SystemR&D drives innovation in smart factories

The past five years have seen significant supply chain disruptions, with political instability creating opportunities for Korean companies. We are also witnessing a global supply chain realignment, driven by new regulations such as the U.S. Inflation Reduction Act (IRA), which pushes companies to find more flexible, faster, and customized suppliers. Some experts suggest this is a golden opportunity for Korean SMEs to step out from under the shadow of large conglomerates and compete on the global stage. Do you agree? What are the challenges and opportunities for Korean SMEs in this evolving landscape?

I absolutely agree that this is an ideal time for Korean SMEs to enter and thrive on the global stage. The ongoing realignment of supply chains, along with the emphasis on onshoring, particularly in the U.S. since the Trump administration, continues to create new opportunities. Korean SMEs, with their technological expertise and reputation for high-quality and reliable products, are well-positioned to benefit from these shifts. We see immense growth potential in automation and cutting-edge technologies, where Korean SMEs can excel and provide innovative solutions to global partners.

In terms of challenges, one of the most pressing challenges Korean SMEs face today is rising labor costs. Korea's rapid industrialization was initially fueled by a highly educated workforce, abundant human resources, and supportive government policies. However, demographic changes caused by low birth rates and a rigid labor environment—including the 52-hour workweek limit and stringent employment regulations—are now driving up labor expenses. Younger generations’ preference for work-life balance further compounds this issue, making traditional manufacturing-based growth strategies less viable.

Additionally, temporary political factors, such as the recent martial law declaration, have adversely impacted Korea's reputation as a stable business partner. This unpredictability has made foreign investors more cautious, potentially causing short-term setbacks for Korean companies.

Another challenge lies in the stagnation of key industries. Sectors where Korea has historically excelled, like display technologies and secondary batteries, are currently struggling due to sluggish global demand and overproduction. Weak performance by Chinese companies has also contributed to market instability.

Despite these hurdles, there are numerous opportunities for Korean SMEs. One major advantage stems from the global "friend-shoring" trend, where companies prioritize partners from politically aligned nations to strengthen their supply chains. This approach, favored by the U.S. and Europe, naturally benefits Korean companies and is likely to continue.

Policies such as the IRA in the U.S. and Europe’s carbon-neutral initiatives are driving clients to establish factories in these regions, creating substantial opportunities for Korean suppliers. Furthermore, the global push toward sustainability aligns well with Korean companies' advancements in green technologies, such as secondary batteries, energy storage systems (ESS), green hydrogen, and hybrid automobiles.

The Korean government’s proactive support for eco-friendly industries has laid the groundwork for SMEs to leverage this trend. Companies with strong technological capabilities are particularly well-positioned to capitalize on the growing demand for sustainable solutions.

Diplomatic trust is another valuable asset for Korean companies. Korea's high-ranking passport status, which allows visa-free travel to numerous countries, reflects the strong international trust and reputation that the nation has built. This global trust is a strategic advantage when forming partnerships and entering new markets.

Lastly, Korea’s "bbali bbali" culture—characterized by agility, speed, and efficiency—is highly valued by global clients. Korean companies are not just fast; they consistently deliver top-quality products tailored to customer requirements. This combination of speed, precision, and technological prowess positions Korean SMEs to gain a competitive edge in the global market.

Given this foundation, Korean SMEs are well-prepared to seize the opportunities presented by the onshoring trend, delivering innovative solutions at a competitive price while maintaining high standards of quality and speed.

One of Korea's strengths is its culture of agility. The high-tech industry, including displays, smartphones, and battery sectors, has historically exhibited significant cyclical patterns due to demand fluctuations and technological advancements. Peaks driven by innovations like 5G smartphones and OLED displays often lead to periods of inventory adjustments. As 2025 begins, there are positive signs of recovery. This underscores the importance of suppliers being reactive and ready to deliver affordable, high-quality, and customized solutions as soon as opportunities arise. Where do you see your key opportunities in 2025?

When we look at the current market landscape, particularly in the display sector, fluctuations are inevitable but often follow a predictable cycle. We see periods of strong demand followed by sluggish phases, which is exactly where we find ourselves now. The secondary battery sector faces a similar challenge as it enters a market chasm.

At System R&D, we proactively analyze market trends to develop strategies that help us navigate these downturns. Beyond maintaining our existing markets, we are actively working to diversify and expand our portfolio by leveraging our technological expertise. Some of the key areas we are exploring include fuel cells for vehicles, the bioindustry, and smart factory automation—particularly focusing on automating large industrial equipment.

You mentioned exploring different sectors by aligning them with your core strengths. What would you say is your key competitive edge? For instance, automation often requires similar foundational technologies. What unique advantages do you have that can apply across these sectors, and how do you compare to your competitors?

We initially started as a supplier in the display industry and gradually expanded into sectors like secondary batteries and automotive technologies. The expertise we've developed through this expansion is highly transferable to industries such as bioengineering and large equipment manufacturing.

Additionally, we have long supplied major Korean conglomerates, which demonstrates our ability to meet stringent requirements in terms of quality, production capacity, and delivery timelines. Through these experiences, we’ve developed sophisticated equipment control technologies and honed our ability to manage complex, high-demand projects. This adaptability is a significant advantage as we move into new industries.

Furthermore, understanding and responding to clients’ precise needs while having the right overseas infrastructure is another core strength. We’ve built a global support network with offices in China, Vietnam, the U.S., and Europe, enabling us to minimize response times and provide fast, efficient after-sales service, maintenance, and product upgrades. Our highly experienced professionals in each region ensure seamless and accurate communication with clients, which has earned us strong trust and loyalty.

You highlighted the importance of systems and operations management. Can you elaborate on your approach and how it adds value for your clients?

Absolutely. In the automation industry, managing production costs, quality, and operational efficiency is critical. Over the past 20 years, we’ve developed a comprehensive management system that has been refined to the point where it’s now a benchmarking model for some of our clients.

Our experienced personnel have been instrumental in developing this system, which supports over 700 projects annually, ranging from tens of millions to tens of billions of KRW in scale. Effective management of production costs, quality, and timelines is essential to ensuring customer satisfaction, and our system is designed to handle all of these aspects seamlessly.

One of our key strengths lies in the system's ability to foster collaboration between teams and optimize resource allocation. This operational efficiency has been recognized by our clients as a distinct competitive advantage, enabling us to respond swiftly to urgent issues and deliver high-quality outcomes consistently.

You mentioned earlier that one of your recent focuses was expanding your portfolio into industries like bio and automotive, which have unique requirements beyond general automation needs. Potential clients might argue that despite your strong track record in certain sectors, you lack experience in others. Could you share a successful example of diversification and explain how you convinced a new client to work with you despite having no prior experience in their specific industry?

Let me first talk about automation in general. Roughly 70% of automation technology applies universally across industries, while the remaining 30% consists of industry-specific requirements. We specialize in that 70%. Of course, when entering a new industry, we don't have complete knowledge from the outset, so we invest heavily in researching the industry and its unique technologies.

When clients use proprietary technologies, they are often open to sharing this information to help us optimize their automation processes. By combining our existing automation capabilities with the client’s specialized technology, we can address fundamental challenges they face.

For example, during a project for fuel cell factory automation, we outperformed competitors by delivering the best solution tailored to the client's specific needs. Despite it being our first project in the fuel cell industry, we secured the contract and exceeded performance expectations.

Building on that success, we transitioned into the automotive sector. As I mentioned earlier, about 70% of the technology is transferable across industries due to the similar foundational elements. We've seen engineers from our existing clients move to companies in new industries, which has happened many times. This allows the engineers who worked with us to share their positive experiences with their new companies, leading to new projects with fresh clients in different industries. This is one of the ways we are expanding our business.

Another factor contributing to our success is that many of our clients’ long-term partners tend to have a narrow, conservative approach that limits their ability to solve deep-rooted issues. By approaching problems from fresh perspectives based on our cross-industry experience, we often provide novel solutions to long-standing challenges. This creativity has consistently impressed our clients and opened doors to new opportunities.

For companies like ours, entering new industries isn’t easy. It often requires aggressive strategies, including competitive pricing, strict quality assurances, and reliable delivery schedules. These factors, combined with our problem-solving capabilities, have been key to securing new clients.

Beyond aggressive strategies, your company also focuses heavily on technological development, particularly software, which is now at the core of automation. You’ve started integrating AI into safety systems, inspection processes, visual controls, and machine vision. Could you elaborate on some of your key innovations and upcoming market offerings?

Absolutely. One of our major advancements is predictive maintenance technology for machinery. By embedding sensors into equipment, we enhance both reliability and efficiency.

There are three main developments in this area. First, failure detection. We use machine learning and deep learning to identify potential failures in core components, such as ball bearings, LM guides, and ball screws. Second, status diagnostics. Our technology continuously monitors and assesses the operational health of equipment to detect glitches in real time. Third, lifespan prediction. We’ve developed systems to forecast the lifespan and compatibility of components across various environments, enabling proactive maintenance and reducing downtime.

Another interesting project involved the development of a food inspection machine capable of detecting a single strand of hair in black rice—a task that requires an incredibly high level of precision. This project was highly successful and demonstrates our ability to tackle complex challenges across diverse industries.

We’re excited to continue driving innovation in these areas and bringing practical, high-performance solutions to market.

You've experienced rapid growth. After entering the battery industry, you quickly seized numerous opportunities. Now that 2025 has just begun, how do you forecast the next three years? What is your outlook for the company’s growth, and where do you see that growth coming from?

The success of System R&D has largely been driven by our achievements in the display and battery industries, and more recently, the automotive sector. Although we anticipate fluctuations ahead, we believe that new technologies and continuous innovation will be essential. Our goal is to establish ourselves as a powerhouse in these fields.

We foresee growing technological demands in areas such as eco-friendly vehicle advancements, enhanced battery performance, and improved display technologies. While these sectors will continue to offer growth opportunities, I believe their potential is somewhat limited. Therefore, we are actively exploring other sectors with increasing global demand, particularly the bio industry and in smart factory automation.

There are also significant challenges ahead, including onshoring trends, an aging workforce, and rising labor costs. Developed countries like the U.S. are accelerating onshoring strategies to secure their supply chains. This has fueled greater demand for automation solutions, which presents new opportunities for us. For example, high labor costs in the U.S. have made automation essential.

Korea faces a similar situation. As the country transitions into a super-aged society, the shrinking workforce—especially the decline in skilled workers—has heightened the need for automation to ensure high-quality, stable production at competitive costs.

However, these demands are not simply for basic automation but represent a push toward fully unmanned smart factories. We anticipate significant opportunities in this area, which we believe will become a critical pillar for our growth.

Looking ahead, if you observe our company over the next one to two years, you will likely see these trends materialize and our solutions play a key role in shaping the future of factory automation.

You mentioned that the U.S. is focusing on onshoring. For many leading industries, the U.S. is a key market. How do you plan to penetrate or establish a strong market share there? What opportunities do you see in the U.S.?

We have three main strategies for penetrating the overseas market, including the U.S. The first strategy is to establish local branches and gradually expand their roles. Initially, these offices focus on after-sales service and maintenance. Over time, we increase their scope to include new equipment development and seek new supply chain management (SCM) opportunities. Our ultimate goal is to equip these local offices with the ability to locally produce our products, and, if necessary, set up local factories. Strengthening local offices in different countries significantly enhances our accessibility to clients and our responsiveness to local market dynamics. This is the approach we are currently applying in our U.S. branch.

The second strategy is developing local talent and professionals. We believe global talent is essential for advancing our systems and technology. To support this, we invest in local employees by bringing them to Korea for training. Through collaboration with our headquarters, we share our business know-how and technology to elevate the skill set of our global workforce. This training ensures we maintain a globally standardized level of service and technology quality.

The third strategy, which we are actively pursuing, is to build a consortium with large Korean corporations to secure overseas clients. As I mentioned earlier, our global branches are continually identifying new client needs. When these opportunities lead to large projects, we form partnerships with major Korean conglomerates to collaborate and grow together. By combining the strengths of conglomerates and SMEs, we can boost our competitiveness on the global stage. The advantages of a consortium are clear—we can successfully tackle large-scale projects with credibility and expertise. These three strategies are accelerating our global expansion.

For instance, we have recently engaged with a major U.S. client to explore a large-scale smart factory project. Initially, they sought U.S. automation companies but found no one capable of meeting their deadline and cost targets. They then approached Japanese firms, but despite their great technology, they weren’t agile enough to meet the timeline at the right cost. The client turned to German companies next, but they also couldn’t meet the deadlines or budget. Ultimately, they turned to Korean and Chinese companies. While Chinese companies offered affordable solutions and met the timeline, the ongoing trade war between the U.S. and China created a significant barrier. This is where we came in. Given the scale of the project, we are collaborating with one of our partner companies. This example shows the many opportunities that stem from the U.S. onshoring trend, and we firmly believe our future in the U.S. is very promising.

Another key strategy is working alongside client companies that possess larger facilities and better technology. We don't pursue large projects alone; collaborating with partners is critical when penetrating new markets. This approach generates even greater opportunities for us.

The goal of this report is to unite the voices of different leaders in Korea who are part of the global supply chain and share their insights. In just a couple of sentences, what would you like readers to take away from your interview?

Korea has immense capabilities, and as an automation company, we are committed to positioning Korea at the forefront of the global stage. We will continue to work hard for the younger generation and strive to make Korea greater.

For more information, please visit: https://www.systemrnd.com/