Accelerating Manufacturing AX in Korea: A Stage-Based Policy Perspective

Sang Hyun Lee and Seunghwan Oh
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Sang Hyun Lee: Korea Institute for Industrial Economics and Trade
Seunghwan Oh: Korea Institute for Industrial Economics and Trade

Industrial Economic Review from Korea Institute for Industrial Economics and Trade

Abstract: South Korea is widely viewed as a leading manufacturing economy, with strong production capabilities accumulated through decades of manufacturing experience. The sector also benefits from an activist and supportive government that has made sustained efforts to boost value-added through innovation and R&D initiatives and digital transformation (DX) policies.

However, the reality on the shop floor tells a different story: digital transformation has been slow to take hold, and the country’s manufacturers have not yet widely adopted artificial intelligence (AI) in their processes.

This study investigates this phenomenon against the larger backdrop of evolution in manufacturing systems, identifying several potential obstacles to what Korean policy circles refer to as the AI transformation (or AX for short): the weak take-up of smart factory technologies, a bifurcated policy framework split between the Ministry of Trade, Industry and Energy (MOTIE) and the Ministry of SMEs and Startups (MSS), a prevailing “AI-model-centric” approach, and insufficient policy attention to AX infrastructure.

To address these issues, the study proposes four policy tasks: raising the rate of smart-manufacturing upgrading by cultivating capable smart-manufacturing supplier firms; introducing a “Bridge” program linking smart factories with AI factories; strengthening manufacturers’ capacity to identify and define problems, and reinforcing support for AX infrastructure.

Keywords: manufacturing; digital transformation; DX; artificial intelligence; AI; AI transformation; AX; smart factories; automation; robotics; autonomous manufacturing; manufacturing infrastructure (search for similar items in EconPapers)
JEL-codes: L23 L53 L60 O33 O38 O53 (search for similar items in EconPapers)
Date: 2026-06-30
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Published in KIET Industrial Economic Review Vol. 31, No. 3

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