name “the Learning Robot”, as
core strategy of Japanʼs 4th Industrial Revolu-
10 Strategic Industry
Made in China 2025
Promotion including IT tion, is expected to improve the global competi-
Combination of Traditional tiveness of the manufacturing industry and en-
Internet Plus
Industry and Internet & IT hance efficiency of Japanʼs production system.
Startup and
Support Startup Ecosystem Singapore also launched their own strategy
Innovation
for the 4th Industrial Revolution by “Infocomm
21c New Silk Road
One Belt, One Road
with 60 countries Development Authority of Singapore (IDA)”. It
is not only focusing on Manufacturing Industry
Source : Hae-Ok Choi (2016), “The Connecting Facto-
but aiming to construct “Smart Nation”. By in-
ry : Made in 2025”, Science & Technology Policy ,
Vol. 26, No. 8, pp. 20-25 stalling sensors across the country and sharing
the real time data, Singapore plans to build fu-
On the other hand, Japan established their ture city nation.
own strategy in the name of “Japan Rehabilita- These strategies of the major countries are
tion Strategy”. Japanese government also needs summarized in <Table 3>.
solutions for Japanʼs internal economic reforma-
tion. Thus, Japanʼs strategy includes measures 2.3 Status of Manufacturing Industry in Korea
for the 4th Industrial Revolution, and new poten- As mentioned above, the major countries
tial market creation, economic development, and have suggested their own countermeasures for
to promote consumption. the 4th Industrial Revolution, which are appro-
Especially, Japanese government decided to priate for each countryʼs internal and environ-

Table 3　Major Countries Strategies for 4th Industrial Revolution

First
Released Country Policy & Strategy

In 2011 Germany Platform Industry 4.0 (Upgraded in 2015) : Manufacture Industry Standard
In 2011 United States AMP 2.0 & GE’s Industry Internet (Upgraded in 2014) : using Data and Cloud
In 2013 Japan Japan Rehabilitation Strategy (Upgraded in 2016) : Learning Robot Strategy
In 2015 China Made in China 2025 & Internet Plus : Strong Government and Development
In 2015 Singapore Smart Nation Master Platform : Nation-wide Smart City using Sensors

Source : Arranged by authors.

30
mental status, in the way of emphasizing their
technical merits and advantages. They have
recognized that the 4th Industrial Revolution has
already come and started to influence on our
real lives.
Korean government has also suggested a
strategy in 2014, termed “Manufacturing Inno-
vation 3.0”. Korea has been regarded as a leader
of IT, which heads Korean government up to
follow the world trend hurriedly.
In fact, Korea has somehow remarkable his-
tory about economic and industrial development.
Somewhere along the line of industrial develop-
ment, Korea achieved one of the most competi-
tive manufacturing technologies. Among the
OECD countries, Korea has recorded that manu-
facturing takes 30% share in GDP, higher than
that of Germany (23%), Japan (19%), and the
USA (12%).
However, with the advent of the “New Nor-
mal” era, Korea has experienced some changes
and crisis such as lower competitiveness in
manufacturing industry and G2 (USA and Chi-
na) countriesʼ new protectionism.
At this point, it is necessary for Korea to
th
recognize that the 4 Industrial Revolution can
be another opportunity to take off again and
that Korea needs innovation especially in manu-
facturing industry not to be get left behind in
world competition.
3. Analysis of “MI 3.0 Initiative”
3.1 Manufacturing Innovation Efforts in Korea
In June, 2014, the Korean government re-
leased the “Manufacture Innovation 3.0” strate-
gy which is designed by Korean Ministry of
Trade, Industry and Energy. They announced
that this strategy is the upgraded version of
past innovation strategies, “Innovation 1.0” and
“Innovation 2.0,” which had been suggested by
following the trend of industrial development in
Korea, as shown in <Table 4>.
Table 4　Change of Innovation Paradigm in Korea
Manufacturing Light Industry
Innovation 1.0 = Import Substitution Strategy
Manufacturing Assembling Industry
Innovation 2.0 = Catchup Strategy
Manufacturing Converged New Industry
Innovation 3.0 = Pacesetting Strategy
Source : MOTIE(http://www.motie.go.kr)
The appearance of embedded technologies
with IT & SW (Information Technology and
Software) and the newly developed technologies
such as 3D printing or Smart Factory using
CPS (Cyber Physical System) and AI (Artificial
Intelligence) is considered as shift into new
manufacture industry paradigm. “Manufacture
Innovation 3.0” which is focusing on Smart Fac-
tory strategy has been suggested for the pur-
pose of resolving the crisis in Korean manufac-
turing industry such as high cost production
structure, increasing offshoring and decreasing
competitiveness in high value-added products.
This strategy comprised the governmental
plan for disseminating Smart Factory system to
10,000 SMEs by converging IT, SW, IoT and
CPS until 2020. For that purpose, 3 major manu-
facturing SWs of Engineering, Design and the
embedded SW are planned to be developed. In
addition, “Manufacturing Innovation Commis-
sion”, in the form of public and private partner-
ship, would be established to prepare the follow-
up measures. The commission was launched in
July, 2014. Since then, has convened the annual
meetings to refine the strategies and the follow-
up measures.

These strategies are summarized shortly in
<Table 5> and comprised of 6 core tasks as fol-
lows.
First, with the collaboration of government
agencies and private enterprises, the “Smart
Factory Bureau” is planning to be organized.
The bureau undertakes to construct the field of
Smart Factory enterprises applying IT, SW and
IoT which is termed as “Zero Waste Factory”.
The Korean government will procure financial
resource by 1 trillion Korean won to carry out
this plan.
Second, to achieve the targeted export vol-
ume of 500 billion dollars by 2020, Korean gov-
ernment plans to support to create the new
products for future growth. Especially, the mar-
ket creation for new energy industry applying
IT technology plans to be supported strongly.
Third, Korean government plans to invest in
development of core materials in Koreaʼs major
industries such as automobile, petrochemistry,
ship- building or ocean plant, machinery, steel,
display and semiconductor.
Fourth, SW power in manufacture industry
plans to be intensified. Specifically, the govern-
mental supports for R&D business are expected
Table 5　Major Strategies and Tasks of Manufacturing Innovation 3.0
3 Strategies 6 Core Tasks
Creation of Converged ① IT&SW Innovation
New Mfg Industry ② Creation of Growth Engine
③ Securing the Leadership in
Intensification of
major industry’s Material and parts Industry
core capability
④ Reinforcing SW power
Enhancement ⑤ Supplying Customized
of Manufacturing Human Resource
Innovation Infrastructure ⑥ Jump as N.E.Asia R&D Hub
Source : MOTIE(http://www.motie.go.kr)
Koreaʼs Manufacturing Innovation 3.0 Initiative 31
to be function as a key measure by establishing
“Base Design Centers”.
Fifth, training plan for professional human
resources in embedded technology will be pro-
grammed. Besides, the aged industrial complex
will be recreated to the new manufacturing in-
novation industrial districts.
Sixth, Korean government plans to construct
R&D network for technological cooperation in
North East Asia. They plan to participate ac-
tively in global R&D center projects and to ex-
pand the channel for technology diffusion to-
ward Korean SMEs.
In summary, Korean governmentʼs strategy
still focuses on Smart Factory system because it
has been established after the model of German
governmentʼs “Industrie 4.0” strategy.
3.2 Status and Results of “MI 3.0”
According to the performance report of Ko-
rean Ministry of Trade, Industry and Energy in
October 2016, for the past 2 years, the Smart
Factory system has been transferred to about
2,600 enterprises. Through Smart Factory sys-
tem, various positive results could be achieved
such as decreased rate of defective products,
Follow-up Measures (Planned)
- 13 Industrial Specific Plan
- New Energy Industry creation Plan
- Expanding Smart Factory
- Comprehensive Measures for SW Power
- Restructure of Human Resource Training System
- Strategies for Northeast Asia R&D Hub
32
cost reduction, reduced delivery time, diversifi-
cation of products by flexible production pro-
cess, increased efficiency in stock management,
energy reduction and creation of new market.
Especially, the Smart Factory Bureauʼs survey,
targeting 1,566 Smart Factory enterprises, ex-
plains that 51.4% of enterprises are considering
the decreased rate of defective products as the
most remarkable result from the Smart Factory
system.
Besides, more SMEs start to recognize the
necessity of application of new technologies
such as Smart Factory system. According to the
survey result, only 57% of SMEs answered the
need of innovation at the first survey in Decem-
ber, 2014. More than 86% of SMEs, however, an-
swered that the application of innovative tech-
nologies is necessary for the production
efficiency, at the recent survey of May, 2016.
The more support projects from the private or-
ganizations increases, the more SMEs partici-
pate in Smart Factory projects.
After reviewing the results, Korean govern-
ment intends to extend the application of new
technologies such as Robots, 3D printing and
ESS (Energy Storage System) and to implement
more practical and financial support projects.
At the same time, Korean Ministry of Sci-
ence, ICT and Future Planning (MSIP) also start
the technical support projects to help Korean
enterprises such as “Expansion of creative econ-
omy with Startup Ecosystem,” “Field centered
policy enforcement,” “Creation of new industry
and new service with embedded and innovative
technologies.” The “AI Project” announced in
January, 2017, is the first support project re-
leased by MSIP.
3.3 Application Cases of “MI 3.0”
Although the Korean strategy highlights the
Smart Factory, there appeared some cases ap-
plying some other technologies such as Big Data
or AI. Besides, those technological changes influ-
ence not only on manufacturing industry but
also on other industries like distribution, servic-
es and international trade. Here are some cases
of Korean major enterprises and SMEs.
1) Major Enterprisesʼ Cases
In Korea, most of large corporations are the
main player for Manufacturing Innovation 3.0.
Samsung SDS, SK C&C and LG CNS have re-
leased their own Smart Factory solutions. Sam-
sung SDSʼs solution “Nexplant” is the data anal-
ysis platform to confirm the problems in
production process applying AI and Big Data.
SK C&Cʼs and LG CNSʼs solutions are “Scala”
and “SMS (Sorter Management System)” those
are also data analysis system to manage the
production line and distribution information.
The most well-known case is “Coupangʼs In-
novation”. Coupang is a Korean social commerce
company operating a web marketplace and SNS
(Social Network Service), established in 2010.
Since 2015, Coupang has been operating spe-
cial delivery system, called “Rocket Delivery”.
The Rocket Delivery is a specially customized
delivery system. It means Coupang is not apply-
ing the ordinary stock management system.
The stocks for delivery are classified by each
customer segmentsʼ database.
After analyzing the customerʼs propensity to
consume, that database of each market seg-
ments notify how to store and manage the stock
lines. Then, automatic conveyor system classi-
fies the products. Although it does not seem the
products are stocked in order, it is, astonishing-
ly, much easier for delivery manager to find and
pack the products for each customer. Then, the
trained courier, called specially as “Coupang
man”, delivers the products with customized

service.
Coupang is using their own customer infor-
mation database based on Big Data technology
for better service and faster delivery. Besides,
Coupang was nominated for one of “100 excel-
lent corporations in job creation” in 2016. Also,
Coupang was included in “50 Smartest Compa-
nies 2016”, selected by MIT Technology Review,
as the only Korean company.
2) Small and Medium Enterprisesʼ Cases
The cases of SMEsʼ participation in Manufac-
turing Innovation plan have increased recently.
In Korea, more than 100 thousands of SMEs are
operating in the manufacturing industry. There-
fore, the SMEʼs successful application and par-
ticipation cases can be evaluated as more re-
markable results.
Here introduces the case of “Wizcoreʼs Nex-
pom”. Wizcore (www.wizcore.co.kr) is a SW
company which has been established for 7 years
and aimed to suggest the manufacture & IT
embedded solution. They have developed the
production line monitoring service, called “Nex-
pom”, provided for other Korean major corpora-
tions such as LSIS and Hanwha Techwin. Their
monitoring service is based on Big Data analyz-
ing technology.
Wizcore has been highly acclaimed as the
company which contributes to advancement of
manufacturing SW power as one of the leading
venture firms of innovation. They are expected
to accomplish sales amount of 12 billion won in
2016.
The next case for successful application of
Smart Factory, is a small enterprise named
“Ace&Tech”. Ace&Tech (www.antek.co.kr) was
established in 2006 as a manufacturer of ceramic
and quartz products and applied the Smart Fac-
tory system in 2014.
The Smart Factory system they adopted is a
Koreaʼs Manufacturing Innovation 3.0 Initiative 33
basic version of “MES (Manufacturing Execution
System).” After applying this automatic factory
management system, theyʼve experienced huge
improvement in production management. The
production order can be transferred in real time
by the data processing system and the data col-
lecting system can gather the information of
failure rate and machinery error rate automati-
cally. Besides, the real time monitoring for man-
agement of production line can be possible.
According to their company reports, since
they applied the automatic production manage-
ment system, one of Smart Factory technolo-
gies, Ace&Tech has achieved 15% of cost reduc-
tion, increased rate of operation by 45% and
reduction of delivery time by 20%. In near fu-
ture, Ace&Tech is planning to examine the ap-
plication of much upgraded version of Smart
Factory technologies.
The last case here introduced is “Dong Yang
Piston”. Dong Yang Piston (www.dypiston.co.kr),
founded in 1967, has manufactured and provided
the automobile engine piston. This company has
invested to construct the Smart Factory system
in their factory for a long time, since 1996. In
2015, their Smart Factory system finally started
to be operated and they could gain amazing re-
sults of increased output by 25% and increased
sales by 50%. Also, the failure rate has de-
creased at one-tenth and it caused that much
cost reduction.
Dong Yang Piston was selected as the repre-
sentative success case in 2016 and their case
will be benchmarked as the most practical solu-
tion by lots of Korean SMEs.
4. Conclusion
This study discussed the current state of
Korean strategy for the 4th Industrial Revolu-
tion, “Manufacture Innovation 3.0”, which was
34
first introduced in 2014 by Korean Ministry of
Trade, Industry and Energy.
According to the result report, most of par-
ticipators are satisfied with improved produc-
tion management and increased efficiency. Be-
sides, by comparing with the previous year,
more SMEs start to be interested in this innova-
tion trend and recognize that the application of
new technologies is not optional but necessary.
At this point, it seems that Korean govern-
ment faces the important moment to confirm
whether these current support projects are suf-
ficient to promote Korean SMEsʼ innovation ef-
forts and whether the current strategy reflects
the status of SMEʼs business environment.
Still, there need more developments in SW
industry and more supports for training human
resource. To apply Smart Factory system for
SMEs, current support from the government is
not enough. It means that much practical and
feasible strategy should be developed that can
promote Korean SMEsʼ innovation efforts.
In this context, we would like to suggest
that the collaboration of government agencies,
industries, and university can be helpful for im-
proved policy initiative. By reflecting the char-
acteristics of Korean economy, which is highly
dependent on international trade, innovative
policy model should be devised which comprise
Manufacturing Innovation and Globalization.
Thus, this study suggests the upgrade of
policy from “Manufacture Innovation 3.0” to
“Globalization 4.0” that aims to improve the
global competitiveness of Korean SMEs.
As the worldʼs economy, industry and tech-
nology changed rapidly, Korea should partici-
pate in this world trend as one of the driving
forces. In these days, the new economic para-
digm comes to Korea as a crisis. However, when
the appropriate response to the 4th Industrial
Revolution is made properly, Korea can take the
opportunity to take off again.
Acknowledgments
This research is partially supported by Chuo Univer-
sity Joint Research Grant．
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