As South Korea’s industrial structure evolves, small and medium-sized enterprises are moving beyond subcontracted auto parts and materials to lead global markets with cosmetics, medical electronics, and semiconductor equipment.
In 2010, S. Korea’s small and medium-sized enterprises (SMEs) largely depended on exporting automotive parts. Many supplied components to overseas plants operated by Hyundai Motor and Kia, while second- and third-tier subcontractors delivered parts to other global carmakers.
Other leading exports included synthetic resins used in plastic bumpers and knitted fabrics for clothing—mostly materials incorporated into final products manufactured by large corporations with offshore factories.
Over the past five to six years, however, a shift has taken place. A joint analysis by The Chosun Daily and the Ministry of SMEs and Startups, which examined SME export trends from 2010 to 2024, shows that the top export items have changed significantly.
At the forefront of this transformation is the cosmetics sector.
In 2015, cosmetics entered the SME export rankings for the first time at seventh place. Since then, they have steadily climbed, reaching No. 1 in 2022 and maintaining that position for the second straight year in 2023.
Notably, this rise has been driven not by major brands such as Amorepacific or LG Household & Health Care, but by smaller firms like Jung Saem Mool Beauty, TS Trillion and more. These companies have carved out their own markets, playing a leading role in the global K-beauty boom.
Cosmetics are not the only products climbing the export rankings. High-value-added items such as semiconductor manufacturing equipment and electronic devices used in batteries and medical care are also rising.
This marks a broader shift from the traditional subcontract-based export model—where SMEs operated under large conglomerates—to one where SMEs are independently developing brands and entering global markets with their own technologies.
In 2024, S. Korean SMEs exported approximately $6.84 billion worth of cosmetics, making up about 67% of the country’s total cosmetics exports of $10.2 billion. The upward momentum is accelerating, with cosmetics ranking as the No. 1 SME export item for 25 consecutive months since February 2023.
As Korean pop culture—including K-pop and K-dramas—continues to spread globally, overseas interest in Korean cosmetics has grown. Many international consumers now perceive Korean products as offering high-quality ingredients at reasonable prices, further boosting demand.
The expansion of online distribution channels has also played a significant role. About 15 years ago, even SMEs capable of producing finished products struggled with low brand recognition and limited marketing capacity. As a result, their only option was often to supply larger corporations.
By 2024, however, of the 8,989 SMEs exporting cosmetics, 1,339—around 14.9%—were doing so exclusively through online channels.
The growth of e-commerce has enabled SMEs to target overseas consumers directly without the need for physical retail networks. As long as the product quality is strong, they can compete globally on their own terms.
This shift in SME export items reflects broader changes in S. Korea’s industrial base. Items previously dominant due to their subcontracting roles have gradually declined, while products tied to advanced technology have gained ground.
For example, synthetic resin, which ranked second in 2010, dropped to sixth in 2024. Knitted fabrics and steel plates, ranked sixth and seventh respectively in 2010, fell out of the top 10 entirely.
In their place are electronic application devices and semiconductor manufacturing equipment. Since entering the top 10 in 2016, electronic application devices—such as battery testing systems, medical devices for skincare, and industrial precision machinery—have seen consistent growth. In 2024, fueled by the popularity of K-beauty in Japan, demand surged for skin-related medical equipment including radiofrequency wrinkle treatment machines and laser devices for acne care.
Semiconductor manufacturing equipment, which joined the top 10 in 2018, has also emerged as a major contributor. These machines, used in chip production processes, are exported not only to overseas plants operated by Samsung Electronics and SK Hynix but also to a wide range of semiconductor firms across the United States and Europe.
Geopolitical developments have also shaped recent export patterns, particularly in the automotive sector. In 2024, automobiles—mainly used vehicles—unexpectedly climbed to become the second-largest export item among SMEs.
This surge was driven by a shortage of vehicles in Russia and its neighboring countries following the invasion of Ukraine. Seizing this window of opportunity, S. Korean SMEs quickly ramped up exports to nearby markets such as Kazakhstan, Kyrgyzstan and Uzbekistan.
Looking ahead, however, potential risks remain. With the return of the Trump administration in the United States, global trade tensions may flare up once more.
Roughly 32% of S. Korea’s SME exports are concentrated in the United States and China. If tariff battles or other trade barriers intensify, they could pose significant challenges to sustaining current growth trends.
