Korean tech giants overly depend on hardware

By Kang Seung-woo

The nation’s information technology (IT) industry is heavily dependent on hardware, lagging far behind the global trend of focusing on software, a recent report said, Monday.

According to the report by the Institute for Information and Communications Technology Promotion (IITP), the software business represented merely 15 percent of Korea’s total IT industry in terms of market capitalization in 2016 despite a 6 percentage point gain from a decade ago.

On the contrary, the share of the hardware segment, including that of Samsung Electronics, accounted for more than 50 percent.

The report classified the IT industry into eight categories – semiconductors, electronics parts, software, the internet, IT services, home appliances, IT hardware and communications equipment – to calculate the shares of hardware and software.

Also, the report showed that the United States and China were less dependent on a specific type of business.

The ratio between software and hardware in the U.S. market was 62 percent to 38 percent last year, compared with a 50-50 split 10 years ago. China’s software proportion was 58 percent, compared to hardware’s 42 percent. The figures were 70 percent to 30 percent 10 years earlier.

The report found that Japan also had a high dependence on hardware as its share was 69 percent last year.

“Japan still has a high hardware proportion, but it differs from Korea in that the country doesn’t rely excessively on a few specific sectors, except for electronics parts,” the report said.

According to the report that analyzed the global top 100 IT firms in terms of market capitalization, the global IT industry was shifting its focus to software from hardware.

“Among the top 100 players, the number of software companies increased from 24 in 1990 to 51 in 2015,” it said.

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