Strong Industrial Competitiveness
Korea has a well-balanced industrial structure, producing a range of goods from high-tech to intermediates to consumables. Such diversification provides foreign invested companies with excellent opportunities for value creation through strong forward/backward linkages with Korean industries that maintain high shares of world markets. In particular, national and corporate competitiveness cannot be matched in the electronics, semiconductors, steel, shipbuilding and automobile industries.
Figure V: World Ranking of Korean Industries in 2002
Advanced IT Infrastructure
Korea continues to cement its role as a dominant global player in the fields of information technology and communication by developing cutting-edge products and services and ensuring that its technology savvy population has access to the latest innovations
The IT industry is characterized by technological innovations, short product cycles, high profits, and extensive investments in research and development, which have become pivotal factors in attaining a competitive edge in modern times. During the last decade, the role of the IT industry has become increasingly more significant with the creation, spread and usage of knowledge to create economic value in the knowledge-based economy. IT connects individuals and enterprises via networks, facilitating the production, distribution and consumption of information by the overall economy as well as enhancing the development of the intangible economy. In particular, any further advancements in the use of the Internet by the business world depends largely on the development of the IT industry. Moreover, the continuous development of the IT industry fuels the explosive growth of electronic commerce and business re-engineering. IT industry is one of the most dynamic fields in Korea. Along with private investments in the IT sector, a wide variety of policies tailored to promote the IT industry and informatization has been actively implemented. Currently, the IT industry stands as the most crucial sector in the Korean economy with its sustained development tabbed as an indispensable element of economic growth.
In the 1990s the average growth rate of the IT industry was about three times that of GDP. As a result, the share of IT industry has increased significantly, reaching 14.9% in 2002. In particular, the amount of IT hardware production of Korea recorded 4th in the world.
Figure W: IT Production in Korea
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Figure W: IT Production in Korea
R&D in IT and Korea's technology level
One of the major reasons behind Korea's successful IT exports is the investment in R&D. In 2000, the share of IT R&D in the total private sector R&D reached 51% (7.2 billion USD), which is the 3rd among the OECD member economies. In particular, since 1996, private IT R&D in Korea has grown 12.2% annually (6th among OECD member economies). As a result, the number of patents acquired in the U.S. was 1,026 in 2000, 3rd among OECD countries. The competitive advantage of Korea in semiconductors, LCD panels and mobile handsets is mainly attributable to this R&D effort. Moreover, the technology of Korea in broadband Internet, home networking and related digital hardware is world class.
Internet use
Korea is a wired society, boasting of one of the world’s greatest IT infrastructures. As a result of Korea's booming communication services sector in the 1980s and 1990s, 26 million people use the Internet and 10 million subscribers access to highspeed Internet services. Korea had the highest broadband Internet subscription rate among the OECD countries in 2002, while the overall Internet penetration rate of 55.7 percent ranked second in the world. Korea wa s the first country to commercialize CDMA (Code Division Multiple Access) technology, and plays a leading role in the development of CDMA applications worldwide.
A survey by the Ministry of Information and Communications in found that there were 26 million individual Internet users in a total population of 48 million as of December 2002.
Figure X: Internet Use Figure Y: Broadband Penetration, 2002
As of September 2003, the number of mobile phone service subscribers and Internet users in Korea recorded 33.2 million and 30.9 million respectively. In particular, 11.3 million households with access to broadband Internet, ranked 1st in the world in terms of penetration rate.
The development of the IT industry in Korea has also resulted in spill-over effects such as stimulating e-commerce, digitalizing the contents industry and revolutionizing distribution.
Why Korea Hurries to Introduce New Technology
A pursuit of profitability is, of course, a matter of any business priority that makes western telecom operators think hard before introducing a new technology. However, Korean telecom service providers have little time to think hard about introducing new technology. The reason: Korean operators are strongly competition-driven to strive for something newer, faster, different, even if this may come at the expense of profit and quick gains. This may be a compelling choice, as the market is maturing and is offering almost homogeneous quality of services among peer carriers running together neck-to-neck.
Densely populated residential pattern in Korea was another driver that has fueled an rapid penetration of broadband access services. More than half of homes in Korea are in apartment complexes. This is the basic condition to easily deploy network faster and a ffordable.
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Parts and Materials
The parts and material industry is important and accounts for a third of the entire manufacturing sector in Korea. Recently, Korea's international competitiveness in the industry has improved and sales of high-tech parts used for semiconductors, TFT-LCD and computers continue to increase in the global market.
In addition, the government has taken specific steps to foster the industry. Following the enactment of the Parts and Material Promotion Act was in April 2000, the government stated its aim to attract investments from 200 advanced companies in the United States, Japan, or Germany over the next 10 years. At the same time, it announced it would assist fifty firms every year to enter overseas markets. Furthermore, the government has an ambitious plan under which Korea would serve as a supply center for parts and materials in the global market.
The government's efforts in this regard have already borne fruit. In December 2001, Korea agreed on the outline of a bilateral investment treaty with Japan. As a result of the agreement, the government anticipates Japanese firms will increase their investment in Korea's high-tech parts and materials industry. In addition, the government will dispatch investment promotion teams to attract investments into the parts and material sectors from advanced-nation companies.
