South Korea's mask manufacturers face bankruptcy amid eased masking rules

People wearing face masks wait at a crosswalk in Jongno-gu, Seoul. (Yonhap)

February 3, 2023

SEOUL – The government's decision to lift its indoor mask mandate has been welcomed by many, but it is being seen as a giant threat to the survival of mask manufacturers already struggling to stay afloat here.

"We are just hanging in there," Jung, an owner of a small mask manufacturing company, told The Korea Herald. "It will be difficult to hold out if the current situation continues."

Local manufacturers are now suffering from shrinking mask demand. Many manufacturers have already closed factories, while others decided to brace for difficulties by cutting expenses, although they are not certain for how long they can stay afloat like that.

Jung said there were around 50 mask manufacturing companies involved in a small association of mask companies in his region around Daegu from the early stages of the COVID-19 pandemic. However, less than 10 percent of them have managed to survive.

As of January 2023, the number of mask manufacturing firms registered to the Ministry of Food and Drug Safety came to around 1,500. However, the Korea Mask Industry Association estimated that the number of mask firms that are actually continuing normal operations could be less than 500.

The number of mask manufacturers rapidly increased in the first half of 2020, when the government grappled with a severe mask shortage when the COVID-19 outbreak first hit the country hard.

The government encouraged entrepreneurs to join the mask manufacturing industry to cope with the severe supply shortage caused by the pandemic. But then, it turned its back on the manufacturers.

"The mask industry was in a way a national strategic industry. The government intervened in the market by controlling production, forbidding exports and lowering prices. But the industry is now basically shut down without any guidelines for the future," said an official from the mask association who wished to be unnamed.

Jung said he was one of many entrepreneurs who jumped into the industry. Back then, there were so many large orders, he recalled.

Many people, including himself, became involved in mask manufacturing believing that there would be ample mask orders. But the orders that had been placed were later not needed when the time for payment came around.

For better or for worse, they had to continue operating the factories to make up for their initial investments. But the situation became worse as the government started to ease masking rules, starting last year.

In September, the government decided to lift the mask-wearing requirement for large outdoor gatherings. After the announcement, local mask manufacturers suffered sharp decreases in their sales.

"Our sales dropped by around 50 percent compared to the period before the announcement was made," Jung said.

Their sales further dropped toward January this year as the government reviewed options to ease the country's indoor mask mandate. Jung said the company's sales decreased around 30 percent after the government's recent announcement to lift the rule.

The mask association official added small and medium-sized mask makers have been hit hard by declining demand. "Except for some companies that can get orders from large companies, many are going through a difficult time," the official said.

Amid dwindling demand, many have gone bankrupt, while some have tried to reduce their fixed costs by selling the mask-making machines, which cannot be altered to produce other products.

Jung used to have 50 machines but sold around 30 of them. "Out of 20 machines that are left, my company only uses one or two machines these days," he said. The number of his employees is also now just four, down from 50.

Selling the machines is not a way to retrieve their investments as they cost so little nowadays. According to Jung, a mask machine that used to cost 100 million won ($82,000), is now going for less than 1 million won. "They are basically scrap metal nowadays," he said.

Amid ongoing difficulties, the local mask association official said they are currently reviewing options to ask the central and local governments to compensate for damages they might have caused during the early stage of the COVID-19 pandemic by taking full control of the entire process of production, logistics and distribution of the masks.

"Operators of mask manufacturing companies are certainly responsible for starting and expanding their businesses," Jung said. He, however, added the government could have better assessed local demand by sorting out fake orders so that local mask companies did not have to expand their businesses so aggressively.