The National Federation of Urban Small Manufacturers has demanded that the government withdraw its 2026 reform plan for the Small Manufacturers Smart Manufacturing Support Program. The industry argues that the newly introduced annual revenue threshold of 200 million won and the increased cost-sharing burden could exclude small manufacturers from support. The government, however, says the measures are unavoidable to prevent recently uncovered large-scale fraud.
The Emergency Response Committee of the National Federation of Urban Small Manufacturers held a press conference on the 28th at 2 p.m. at the fountain plaza on Hyoja-ro in Jongno-gu, Seoul. The federation demanded that the government withdraw the 200 million won annual revenue eligibility threshold, reconsider the 40 percent self-pay ratio, review the five-year contract clause, halt unilateral public disclosure of fraud cases, and establish a public-private consultative body.
The Small Manufacturers Smart Manufacturing Support Program was introduced in 2020 to help small manufacturers improve productivity and undergo digital transformation. The program supports the cost of installing smart equipment and software, with this year's related budget reaching 98 billion won. The urban small manufacturers eligible for support are small business operators engaged in sewing, printing, metalwork, machinery, jewelry, and crafts, and are regarded as forming the foundation of the regional manufacturing ecosystem.
At the center of the controversy is the 2026 reform plan for the Small Manufacturers Smart Manufacturing Support Program, which the Ministry of SMEs and Startups (MSS) released on the 30th of last month. The reform plan introduces a new eligibility requirement of at least 200 million won in annual revenue—based on either the three-year average or the previous year—for the process technology and lifestyle-culture categories, and adjusts the government funding ratio from 70 percent to 60 percent. The cost burden borne by small manufacturers has been expanded from 30 percent to 40 percent. In addition, the mandatory period for retaining and managing the supported equipment has been extended from two years to five years.
The industry has strongly opposed the reform, arguing that it could exclude the very small manufacturers most in need of digital transformation. Noh Hyung-jung, treasurer of the Goyang branch of the National Federation of Urban Small Manufacturers, said, "It has become difficult for small manufacturers with annual revenue below 200 million won to even apply for the smart manufacturing support program." He added, "The extension of the equipment retention requirement to five years places a heavy burden on small businesses, as it effectively makes shutting down impossible during that period." He continued, "What is most regrettable is that, because of a few fraud cases, even small manufacturers who have run their businesses faithfully are now viewed as potential fraudsters."
On the other hand, the government's push for such reforms comes against the backdrop of repeatedly uncovered fraud cases. According to an inspection conducted by the MSS last year, fraud was confirmed at 112 of the 1,887 companies that received support in 2024. Some supplier companies, while handling applications and settlements on behalf of recipients, inflated equipment prices and pocketed the difference through a "payback" scheme. Other cases involved fabricating documents to make leased equipment appear as if it had been purchased in order to obtain subsidies.
Accordingly, the MSS plans to tighten overall management and oversight of the program, including strengthening supervision of supplier companies and introducing an AI-based inspection system. The ministry also intends to restructure support to focus on small manufacturers with the financial capacity to invest and the potential to grow. However, the small manufacturing industry is concerned that raising the bar for support could undermine the program's original purpose, suggesting that the gap between the two sides is unlikely to narrow anytime soon.
