The future of the manufacturing industry I ？ The growing prominence of the service industry as a source of intermediary services and its implications

Contents

I. The background of the research

II. The growing prominence of the service industry as a source of intermediary services

III. Conclusion and implications

The manufacturing industries of China, Germany, Japan, Korea and the U.S. were compared with each other to study the level of contribution made by services in producing goods made for exports.

Among these five countries, Germany was ranked number one with services contributing 36.5% to producing goods made for exports and Korea was ranked the lowest with 27.9%.

◆ Added value produced by service exports outpaces the added value produced by manufacturing in global value chains.

* As of 2021, the service industry’s contribution to the global value chains reached 65.3%, whereas the contribution made by manufacturing stalled at 53.4%

◆ The role of services as a source of intermediary services is earning greater prominence as a tool in producing goods for exports.

* The share of contribution made by services in producing good for exports increased to 32.3% in 2021, which stood at 29.8% in 2011.

◆ An effort to benchmark Germany is recommended, as Germany’s share of contribution made by services in and out of the country shows similar patterns with that of Korea.

◆ Taking advantage of services as intermediary services is required by encouraging convergence between the Korean service and manufacturing industries.

It was revealed that added value produced by service exports outpaces the added value produced by manufacturing in global value chains. This finding is serving as a source of boosting awareness of the growing role and the responsibility of the service industry as a contributor in boosting production and exports. The service industry has contributed more to global value chains by a big margin for the past two decades compared to the manufacturing industry. The service industry’s contribution to the global value chains has hit 65.3% in 2021, which is a 6.0%p rise from 59.3% posted in 2010 shortly after the global financial crisis. On the other hand, the share of contribution made by the manufacturing industry in global value chains was 53.4% in 2021, which is only a meager increase by 1.7%p during the same period. The prominence of the service industry as a source of intermediary services is becoming more significant in producing products for exports. This brings the need to focus on the following two tasks to strengthen the competitiveness manufactured goods produced in Korea - a) taking the full advantage of the benefits materialized by converging the service industry and the manufacturing industry and b) reinforcing the competitiveness of intermediary services as means of buttressing exports. Boosting the contribution of services is a universal trend that is utilized as a method to increase aggregate exports of the manufacturing industry. However, it was revealed Korea lags behind major countries, including the U.S., Japan, Germany and China, in the level of convergence of the service industry and the manufacturing industry. Innovations in the manufacturing industries made by advanced nations will inevitably lead to a big change requiring Korean manufacturing companies to incorporate innovative services in their production procedures. Korean companies should a) embrace this change and bolster their efforts to develop and utilize services that are used in their manufacturing procedures and b) benchmark the industrial structure unique to Germany to increase the role of services in Korea’s manufacturing sector.

* Images appearing in this article is provided by Gettyimages and materials published in a new article released by Samsung Display’s Newsroom website at https://news.samsungdisplay.com/13690.