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Trends and Outlook of Korea’s Post COVID-19 Non-Contact Industry

The coronavirus pandemic, sweeping across the entire world, has affected every corner of our lives and economy. Schools started the spring semester online for the first time in Korea as virus cases began to spiral out of control a few months ago. The authorities soon provided a weekly ration of face masks for all citizens to curb the spread of the infections nationwide. Furthermore, the pre-approval of test kits under emergency use authorization from the Ministry of Food and Drug Safety (MFDS) allowed test kit makers to swiftly help health authorities secure stable supplies and begin expanding diagnostic testing capabilities.

Changes in everyday life have reshaped the economic landscape of domestic consumption as well as exports. The impact of the pandemic has driven a drop in both supply and demand, pushing almost all industries to near crisis. Despite the bleak outlook, however, some businesses related to personal disease prevention supplies (face masks, cleaning agent and test kits) and so-called “stay-at-home-economy” products (laptop computers or household appliances) are now thriving.

With focus on these products in high demand, this report covers more information on the current industry trends and the state-led policies, named the Korean version of New Deal, a series of programs instituted to well respond to the Post COVID-19 era.

First, COVID-19 triggered a plunge in exports in April and May this year. The year-over-year growth rate in exports during this period tumbled to 25.1 and 23.7 percent respectively. On the contrary, overseas sales of non-contact (also referred to as “untact”) products which cover personal care products and stay-at-home-economy products have grown substantially with global demand on the rise.

The upturn is clearly visible in the market for hygiene and disease prevention supplies ever since the virus outbreak, with the growth rate of 114.3 and 372.2 percent in exports respectively as of May 2020, the highest gain of all sectors. Exports of test kits went beyond USD 200 million in April and hand sanitizer sales in May rose 15,018 percent (USD 82.48 million) compared with the same period in the previous year. The pandemic has also fueled the growth of non-face-to-face economy such as online learning or remote working. The sales volume of computer devices sold overseas in May totaled USD 11.96 billion, up 82.7 percent year-on-year. Exports of home appliances, designed mainly to keep the house clean and disinfected, such as personal clothing care systems (or called “Styler” in Korea), vacuum cleaners and air purifiers, have also been on an upward trajectory, which represents a 45.8 percent jump from last year. As the coronavirus crisis has forced people to be stuck indoors, sales figures of “at-home” meal kits and personal care products have increased 29.8 and 74.3 percent respectively.

Aforementioned numerical data implies that an export boom in non-contact products probably occurred on the back of the impressive response capacity that businesses in Korea have shown in coping with COVID-19 uncertainties that are accompanied by changing consumer demand and lifestyles. On top of that, it also can be interpreted as Korea’s outstanding performance to stave off the shock from the virus, while ensuring stable supply-chain networks throughout the country.

Plus, some businesses which have seen a boom in orders during the pandemic such as medical devices, hygiene products and home appliances, have shown agility, simultaneously ramping up manufacturing capabilities, while launching new products and services to catch up with the global market demand. Test kit makers, for example, have been put through fast-track approval to make their products commercially valid as early as possible. Companies manufacturing personal hygiene products have increased their output to full capacity to meet the soaring market demand at a fast pace. The sales volume of home appliances sold worldwide has also picked up, thanks to consumers who are rushing to buy house cleaning products.

<Chart> Sales figures of top non-contact exports in Korea (May 2020)

(Unit: USD 1,000 )

Source : Ministry of Trade, Industry and Energy (June 1, 2020)

The world, inspired by South Korea’s innovation to mitigate the spread of the disease, is now watching its virus containment methods and tools: test kit supply, quarantine system and vaccine development in the course of fighting COVID-19. A Korean venture which developed the In-Vitro Diagnostics (IDV) kit, in particular, has started to trade internationally since it has obtained the U.S. FDA emergency use authorization and CE mark certification in the EU in March this year.

<Table> COVID-19 test kits makers in Korea

Company name Export status
Seegene Supplied 90% of its output to 45 countries
Solgent Exported products to 35 countries including Poland and Ukraine
KoteneBiotech Shipped products to 37 countries worldwide including 7 in Latin America for quick supply
Genematrix Exported products to 4 countries including Italy, the UAE and Chile
Genbody Reached a deal to send KRW 4.8 billion worth of goods to 15 countries including Brazil and Ireland
Labgenomics Settled an exclusive supply agreement to deliver products to India via Siemens Healthineers
Bioneer Signed an export contract worth KRW 5 billion with a state-owned petroleum company of Qatar
Clinomics Waiting to acquire MFDA’s export permits for KRW 4.8 billion worth of goods to be sold to Hungary

Source : Maeil Business Newspaper (April 8, 2020) 

With regards to biotechnology, major pharmaceutical companies in Korea have already spurred the vaccine development process to tackle the virus. The potential timeline for the commercial use of the coronavirus vaccine appears to be early 2021, which makes biotech companies gear up for mass public use, according to a forecast by the health authorities. Meanwhile, the Korean government unveiled a package of COVID-19 economic relief plans, called the Korean version of New Deal (also referred to as the “K-New Deal”) on July 14, which aims to respond to the post-pandemic economy and adjust to the radically changing industry landscape with the advent of unforeseen business trends like the emergence of non-contact products.

In announcing the new deal, the authorities placed a great emphasis on the digital economy (“Digital New Deal”) and shifting paradigms to green growth (“Green New Deal”), which enables the government to boost innovation in industries and strengthen social safety nets so as to help every single unit of economic activity bounce back from the shock.

For the non-contact industry, the administration is set to bring out a plan to break new ground for scaling up non-face-to-face business platforms by building out its infrastructure. Pumping as much as KRW 2.1 trillion into the program up until 2025, the government forms access to telemedicine and community care services for vulnerable groups within society, digital work-from-home practices targeting SMEs and online biz-support systems for small business owners.

The report so far has outlined the recent trends of Korea’s post COVID-19 non-contact industry and the K-New Deal. Notwithstanding its heavy reliance on exports, Korea is assessed to be one of the less affected economies by the negative implications from the pandemic. However, successful risk mitigation efforts carried out until now are not enough to get fully ready for life after COVID-19.

The current market presence largely led by a sales spike for COVID-19 prevention and treatment products cannot be sustainable in the long term. The good news is that Korea has been proactive in ensuring adaptability in this crisis just as it has done in the race for the coronavirus vaccine. Korean biotech companies, previously considered to be not as globally competitive, debuted amidst the virus outbreak to match their global counterparts for vaccine development.

Given the authorities’ commitment to provide full support and allocate a high portion of state funds toward bouncing back from the pandemic, Korea is highly anticipated to be on the right track in the post COVID-19 era, which has opened the door to brand new business models like related to the non-contact industry.

By Shim Woo Jung
Senior Researcher 
Korea Institute for Industrial Economics & Trade (KIET)

< *The opinions expressed in this article are the author’s own and do not reflect the views of KOTRA. >

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