|Technological Independence The Asian experience (UNU, 1994, 372 pages)|
|3. The Republic of Korea|
As part of the research, two case-studies, of the electronics industry and the farm sector, were undertaken. As the electronics industry in the Republic of Korea is very significant, the main highlights of the case-study will be given here.
The Korean electronics industry has gone through five different phases: (1) random exploration; (2) technology introduction; (3) equity joint venture and Original Equipment Manufacturing (OEM); (4) copying and transforming; and (5) the development of its own technologies and products.
In the first stage of random exploration between 1958 and 1962, vacuum radio tube radios, electric fans, and telephone manufacture were begun. The production of these items was carried out with inadequate technology resources. For design, heavy reliance was placed on operation and maintenance manuals, circuit drawings, components lists, and schematic layouts that came with imported electric equipment. It was virtually impossible to obtain materials or information for manufacturing technologies. The manpower for manufacturing during this stage was drawn from those who ran minor repair shops. testers of telephones, and "dabblers" in electrical equipment.
During the second phase from 1963 to 1968, foreign technologies were brought in to fill the perceived inadequacy of the earlier efforts. The packaged deals that were entered into at the time brought in mass production. But such deals often meant that a foreign party was entirely responsible for selecting and supplying the manufacturing equipment and the technical assistance.
Laws to induce foreign capital were now set up, but encountered many difficulties in their implementation, including official inexperience and inefficiency. Yet import substitution was carried out and at the end of this stage about half the electronic and electrical manufactures were being exported. The major products manufactured included refrigerators, watt hour meters, telephone switching equipment, transistor radios, cables, and elevators. Other manufacturing attempts included communications, electronic home appliances, and consumer electronics.
The technologies during this second stage came from drawings and specifications supplied by foreign agencies, instructions given by foreign experts, and know-how brought back by Koreans trained abroad. An important manpower consideration at the time was the training of a large amount of subgrade technical manpower for the electronics industry.
The major technological concerns during this period were the manufacture of the moulds, jigs, and tools for mass production, prefabrication of mechanical parts and the production of simple passive circuit elements, and their final assembly and testing. However, foreign collaboration at this time precluded mastery of design, as well as the import of design equipment.
During the third stage of equity joint ventures and OEM (19691975), certain problems associated with mass production had to be faced. As the local market was limited, overseas markets were sought. But overseas marketing by Korean industry alone was found to be impossible. Because design capacities were not transferred. every time a new model was introduced fresh contracts had to be signed with the foreign partner. Large-scale manufacture also required advanced business skills beyond mere production and testing.
In spite of these difficulties, the number of technical collaborations increased for some time. Overseas markets were cultivated and management know-how was acquired. To attain these objectives, joint ventures, in which production management is partially carried out by the foreign partner, were increased in the fields that required more complicated manufacturing and management techniques, namely industrial and communications equipment. On the other hand, OEM was resorted to in the area of electronic home appliances for export.
With regard to joint ventures, the technologies acquired included manufacturing technologies that were slightly more sophisticated than those acquired in the earlier period and manufacturing techniques learnt through daily contact with foreign experts. No design technologies were transferred.
In the case of Original Equipment Manufacturing (OEM), quality control and testing techniques improved remarkably, partly through the process of learning from the foreign experts sent to do the final stages of testing. The comparative study of many different foreign companies proposing OEM also led to improvements in design capabilities. Unlike mere technology agreements, OEM involved the foreign party directly in the production fortunes of the company, so that technologies beyond the contractual ones were often transferred.
The new products manufactured during this stage included colour TVs and cassette radios. Progress was also made in other areas proving models and increasing indigenization. The mass production of several circuit elements in joint ventures was also initiated. Several foreign firms began independent projects, assembling and manufacturing other electronic parts utilizing the cheap labour available.
As the positive effects of the electronics industry began to be perceived and its export potential realized, additional measures were made to foster it. These included the waiving of import duties on imported inputs for export electronics. The package of government supports helped strengthen the structure of the industry, rendering it partially immune to unfavourable external changes.
The fourth stage in the industry was that of copying and transforming (1976-1980), and this became necessary because of several changes. The oil shocks of the 1970s created a demand for electronically run control devices that would save energy. It also favoured less energy-consuming industries such as electronics. On the other hand, electronics-based automation also eroded the advantages of cheap labour on which some of the OEM prefabrication and assembly industries were based.
Furthermore, the shortening product cycles of new products were making the introduction of a particular technology for each model unattractive; and as the Republic of Korea's exports continued to increase, foreign collaborators were increasingly reluctant to transfer new technology. Many direct foreign investment and OEM ventures now virtually closed down overnight. And joint ventures aimed at the local market also came more or less to a standstill as local market limits were reached.
Because of these factors, Korean industry felt acutely the limits of the prevailing strategy of technology acquisition. It now began to venture out on its own by copying foreign products and transforming them to avoid legal and ethical complications. However, it was soon realized that, to copy foreign products successfully, custom-designed key components were required.
Major technological developments were reported during the period as industry responded to the changed circumstances. These included: increases in design capacity to produce models different from the ones being copied; the ability to design sequential control circuits using a microprocessor; the design of printing mechanisms for the Korean-alphabet office equipment; and the design of parts for electronic PABX. In manufacturing, mechanical products capability, for example in audio deck mechanisms and Korean-alphabet mechanisms, was achieved.
These advances were aided by an increase in the stock of relevant technical skills. The latter included repatriated Korean scientists and engineers, graduates of KAIST, those trained in industry and private technology centres, and graduates of local engineering colleges.
The government also laid down new guidelines for the industry. Measures to help the industry included tax privileges and exemption from military service for electronics specialists, the latter permitting the release of adequate manpower for R&D efforts.
New products during this period included colour TVs, audio components equipment, and car radios in consumer electronics; typewriters and cash registers in electronic office equipment; and key telephone systems, electronic PABX, PCM carriers, and optical fibre cables in telecommunications equipment.
The last stage in the electronics industry involved the development of its own technologies and products (1981-). The continuing export of Korean electronic products had alarmed overseas markets and the licensing of foreign technology was becoming more difficult. The life cycle of products was getting shorter and shorter and a new model would appear in the market before significant progress could be achieved, thus blocking genuine local integration of the product. Creating new models by copying was also difficult because of the problem of custom-designed key components, which were impossible or very expensive to obtain from the respective foreign country.
When the local production costs of OEM or direct investment projects exceeded the level that foreign parties were willing to pay, they would suspend production. This immediately damaged the image of Korean products in the foreign market, and also tied up already invested facilities and technologies. Consequently, the crucial importance of self-reliance was realized.
This realization was reflected in the integrated circuits (ICs) that were developed during this period. An independent process of full-scale market cultivation was also launched to promote the overseas sales of VCRs. To reinforce existing know-how, the electronics industries established their own development centres to cover those technology areas for which no direct support was possible from other sources. They also established development centres in selected overseas countries, employing locals and available Korean engineers.
The Korean government also subsidized the incorporation of a number of research institutes apart from KIST, including the Korea Institute of Electronic Technology (KIET) and the Korea Electronic Telecommunications Research Institute (KETRI). In partnership with private industry, they developed computers and their peripheral equipment, the Very Large Scale Integration of electronic circuits (VLSI), and new materials.
In the case of the VCR, a successful though imperfect solution in basic design and mass production was achieved without external assistance. Considerable progress was also reported in mass production technologies, in quality stabilization using the most advanced automated equipment, and in the design of a process flow to make the best possible use of the relatively low wages in the Republic of Korea. The result of all these measures was that the Korean electronics industry had become a leader in consumer electronics and electric home appliances, and was now also establishing its own manufacturing bases overseas.