KDI Conference on Industrial Dynamism and Competitiveness in East Asia Joonghae Suh Korea Development Institute Industrial Dynamism and Competitiveness - The Case of Korea’s IT Industry -
KDI Conference on Industrial Dynamism and Competitiveness in East Asia
Joonghae Suh
Korea Development Institute
Industrial Dynamism and Competitiveness - The Case of Korea’s IT Industry -
Model A-501 (1959)
The First B/W TV-set (1966)
Korea’s IT Industry
• Highest growth rates - Leading economic growth and exports
• Successful Transformation from imitation to innovation
• Leading role by Chaebols
• Bifurcation - Between industries in Manuf. - Between sub-sectors in an industry- Between leading, large firms and smaller firms⇒ A natural consequence of structural change? Or,⇒ Any structural weakness which might hinder further
growth?
IT Products : Chips + Screen + Software
IT Industry’s Supply Chain - A Simple Scheme
Electronic components
Materials Machinery
S/W
Electronicequipment
Consumer electronics
Otherindustries
The Scope and Classification of IT Industry
9 Sectors E xam ples
Sem iconductor IC, D R A M , M P U, A SIC
D isplay C RT, LC D, PD PE lectroniccom ponents
IT parts P C B, m agnetic card, other electron iccom ponents, secondary battery
C om m unicationsequipm ent
Telephone, m obile phone, broadcastingequipm ent, fax m achine
C om puter C om puter, com puter d isk, com puterperipherals including printer
O ffice equipm ent C opy m achine
E lectronicfinalproducts
IT hom e appliances T V, V TR , A udio-set
E lectrical parts G enerator, m otor, transform er, contro ller,cable, battery, lam p, resister, batteryE lectrical
products E lectrical hom e appliances Refrigerator, laundry m achine, cookingm achine, air-conditioner
The Share of IT Industry in Manufacturing
7
12 1113
17
10
16 16 16
27
10
1619 19
38
11
1922
17
35
0
10
20
30
40
Number ofEstablishment
Number ofEmployee
Output Value added Exports
(%)
1985 1990 1995 2001
Source of Growth - Growth Accounting
-5
0
5
10
15
20
25
30
35
40
Semi-conductor
IT parts Display Electronic parts
Comm. Equip.
Computer Office equip.
Electronic home appl.
IT home appl.
Manufac.total
Labor Capital TFP
TFPG - Multilateral Index
-5
0
5
10
15
20
1985~1989 1989~1997 1998~2001
Semi-conducto r
IT parts Display Electronicparts
Comm.Equip.
Computer Officeequip.
Electronichomeappl.
IT homeappl.
Manufac.total
TFPG by Size
-1 0 1 2 3 4 5 6 7
1~9 10~19 20~99 100~299 300~
Manuf.
ITH.A.
ElectricalH.A.
Officeequipment
Computer
Comm.equipment
electricalparts
Display
IT parts
Semi-conductor
The Share of Large Firms in IT Industry (1997 ~ 2001 average)
0
20
40
60
80
100
120Semicond.
Display
Computer
IT H.A.
Comm.Eq.
OfficeEq.
Electrical
H.A.
IT Parts
Electrical
Parts
(%)
Employee Output Capital Stock
Average Number of Employee in IT Industry
0
100
200
300
400
500
Semi
Conductor
Display IT Parts Comm.
Equip.
Computer Office
Equip.
IT Home
Appl.
Electri.
Parts
Electri.
Home Appl.
total
1985 1990 1995 2001
Table 6: Capital Stock per Employee
(1997 ~ 2001 average, million won per employee)All 1~9 10~19 20~99 100~299 300~
SemiconductorIT partsDisplayElectr ical partsCommunication equipmentComputerOffice equipmentElectr ical home applianceIT home applianceManufacturing total
246.4858.62
152.7748.9942.0555.6945.7748.1432.3383.96
25.4621.8827.6620.7321.0923.2823.2422.4323.3328.57
27.8520.8325.8922.9119.1219.0123.1522.3316.1131.63
33.0134.7325.1829.7423.4923.9329.4028.6420.0043.62
65.2062.6830.1552.7037.6439.2865.3148.1929.6882.19
272.7794.77
186.9494.9467.9577.0761.8879.9846.19
181.31
Capital Stock per Employee
Table 7: Labor Productivity by Size-cohort(1997 ~ 2001 average, million won per employee)
All 1~9 10~19 20~99 100~299 300~SemiconductorIT partsDisplayElectr ical partsCommunication equipmentComputerOffice equipmentElectr ical home applianceIT home applianceManufacturing total
151.8957.53
186.6554.51
155.41139.87
75.7243.3459.5852.95
6.6631.9635.2631.2440.4241.5437.0820.0434.9518.71
6.9132.2632.4732.7544.8248.8946.0620.1833.1822.42
5.7139.5734.9236.4658.3354.2561.0624.2639.7729.78
21.2157.2037.6150.8970.8258.4384.7648.2849.4051.94
170.7086.26
227.54101.00325.07213.68
95.5671.6587.20
110.72
Labor Productivity by Size
Supply Chain - Semiconductor
M aterialM aterial
• LG Siltron• Poongsan M icrotec
Sem iconductor M anufacturerSem iconductor M anufacturer
• Integrated D esign M anufacturer: Sam sung E lectronics, H ynix
• Fabless C om pany: (A ltera), (Q ualcom m ), C & S Tech
• Foundry: (TSM C ), (U M C ), A nam Sem iconductor
• Packaging: C hipPA C K orea
C om puterC om puter
• (IB M )• TriG em
C om m . Equipm entC om m . Equipm ent
• Sam sung E .• LG Electronics
H om e A pplianceH om e A ppliance
• Sam sung E .• LG Electronics
O ther IndustryO ther Industry
A utom obile, M achinery, etc
Equipm entEquipm ent
• Jusung Engineering• M irae Corporation
Supply Chain - Display
D isplay M anufactu rerD isp lay M anufacturer
• C R T : O rion E lectric , L G Philips D isp lay , S am sung S D I
• L C D Panel: S am sung E lectron ics, L G Philips L C D , H ydis
• PD P , O L E D , F E D , V FD , L E D , etc .
C om puterC om puter
• T riG em• L G , S am sung,,
C om m unicationC om m unicationE quipm entE quipm ent
• S am sung, L G• T elson ,,,,,
H om e A pplianceH om e A ppliance
• S am sung E lectr.• L G E lectron ics
O ther IndustryO ther Industry
A utom obile , T oy ,M ach inery , etc .
P artsP arts
• L G M icron• Sam sung C orn ing• H ankuk E lectric G lass
M aterialM ateria l
• L G C hem ical• M erck K orea• K O L O N
E quipm entE quipm ent
• Jusung E ngineering• K orea D N S• A K T
The Interplay of Technology & Market
- Display Industry -
’60 ’70 ’80 ’90 ’00 ’05
400
300
200
100
Digital Broadcasting
MobileTelephony
PersonalComputer
MobileMobile
MonitorMonitor
TVTV
CPT
PRT
CDT
LCOS
STN
TFT
PDP
DVT
PDP
FED
FED
STN
small TFT
OELD
LCOS
Mono CRT
Color TV
Market size (m
. USD
)
Number of Researchers in Display HAN Project
0
200
400
600
800
1000
1200
1995 1996 1997 1998 1999 2000
Industry University GRI
LCD Industry in East Asia
Samsung E
S-LCD Sony
Philips LGE
LG PhilpsLCD
(Netherlands)
Quanta Sharp STLCD
Toyota
Hynix Chi Mei
Fujitsu
NEC
New J.V. IBM Japan
Toshiba
Hydis Cando
Hannstar
Unipac
AU Opt.
ADT
Matsushita
Chirin E
Casio
(Singapore)Tech. Licensing
OEMShare-holding
BOE
(China)
(China)
AFPD
KOREA TAIWAN JAPANOTHERS
T.A.
R&D Expenditure
Table 8: R&D Expenditure of Korea
1985 1990 1995 2001GERD as of GDP (%) 1.42 1.87 2.50 2.96GERD (million won) 1,155,156 3,349,864 9,440,606 16,110,522
BERD (million won) 751,025 2,374,502 6,902,981 12,273,579R&D in IT Sector (million won) 291,729 992,726 2,324,920 5,622,302
(IT Share as of BERD, %) (38.84) (41.81) (33.68) (45.81)Concentration ratio of top 10 companies (%) N/A 42.69 45.24 43.41
Technology Level of Korea’s Components/Materials Producers
67.766.4
68.4
77.8
50
55
60
65
70
75
80
85
90
95
100
(%)
Design
technology
Capability to
develop new
products
Capability to
apply new
technologies
Processing
technology
The Race for Secondary Battery
• Japan- R.C of Ten companies in Jan. 1993- New Sunshine Project: 14 B. Yen by Government
• US- USABC (US Adv. Battery Consortium) Mar. ‘91 - 12 years with 1 B. USD : 1/2 gov’t 1/2 private
• EU- Joule Program - DE, FR, DN consortium
• Taiwan- 1994, government initiated with 1 B. Yen - Four company consortium
Korea’s Li-Ion Secondary Battery Industry
IT Products(Mobile Phone, PDA,NPC, etc.)
Domestic : SamsungE, LGE, etc.Foreign : Nokia, Motorola, HP, etc.
Battery Pack
LG ChemSamsung SDI Pack OEM
Elentec, SMC,Saft Korea, etcBare Cell
LG ChemSamsung SDI
Cathode(Li Co O2)
ImportsUmicore Korea
Saft & Solvent
ImportsCheil Ind.
Anode(Graphite)
Imports
Separator
Imports
Binder
Imports
Can, Cap & PTC
Imports(Raychem)
Competitiveness Factors - Firm Survey
Semiconductor Display Parts Communication equipment
Computer &Office equipment Home appliance
engineer engineer engineer &technician engineer technician Technician, but
engineer in digital
State-of-art tech,prod. know-how
State-of-art tech,prod. Know-how Specialized tech S/W &
architecture standardized Matured, butnew digital tech
critical critical critical critical moderate moderate
moderate moderate moderate moderate moderate moderate
moderate moderate minor major very important very important
stable stable variable stable variable variable
Stable(Quality Price)
Stable(Quality Price) variable Stable(Price) variable(Price) variable(Price)
not critical not critical not critical not critical not critical not critical
Core humanresource
Tech, R&D,& Design
Qualitycontrol
Logistics
Marketing &Brand
Relation withsupplier
Relation withcustomer
Business service
Pro-duction
/Sales
Supplychain
Policy Areas
• Firm growth - Competition policy : e.g., more active M&A
• Deregulation- Induce Conglomerates into new business with capital
investment (Job-creation issue)
• SME’s Technological capability- The role of public research institutes
• New Industrial Policy? - Cluster: Are market forces enough?
Policy Areas (continued)
• Human Resources - The shortage of both skilled labor and top-notch
engineers is prevalent- Reforming education system?
• FDI- IT sector: the largest share of inbound FDI - Next stage: e.g., R&D centers