Bank of Korea (the central bank) reports a knowledge services trade deficit of about $4.5 billion (KRW 6.2 trillion) in the first half of 2025.
The deficit widened by roughly $770 million compared with the second half of last year.
Patent royalties, increased overseas R&D orders, and consumption of global OTT platforms and online games are the main drivers of the gap.
These figures reveal both Korea's dependence on foreign technology and changing digital consumption patterns.
"What does the 'deficit' number mean?"
Indicators and trends
Face the facts.
In the first half of 2025 the knowledge services deficit stood near KRW 6.2 trillion, signaling a renewed expansion of the shortfall versus the prior year.
After a steady narrowing through much of the 2010s, the trend reversed as royalties and overseas contracts climbed.
Because knowledge services make up a growing share of total service trade, small shifts can have large effects on the overall trade balance.
The Bank of Korea aggregates items such as intellectual property fees, copyrights, ICT services, and professional and business services.
Notably, rising industrial property fees (payments for patents and related rights) have been a key force pushing the deficit wider.
Royalty payments by domestic firms for foreign core technologies have built up over several years, which raises questions about industrial policy design.
At this point the data carry policy implications beyond mere numbers.
A single image helps visualize the trend.
However, interpreting the numbers requires multiple perspectives.
Some economic actors treat the trade deficit itself as a problem, while others see it as the cost of investing in long-term competitiveness through technology and content imports.
The next section examines the causes in detail.
What has increased?
The core issue is royalties.
First, industrial property fees have surged.
Costs tied to overseas patents and technology use have raised the deficit in the intellectual property account.
Second, firms are increasingly contracting R&D abroad to secure manufacturing competitiveness.
Patent royalties and overseas R&D orders are the main drivers of the recent deficit expansion.
Expenditures on overseas R&D show up immediately as outflows in the knowledge services account.
Meanwhile, long term gains—in the form of technology transfer and higher productivity—may follow from foreign collaboration.
However, in short-term statistics income outflows rise first, worsening the deficit.
Third, consumption patterns have shifted.
As subscriptions to OTT platforms, online games, and AI-based apps grow, copyright-related payments have increased.
The more Koreans use global platforms, the more content fees and royalties flow abroad.
The paradox is that broader cultural consumption shows up economically as higher overseas payments.
Contrasting views
Opinions diverge.
Those worried by the widening deficit warn of weakened technological self-reliance and declining industrial competitiveness.
They argue that dependence on foreign core technologies could blunt domestic firms' capacity to innovate.
Failing to secure foundational technologies may entrench vulnerabilities in global value chains.
It signals political and economic choices and highlights the need to rethink technology sovereignty and industrial policy in the medium term.
Others interpret the situation differently.
They contend that importing technology and partnering on R&D abroad are necessary steps to rebuild manufacturing competitiveness.
Absorbing foreign know-how and rapidly applying it in the market can yield greater benefits than trying to develop everything at home.
In a globalized division of labor, the choice is about balancing cooperation and independence.
Arguments on both sides go beyond a simple tally of gains and losses.
Policy priorities, funding choices, and the public-private division of labor will shape outcomes.
For example, using overseas R&D to learn and then converting that knowledge into domestic production takes time and investment.
Conversely, pursuing immediate technological independence risks high costs and slow progress.
Regional differences
The pattern varies by market.
In Asia, game and K-content exports and patent licensing often produce surpluses in many cases.
By contrast, the North American market shows heavier imports of core technologies, creating a deficit-heavy split.
Asia tends to run surpluses on content, while North America shows deficits on core technology—a persistent dual structure.
That split complicates strategy for Korean firms.
Content and gaming companies can boost earnings by targeting Asian and European markets.
But high-dependence sectors tied to North America—like advanced semiconductors and biotech—face steady royalty payments.
Tailored regional strategies are therefore required.
Regional policy must combine export diversification with calibrated technology investment.
For example, game and content firms should intensify marketing in Asia and Europe to increase profitability.
Meanwhile, key technology sectors—semiconductors or biopharma—must focus on securing core technologies and expanding domestic R&D to reduce dependence.
These complementary approaches can help stabilize the national trade structure.
What should we prepare?
Set clear priorities.
Policy responses should combine short-term relief with long-term structural change.
In the near term, safety nets and measures to support corporate cash flow can mitigate trade shock effects.
In the long term, investment in core technology and talent development is indispensable.
Redistributing R&D funds, tax incentives, and stronger training programs must proceed in parallel.
Companies do not need to stop overseas R&D altogether.
Instead, they should design strategies that internalize the benefits of foreign collaboration.
Clear licensing terms that require meaningful technology transfer, and projects that link foreign research outcomes to domestic production, are practical steps.
Also, content firms should diversify revenue streams to lower platform dependency.
Government and industry must build a feasible roadmap together.
For instance, a long-term R&D fund for strategic technologies, plus support for young researchers and startups, can strengthen domestic capabilities.
At the same time, institutions should help negotiate fair revenue shares with global platforms.
Policy effectiveness comes from choosing the right direction rather than hasty moves.
Conclusion and a question
In short, the widening knowledge services trade deficit reflects multiple factors working together.
Patent royalties, overseas R&D orders, and rising digital content consumption are the main drivers.
The deficit carries policy and industrial implications that call for redesigned responses and strategies.
In conclusion, it is important to combine short-term cost acceptance with long-term goals of technological independence and export diversification.
The government should realign R&D funding and reform institutions, while companies should ensure that foreign collaborations benefit the domestic industry.
Ultimately, society must find a balance between enjoying global culture and building industrial strength.
We ask readers: which strategy do you support to address Korea's knowledge services trade deficit?
