The following is the third (Chapter 2 summary) in a series of articles on the book, titled “Corporate Korea’.—Ed.
By Kim Kwang-sooh
As part of the economic development policy, the government established over a dozen science and technology research institutions in the 1960s and 1970s. It first founded Korea Institute of Science and Technology (KIST) in February 1966. Other government-funded research organizations included Korea Telecommunications Research Institute (KTRI), Korea Research Institute of Standards and Science (KRISS, formerly Korea Standards Research Institute), Korea Research Institute of Chemical Technology (KRICT), Korea Atomic Energy Research Institute (KAERI, formerly Atomic Energy Research Institute), Korea Institute of Electronics Technology (KIET), Korea Electric Research and Testing Institute (KERTI) and Korea Aerospace Research Institute (KARI). Of these, institutions in areas of electronics, telecommunication and computer were KIET, KTRI and KERTI. In 1984, these three organizations were integrated into the Electronics and Telecommunications Research Institute (ETRI).
During the 1960s and 1970s, these public research institutions took primary role in the nation’s research and development (R&D) efforts. But in the 1980s, the private sector began to play significant role in R&D initiatives. The public sector accounted for 68% of Korea’s total R&D expenditures in 1971, but by 1986 its percentage declined to 19%. Encouraged by government’s tax and financial incentives for establishing industrial research institutions, the number of industrial research organizations increased from 152 in 1984 to 1,949 in 1993. And the amount of R&D expenditures by the industry sector increased 10~20% annually during the same period.
Along with establishment of technology research organizations, the Korean government began to construct export-oriented industrial complexes in the 1960s. The first industrial complex was built in Guro-dong, Seoul, and a large-scale petrochemical industrial complex was begun to be constructed in Ulsan in 1968. Since then, a number of industrial complexes were constructed by the central government, local autonomous entities and private sector across the country. The central government built industrial complexes mainly to promote heavy industries, such as machinery, synthesized chemistry, and electronics. Of these industrial complexes, Gumi Electronic Industrial Complex and Masan Free Trade Zone, which were begun to be built at the end of the 1960s and in early 1970s respectively, were devoted to development of electronic industry. But the first oil shock caused by the fourth war in the Middle East starting in October 1973 seriously affected overall industry in Korea. Yet, the oil shock brought a chance of takeoff to electronic and shipbuilding industries in early phase as they consume relatively less energy.
In early 1980s, Korea focused on avoiding government-led industry promotion policy. The government enacted a new law that encouraged enterprises to fully enhance creativity while striving to distribute industries to wider regions for regionally balanced development. Since latter part of the 1980s, the industry could hardly maintain low-wage structure that supported export competitiveness due to the democratization movement and stronger trade union activities. These social changes led labor-intensive industrial companies to shift to capital and technology-intensive heavy chemical and advanced technology-based ones. And the 1990s is characterized by the change in industrial model for growth in quality, refraining from expansion in quantity.
After producing the first electronic device, the radio, in Korea in 1959, Gold Star (now LG Electronics) developed the Korea’s first black/white TVs in 1966, and Samsung Electronics, the late comer, also began to produce black/white TVs in 1969. During the 1970s, Gold Star commercialized as many as 111 different TV models, while drastically increasing annual production capacity from 52,970 units in 1970 to 1.18 million units in 1978. Between 1970 and 1974, Samsung Electronics introduced 48 different TV models, and it gained competitive advantage by developing a superior TV model with higher energy efficiency. In 1978, Samsung Electronics produced over 1 million TV units.
But saturation rate of black/white TVs in Korea’s market exceeded 90% in the middle of the 1970s, and these two companies and other electronic companies began to produce color TVs. Korea National Electric (changed name to Anam Electronics later) first produced color TVs in 1974, and both Gold Star and Samsung Electronics began to manufacture color TVs in 1977, until when Korea did not have any color TV broadcasting channel, except the American Forces Korea Network (AFKN). The government permitted to sell color TVs in the market in Korea starting on August 1, 1980, but the market grew little in the absence of color TV broadcasting channel. The government decided to start color TV broadcasting on December 1, 1980, boosting local color TV market. By July 1981, more than 1 million color TVs were sold in Korea. In addition to color TVs, Gold Star and Samsung Electronics also developed other digital consumer electronic appliances, such as digital TVs, digital cameras, digital versatile disc (DVD) players, liquid crystal display (LCD) TVs and set-top-boxes.
The first mini-computer in Korea was developed in 1975 by OCE by assembling key parts, such as central processing unit (CPU), auxiliary memory and cathode-ray tube (CRT) terminal, developed by the U.S.-based Digital Equipment Company (DEC). OCE was followed by several other companies, including Samsung Electronics, Gold Star, Gold Star Electric, Oriental Precision, Ssangyong Cement and Doosan. Of these, Samsung Electronics and Gold Star dominated the computer market in Korea. Samsung Electronics began marketing computers in 1976 and Gold Star started to supply computers in 1978 under exclusive marketing contracts with the U.S.-based Hewlett Packard (HP) and Honeywell, respectively. Then in the late 1970s, Korea Institute of Science and Technology (KIST) developed a microcomputer using Intel 8080 microprocessor, and it was followed by Trigem Computer that developed a microcomputer in the early 1980s, laying foundation for developing microprocessor-based desktop personal computer (PC) industry. In 1978, Samsung Electronics and Gold Star developed the Korean language CRT terminal.
Acquiring Hankuk Semiconductor, the first semiconductor firm in Korea, in 1974, Samsung Electronics renamed it as Samsung Semiconductor and began to develop 64K DRAM in June 1983 by licensing technology from the U.S.-based Micron Technology. In November of the same year, Samsung Semiconductor (integrated into Samsung Electronics later) successfully developed all processes needed for producing 64K DRAM. In these courses, it also licensed technologies from Japan’s Sharp for processing complementary metal oxide semiconductor (CMOS), 16K SRAM and advanced very large scale integration (VLSI). In September 1992, Samsung Electronics successfully developed the world’s first 64M DRAM, outpacing Japan. Since then, Samsung Electronics developed 256M DRAM in August 1994, 1G DRAM in 1996, 4G DRAM in 2001, and 60 nano technology-based flash memory in 2004. And the company started commercial production of 50 nano technology-based DRAM in April 2008. Since 2002, Korean semiconductor industry (Samsung Electronics and Hynix Semiconductor) had been ranking first in the world DRAM and NAND flash memory market, accounting for 43.1% of the global memory market in production volume. Since then, sales revenue in semiconductor segment at Samsung Electronics and Hynix Semiconductor (Hynix Semiconductor was acquired by SK Group in 2012, changing its name to SK Hynix) continued strong growth to reach $28.1 billion and $10.52 billion in 2010, respectively. Thus the semiconductor industry made significant contribution to transforming Korea from a tech-follower to a tech-leader.
The writer Kim Kwang-sooh is a veteran journalist in economy and technology who served at the International Cultural Society of Korea (predecessor of Korea Foundation) as director for international cultural exchange, and joined The Electronic Times, a leading daily in electronics and technology industries in Korea, where he worked for over two decades holding senior editorial positions. Kim is currently serving as a member of the editorial board at The Korea Post, a leading news and business English monthly in Korea. –Ed.