From Two Years to Five — What Actually Changed
In April 2026, the Ministry of SMEs and Startups disclosed widespread improper claims in its smart manufacturing support program for micro-manufacturers and restructured the program, significantly extending the obligations that recipient companies carry. The central change is that equipment purchased with the subsidy is now registered as a major asset under the Subsidy Management Act, with the post-management period extended from two years to five years. The Smart Factory Deployment Program's Detailed Management Standards (Article 37) likewise require machinery, equipment and solutions to be kept in their original use for five years from installation.
The driver behind this change is a recurring pattern of subsidy fraud. Leasing (rental) arrangements in particular were exploited — companies collected subsidies on the strength of a contract without ever installing equipment, or terminated leases early to recover cash. As a result, leasing has been abolished and purchase is now the only permitted acquisition method. This raises the upfront cash burden and shifts depreciation onto the company, but it also means the asset genuinely belongs to the business.
An equally overlooked point is the statute of limitations on sanctions. Penalties may be imposed for five years after the agreement period ends — a considerable gap from the common assumption that "once the build passes inspection, the matter is closed." Companies in the Smart Factory Deployment Program (basic, advanced or win-win tracks) also face a five-year retention period and utilization-reporting duties under its Detailed Management Standards, so the post-management principles are effectively the same across programs.
What Companies Actually Owe Over Five Years
First, reporting on post-management and system utilization. It is not enough for the equipment to physically sit on the factory floor. Evidence of actual operation — MES and ERP log records, for instance — is required. A system that employees never adopted is at risk of being classified as "non-operational."
Second, restrictions on disposing of major assets. Selling, scrapping, pledging equipment as collateral, or relocating the factory all require prior approval. Unauthorized disposal triggers clawback proceedings.
Third, reporting material changes. Factory relocation, change of representative director, merger or division, and suspension or closure of business are all realistic events within a five-year window, and must be reported to the administering agency without delay.
The question we hear most often on site is: "Our solution vendor went out of business and maintenance stopped — what now?" Doing nothing is not the answer. Document the vendor's closure and the circumstances of the system shutdown, report it to the administering agency, and present either an alternative maintenance arrangement or an in-house operating plan. That record is what prevents a later finding of "non-operation."
Where Clawback and Sanctions Are Actually Triggered
Typical findings of improper receipt include falsified tax invoices, equipment that was never installed or never operated, and use outside the approved purpose. These escalate in stages: full or partial clawback of the subsidy → participation restriction → exclusion from future support programs. A company that received KRW 50 million and sold off part of its equipment without approval, for example, could face clawback of that amount and a participation ban on top.
What deserves particular attention is the grey zone where administrative sloppiness — not intent — produces penalties. Missing supporting documents, unreported changes, or a mismatch between the asset register and the equipment actually on site can each lead to a corrective order or partial clawback. A common scenario is the departure of the employee who handled the project, leaving no one who knows where the records are.
With 112 companies caught for improper claims in the micro-manufacturer smart manufacturing program in April 2026, post-completion inspections across smart manufacturing subsidies are tightening. The more time that has passed since your build, the more a self-assessment now is worth.
Building a System That Survives Five Years
At the close of the agreement, the following minimum document set should be preserved:
We further recommend formalizing an annual self-assessment. Three checks suffice: ① are operating logs actually being captured, ② does the asset register match the equipment on the floor, and ③ have any intervening changes been reported. It is a thirty-minute exercise, but the difference it makes when an inspection notice arrives five years later is substantial.
Post-management records are not purely defensive, either. When applying to the advanced track, seeking an upgraded smart factory level certification, or pursuing policy financing, faithful performance on a prior project is weighed as an evaluation factor.
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KITIM (Korea Institute of Technology Innovation Management) supports the full lifecycle — designing documentation during the build phase, conducting periodic reviews and filing change notifications throughout the post-management period, and responding to clawback notices. We also provide self-assessment diagnostics for companies that have already completed their builds. If your management framework needs review, please get in touch.