THE ASIA BOOM : Research : Risks, Windfalls Found in Developing Technology : South Korea scored success by climbing onto cutting edge of computer production. Smaller economies must use funds for basic needs.
Lee Jong Gil was well established as a Silicon Valley electronics engineer when Samsung Electronics Co. enticed him back to his native South Korea.
With a Ph.D. from the University of Notre Dame plus six years of experience in U.S. electronics firms, Lee joined a team of mostly U.S.-trained South Korean researchers who set out to bring Samsung into the front ranks of the world’s semiconductor manufacturers.
Dramatic success in that decade-long effort was marked in August when Samsung announced that the research center now headed by Lee had produced the world’s first fully working example of a powerful semiconductor called a 256 megabit dynamic random access memory chip, or 256M DRAM.
This next-generation semiconductor, which is also being developed by competing firms around the world, is capable of giving personal computers vastly increased memory capacity and operating speed. Such chips will play a key role in the multimedia era as personal computers handle text, video and sound with ever greater ease. Expected to be a key component in computers made around the year 2000, the 256M DRAM chip will also be valuable in producing high-definition television sets.
Samsung’s success marks the high priority that Asian economies are placing on research and development, long the foundation of Western advances.
Efforts by Samsung and other South Korean electronics firms to develop their own cutting-edge semiconductor technology reflect the growing trend. Japan became a world leader in technology years ago. But now corporations and governments in other countries of the region have also begun pouring resources into domestic R&D; targeted at selected fields of strong potential growth.
Technology transfers from the United States, Japan or Europe through purchase, licensing, joint ventures and outright piracy retain a central role in the region’s growth. But there is a growing sense that, as more countries aim to catch up with the world’s industrial leaders in the early 21st Century, reliance on these measures alone is not enough.
“In the early stage of economic development, R&D; is not very important. Foreign companies . . . bring technology to take advantage of the lower labor costs,” said Lee Youn Ho, an analyst at the Lucky-Goldstar Economic Research Institute. “But when economic development reaches some level, you have to have your own R&D.; Korea is such a case. The last 20 or 30 years we didn’t emphasize R&D.; But at this moment, we realize that R&D; is very important to move this economy to a more advanced level.”
In the case of semiconductors, research is an essential ingredient in maintaining competitiveness, said Samsung’s Lee, who now heads the firm’s Semiconductor Research and Development Center. “Technology and products are just so intertwined in the high-technology area that if you are behind in technology, you are behind also in manufacturing,” he said.
The basic challenge in making more powerful memory chips is to develop the ability to etch ever smaller patterns onto tiny wafers.
“It involves lots of laboratory work, and also computer simulation, analysis of data and planning,” Lee said. “The crux of the issue is to make this patterning capability to the maximum.”
But there is a “price you have to pay to be leading edge,” he added. “The future is unclear. There is always risk involved.”
For countries at lower economic levels, funding of domestic R&D; remains a controversial strategy not only because of the risks involved but also because of the necessity of diverting funds from more immediate needs.
In Indonesia, for example, Research and Technology Minister B.J. Habibie has been a forceful advocate for development of an indigenous aircraft industry, but the expensive project faces many critics.
Habibie’s attitude is illustrated by the story of a visitor who reportedly spoke with him several years ago across a conference table strewn with model airplanes. Habibie stepped into another room and came back with a personal letter from Margaret Thatcher, then prime minister of Britain, praising his vision for Indonesian high-tech industry.
“You see, I’m not crazy,” Habibie said. “I have to start. Somebody has to start.”
At a cost so far of $650 million in government funds, the project has succeeded to the degree that its first completed airplane, a locally designed 70-seat twin turboprop called the N-250-100, was unveiled this month in a ceremony presided over by Indonesian President Suharto. But prospects for commercial success remain uncertain.
Some analysts argue that economic growth in poor countries is better served by devoting more resources to basic education rather than development of high technology. But others insist that even in countries such as China and Indonesia, it is worthwhile to devote some resources to building up a high-tech sector, complete with domestic R&D; capabilities.
“They have a limited amount of investment funds, so they have to select in which areas they think they can do best and put money more heavily in those areas,” said Lee, the Lucky-Goldstar analyst, although he pointed out that China is a special case because of its huge size and economic diversity.
“China has a very wide economic spectrum. It’s a very difficult country to say, ‘This way is right, this way is wrong,’ ” he explained. “They have a very advanced level and a very primitive level. But in general they will serve as a production center, not an R&D; center, for the whole world economy for the time being.”
With Japan already at the leading edge of commercial technology development, and countries such as China and Indonesia weighted down by huge peasant populations, it is newly industrialized nations such as South Korea that are now poised to attempt a leap from labor-intensive to more technologically driven economies.
Import of technology through licensing and joint ventures has played a key role in the development of not only South Korea but also Taiwan, Hong Kong, Thailand, Malaysia and Singapore. Now further progress must address a growing reluctance of firms in leading industrialized nations to sell high technology, said Lee, the Lucky-Goldstar analyst.
“If we are going to become an advanced country . . . we have to have our own technology and development, our own advanced commodities,” he said. “If you don’t develop advanced technology, you will always be a follower.”
The South Korean effort in semiconductors is one of the most spectacular examples of determined, targeted efforts in high technology paying off in a newly industrialized Pacific Rim nation.
Firms such as Samsung, Goldstar Electron Co. and Hyundai Electronics Industries Co. have caught up with top world levels in the manufacture of memory chips, which make up about 28% of the estimated $100-billion 1994 global semiconductor market. Based largely on their strength in memory chips, South Korean firms will produce about $10.4 billion worth of semiconductors this year, or 10% of world demand, according to the Korea Semiconductor Industry Assn.
Last year, Samsung became the largest producer of memory chips in the world, nailing down 10.8% of the global market. It ranked seventh in the world in total semiconductor sales.
Nearly three-quarters of worldwide semiconductor demand is in non-memory chips. These devices, such as ASIC (application specific integrated circuit) chips, are designed for specific customers or products. Still behind in this field, South Korean firms are striving hard to catch up.
Hyundai, for example, is pouring about 13% of its semiconductor sales revenue into R&D;, with funds divided equally between the memory and non-memory areas, said Chang Hong Jo, senior vice president in charge of semiconductor research. Hyundai’s semiconductor sales are expected to hit nearly $1.7 billion this year, up from $950 million last year, and research spending is being boosted at an equivalent pace, he said.
“Many American companies are now protecting their know-how, not licensing as much as before,” Chang said. “In the old days, they licensed many technologies to Japan. Now they are not doing it to Korea as much as they did to Japan. Now intellectual property is protected by the American government. . . .
“In the old days, Japanese, Taiwanese, even Koreans had been copying the design by reverse engineering. I don’t think it’s allowed anymore. Everything, whatever we want to do, is checked by that intellectual property regulation. And also the business trend is that semiconductor companies in America are now collecting royalties everywhere, which they were not doing before. We are doing a lot of cross-licensing by paying a lot of royalties. It costs a lot. It’s harder to negotiate, and the price is higher than before.”
The effect of these changes is to make the relative payoff from domestic R&D; greater than ever for firms such as Hyundai and Samsung.
These firms have also seen that persistent efforts can produce results. Samsung was nearly five years behind global industry leaders when it first developed a DRAM chip of its own in 1983, engineer Lee said.
“The first time we made a 64K DRAM, actually we hired lots of experienced engineers from the United States,” he said. “I am one of them. Even now we hire lots of good people who graduated from (schools in industrialized nations). That’s the human resource side. Another thing is that top management is willing to invest.”
Samsung has already put $150 million into development of its 256M DRAM, which is only twice the size of a fingernail but can store information equal to 40 volumes of an encyclopedia.
Times researcher Chi Jung Nam in Seoul contributed to this report.
Success Story
South Korea’s semiconductor production has grown 54.5% over its 1992 total. The number manufactured for export has risen 136%, based on estimates for 1994. R & D Spending
Much of the $3.8 billion South Korea is spending on research and development* is in electronics.
Electronics: 40.2%
Transportation: 24.5%
Chemicals: 14.2%
Machinery: 8.0%
Others: 13.1%
* 1993 through 1997 Sources: Korea Semiconductor Industry Assn., Ministry of Science and Technology
