Concerns are growing that small and mid-sized manufacturers shutting down for lack of a successor could destabilize South Korea's industrial ecosystem and sever supply chains. Industry officials warn that the sudden disappearance of a company producing critical components can break the chain outright.
Of the 1,500 small and mid-sized companies that had signed agreements with Woori Bank's Corporate Succession Support Center through the end of August this year, 51.6%, or 775 firms, held patents, according to financial industry sources on the 15th. By sector, manufacturers made up the largest share at 31.7%, or 476 companies, of all 1,500 partner firms, followed by wholesale and retail at 7.8% and construction at 4.8%. Even companies that have secured technological competitiveness in their fields are struggling to find successors.
Industry watchers say the fallout could be considerable if these companies close down after failing to resolve succession issues. Decades of production experience, industrial know-how and skilled workers would vanish along with them, raising the risk of supply chain disruptions.
In manufacturing in particular, where firms are tightly interlinked, the abrupt closure of a single supplier can deal a heavy blow through lost business relationships and falling revenue. A single company's succession problem can become a source of instability across an entire supply chain. Many of the companies that approached Woori Bank's Corporate Succession Support Center did so at the request of large corporations, sources said. "When we first opened the center, I wondered whether there would be much demand for counseling, but 1,500 companies came to us," a senior Woori Bank official said. "Many of them were firms that their large corporate clients, worried about losing the technology, urged to come see us first."
Supply chain stability matters even more in sectors that underpin Korean industry, such as automobiles, shipbuilding and defense, where failure to procure even one part can severely disrupt production. In March this year, a large fire at Anjeon Industrial, an auto parts maker in Daedeok District, Daejeon, disrupted supplies of engine valves, a core engine component, and held up production of Hyundai Motor's flagship models. Engine valves are essential parts that control fuel injection into the cylinder and the discharge of exhaust gases.
"If even one supplier making parts for a company that builds ships or tanks disappears, the finished product cannot be made," said Kim Yoo-jae, head of Woori Bank's Corporate Succession Support Center. "Stable business succession is necessary for the stability of industrial supply chains as well."
