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Courting investors, South Korea seeks to move out of Japan’s shadow

EE Times | 11 December 2007

Courting investors, South Korea seeks to move out of Japan’s shadow

George Leopold

NEW YORK - South Korea’s electronics industry is seeking to reduce its dependence on rival and chief supplier Japan while diversifying beyond its chip-manufacturing base to develop fresh intellectual property and new product categories.

The efforts, part of a renewed drive to attract more foreign-direct investment, come as Seoul and Washington work to wrap up a free trade agreement that would give U.S. companies greater access to the Korean market while clarifying sticky trade issues like IP rights protection.

Korean government and industry executives gathered here last week to drum up investment in Korean electronics, pharmaceuticals, biotechnology and auto industries. Trade officials stressed that South Korea is the land of the early technology adopter. "Korea is a great test market," especially for new electronic gadgets, said Young-Ju Kim, minister of commerce, industry and energy.

Kim said a U.S.-Korea free trade agreement (FTA), currently the subject of hard bargaining in Congress, would provide U.S. investors with "enhanced" IP rights protection. South Korea and other Asian nations have frequently been accused of predicating greater market access on requirements that foreign companies turn over IP, often with few limitations on its use.

South Korea "has adopted an FTA-centric strategy" around the world, said Tong-Soo Chung, head of Invest Korea, which sponsored an investment summit here.

U.S. electronics companies have long had a presence in the Korean market, but concerns over energy development and the environment are attracting new players, officials said. For example, Exxon Mobil recently signed an agreement to establish a plant in South Korea that will manufacture lithium-ion battery separation film. The film will be used in future hybrid-electric vehicles, Chung said.

According to government statistics, South Korea will export an estimated $126 billion in electronics in 2007, an annual increase of 9.5 percent. Officials said strong exports and Korea’s continuing global lead in key markets like memory and displays mean it has emerged from the Asian financial crisis of the late 1990s.

The Korea Electronics Technology Institute estimates that South Korea currently holds a 38-percent share of the global LCD market, 52 percent of the plasma display market and 40 percent of the OLED market. Market share totals for memory products produced by chip makers like Samsung and Hynix continue to soar. For 2006, the government institute estimates that South Korean chip makers hold 45 percent of the DRAM market and a whopping 66 percent of the flash market.

But officials said Korea’s high-tech sector must diversify and break its current dependence on Japanese suppliers. According to Kyeung-Hak Seo, the Institute’s senior vice president, export diversification for Korean chip makers means heavier emphasis on technologies like image sensors, RFID and other semiconductor technologies that could soak up available fab capacity while creating new product categories.

Seo and other Korean officials also stressed that it is looking for U.S.high-tech investment as a means of reducing dependence on Japanese component and materials suppliers. Imports from Japan accounted for 22 percent of South Korea’s total in 2006, with imports from the U.S. last year accounting for only 17.5 percent.

The goal, Seo said, is to steal a march from Japanese rivals and transform South Korea into "global market testbed" and the Asian gateway for high-tech components and materials.

 source: EE Times