Business Restructuring Approved, but... R&D Gaps and Funding Woes Hamper New Industry Pushes

Real-world case confirms impact of 2024 R&D budget cuts
Dedicated R&D also on hold in 2025-2026; resumption planned next year

Yonhap News

Companies whose business restructuring plans were approved by the government to support their transition into new industries are struggling to carry out their original plans because of funding difficulties, declining orders and worsening business prospects. In some cases, projects were suspended after cuts to the government’s research and development (R&D) budget, bringing business restructuring to a halt as well.

According to the “54th Report on Approved Business Restructuring Plans, Revocation of Approvals and Implementation Status,” recently published by the Ministry of Trade, Industry and Energy, many companies with approved restructuring plans have been unable to proceed as planned with facility investments, new product development and R&D.

Business restructuring is a government support program that helps companies respond to changes in the industrial environment by scaling back existing businesses or entering new industries. To date, about 600 companies have received approval for business restructuring. Of these, about 200 have completed the process, while 400 are still carrying out their plans. After reviewing and approving restructuring plans, the government links companies to various forms of support, including financing and R&D assistance, and reviews their progress each year based on implementation reports.

This latest review found various difficulties, including funding problems, declining orders and customers discontinuing their businesses. Dongbu put facility investments, R&D and new product development on hold because of a lack of funds. Neostec failed to carry out its original investment plan because of delays in attracting investment and sluggish domestic sales. DH Autoware decided that its autonomous-driving data storage device business was not viable and did not proceed with facility investments or technology development.

Some companies saw their plans derailed by changes in market conditions. Geonhwa Industry was unable to carry out facility investments and technology development related to hydrogen fuel cell vehicles after a customer discontinued its project. Inpack Elex’s factory investment was delayed after a customer postponed its order.

In other cases, worsening business conditions made restructuring itself difficult. Goodbycar’s facility investments were delayed because of capital impairment caused by accumulated losses and a lack of liquidity. Its business prospects subsequently deteriorated amid rising certification and mass-production costs, leading it to close its research institute and halt mass production. Elf System and Gerno Corporation faced difficulties pursuing facility investments and new product businesses as they entered corporate rehabilitation proceedings.

There was also a case in which cuts to the government’s R&D budget led to the suspension of a business restructuring plan. Isol Industry, which was pursuing a waste-plastic recycling business, reported that it had “suspended its business restructuring project after the R&D project was discontinued due to R&D budget cuts.” An investigation confirmed that the project was indeed halted after its related budget was cut during the government’s 2024 R&D budget-efficiency drive. The Ministry of Trade, Industry and Energy’s R&D budget fell by KRW 590.9 billion, or 10.4%, from KRW 5.6711 trillion in 2023 to KRW 5.0802 trillion in 2024.

An official from the Ministry of Trade, Industry and Energy said, “There was a case in which an R&D project was discontinued after its budget was cut during the 2024 effort to improve the efficiency of the R&D budget.” The official added, “Since then, the need for R&D has once again been recognized, and related budgets have continued to increase.”

L-Tech also cited “poor business performance due to a reduction in government R&D funding” as a reason for failing to meet its plan. An official from the Ministry of Trade, Industry and Energy said, “Our findings show that L-Tech was not selected after applying to several government R&D programs, rather than having its budget cut while carrying out a specific R&D project.” The official added, “’Not selected’ is more accurate than ‘funding reduction.’”

Dedicated R&D support for companies with approved business restructuring plans was also unavailable in 2025 and this year. The Ministry of Trade, Industry and Energy said it had supported selected high-performing companies with dedicated R&D funding, but a two-year gap arose during the program-planning process. The ministry plans to resume dedicated R&D support next year.

Separately, approvals were revoked after three companies—Baskhan Biopharmaceutical, Fine Airtech and Kemco—withdrew their business restructuring plans voluntarily. The Ministry of Trade, Industry and Energy said companies may choose to withdraw voluntarily if their business conditions worsen or it becomes difficult to achieve their original plans.

An official from the Ministry of Trade, Industry and Energy said, “About 400 companies are currently carrying out business restructuring, and while some are doing well, others are facing greater difficulties than expected.” The official added, “We review their progress each year through implementation reports and also provide follow-up consulting on the difficulties companies face through our program to build a support base for business restructuring.”

This content was produced with the assistance of AI translation services.