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[Healthcare] The Bio Industry to Become a New Growth Engine in Korea

Trends and Market Prospects of the Bio Industry

The human being’s innate desire for a longer lifespan bolstered by economic growth has continuously put chronic diseases, including oncology, dementia, and diabetes, on the top ranks of the clinical pipelines. As cutting-edge ICT technologies have pushed the limits of the digital healthcare industry outward, the US recently has launched online pharmacy and virtual healthcare services. In the meantime, since the outbreak of COVID-19, a tremendous amount of public and private investment has been poured into developing COVID-19 vaccines and therapeutics and it seems that a significantly higher portion of public and private money will be earmarked for infectious diseases research for the foreseeable future. Henceforth, such aforementioned factors will make the bio industry stand out itself as one of the new growth engine industries.

The global market size of the whole bio industry, which largely partitions into bio-pharma, medical device, cosmetics, medical service, is expected to grow from USD 11.3 trillion in 2020 to USD 16.2 trillion in 2026, with an annual growth rate of 6.1 percent on average. Meanwhile, its Korean market size, which accounts for 1.5 percent of the global market as of 2020 (USD 171.8 billion), is forecasted to grow at an average rate of 8 percent annually (USD 269.9 billion) and take up 1.7 percent of the global market in 2026.

Market Prospects of the Bio Industry by Sector
(Unit: USD, %)
Market Prospects of the Bio Industry by Sector
2020 (E) 2026 (E)
World Korea World Korea
Bio-pharma 1. 2 trillion 19.6 billion 1.6 trillion 26.8 billion
(1.6%) (1.7%)
Medical Device 429.7 billion 6.8 billion 572.4 billion 9.7 billion
(1.6%) (1.7%)
Cosmetics 416.8 billion 12.3 billion 601.9 billion 14 billion
(3.0%) (2.3%)
Medical Service 9.3 trillion 133.1 billion 13.4 trillion 219.4 billion
(1.4%) (1.6%)
Total 11.3 trillion 171.8 billion 16.2 trillion 269.9 billion
(1.5%) (1.7%)
* Source: Bio-pharma, medical device data from Fitchsolutions, and cosmetics data from Euromonitor International prospect data (as of 1H 2021)

Current Status of Korea’s Bio Industry

The Korean bio-pharmaceutical industry that used to be a mere generic manufacturer and distributor has upgraded itself via open innovation activities and R&D; it has brought in advanced technologies and other non-tangible assets through licensing-in and M&A deals and raked in cash by selling out its pipelines which in return is re-invested into other R&D projects. However, its technological level and marketing power is still quite behind other advanced countries’, with no presence of conspicuous big pharma companies and global blockbuster drugs. The medical device and service sector whose legal system remains pretty much in its nascent phase will mandate social consensus on telemedicine and telepharmacy first. As of 2020, the medical device industry amounted to 3.8 percent of the world’s largest market, the US, and 1.6 percent of the global market, while the medical service industry was 3.4 percent of the biggest market, the US again, and 1.4 percent of the world market. In June 2021, the Korean government has announced that it will examine regulatory grey areas that deem to be excessive compared to other advanced countries and will exert itself to prop up those sectors.

Bio-Industry Fostering Policies

The Korean government unveiled the “Innovative Strategies for the Bio•health industry” in May 2019, and “Policy Directions to Innovate the the Bio industry and 10 Key Tasks” in January 2021, setting out key tasks in five strategic areas that range from R&D support, talent nurturing, regulation and system advancement, to the establishment of business ecosystem and export promotion policies and research commercialization policies. It also announced the “Bio•health R&D Investment Strategy Ⅱ” in January 2021, as a follow-up to the “Bio•health R&D Investment Strategy Ⅰ” announced in December 2019. The strategy intends to improve the linkage between its supporting policies and investment strategies and put more weight on supporting mid-and long-term R&D by setting up the direction for short/long-term investment and framing supporting policies for industrialization and commercialization, which is to support the whole R&D life cycle throughout. Recently, the government amended “the Act on Industrial Cluster Development and Factory Establishment” on June 2021, laying legal grounds to stimulate investment in high-tech investment zones via measures such as subsidy and tax credits, levy and rental subsidy, land use permits, and regulatory improvements. The government also nominates “innovative pharmaceutical companies” and “innovative medical device companies” at every cycle that are qualified based on their R&D spendings.

FDI Policies and FDI Inflows

The Ministry of Trade, Industry and Energy (MOTIE) held a Foreign Investment Committee on June 2021, and announced the “Strategy to Attract high-tech FDI”. The strategy focuses on ① coming up with FDI polices for industries of national importance (such as K-New Deal industries, high-tech material•component•equipment, vaccines, etc.) ② supporting local governments’ FDI attraction activities by putting towards high-tech investment zones ③ bolstering the overall infrastructure that ushers in FDI, such as by devising talent development programs and catering to complaints from foreign companies. 

Even though UNCTAD forecasted earlier that the global FDI of 2020 would experience a steep decline of 40 percent, Korea’s performance turned out to be relatively decent, recording a 11.1 percent decrease in 2020. Moreover, its performance in 1Q 2021 reached its record high ever (arrival-based) for the first quarter with the help of economic recovery and resumption of delayed M&A investment. In the case of high-tech industries that includes bio and autonomous-driving cars, FDI increased 9.3 percent, from USD 7.7 billion in 2019 to USD 8.42 billion in 2020.

Although foreign-invested companies make up a mere 2.2 percent of Korea’s registered corporations, they constitute 10.8 percent of total GDP, 5.6 percent of employment, and 18.6 percent of exports (as of 2019), making a significant contribution to the Korean economy. With the central and local governments being zealously supportive of FDI, it is expected that FDI inflows is on its own way toward growth.  

By Sung-Kyung Lee (
Korea Institute for Industrial Economics & Trade

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

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