From Semiconductors to Multimedia

Presentation by Prof. Alan Cawson and Dr. S. Ran Kim

"From Semiconductors to Multimedia: the evolution of the chaebol"

at the DTI-sponsored and RIIA-supported Asia-Pacific Technology Seminar

9 January 1997

Daiwa Foundation Japan House (London)

Major parts of the electronics industry are in a process of evolution from discrete products to networked multimedia as a result of 'digital convergence'. This continuing trend will have significant implications for Korean electronics companies (the chaebol), who were extremely successful in semiconductors (especially in Dynamic Random Access Memory Chips: DRAMs) and in mass market consumer electronics products.

In this presentation on the Korean electronics industry, we explained;

· how the multimedia challenge is different from the DRAM-challenge,

· how Korea successfully caught up in DRAMs,

· how Korean companies are now responding to the multimedia challenge,

· to what extent the chaebol are "multimedia-ready" in terms of technological innovation capability and company structure.

We did this by looking at the evolution of chaebol-governance, which proved highly effective in DRAMs, but may not be appropriate for meeting the multimedia challenge.

The discussion first analysed how the role of governance - not merely public policy, but rather a consideration of the all the mechanisms for controlling and co-ordinating economic activity (including the private sector) - has been crucial in the rise of the Korea chaebol to world class DRAM prominence. Chaebol governance might most accurately be defined as a combination of "hierarchical and networked" co-ordination and control. One of the vital outcomes has been the possibility of financial cross-subsidisation from one sector to another within the firms. DRAMs and chaebol governance proved to be a neat match both in financial and technological respects, by allowing sustained heavy investments in DRAM process innovations. And this - together with the crucial "window of opportunity" which emerged in the world market - in fact enabled the Korean chaebol's rise to world leaders in DRAM production.

The presentation then analysed how the four chaebols' (Samsung, Daewoo, LG and Hyundai) shape up to the multimedia challenge and whether the match will still be quite so effective in the multimedia era.

Although one cannot predict the future, the forthcoming technological trajectory can be expected to be spectacularly non-linear and the targets presented in the shift from a "known unknown" in memory capacity to a multimedia "unknown unknown" are likely be moving ones. The chief characteristics of the multimedia era seem to be the considerable uncertainty into which constituent markets are being thrust. This, in particular, in view of the convergent and integrative capacity of digital technology to draw on inputs from a variety of individual sectors - telecoms, computing, entertainment, etc.

The large scale, hierarchical corporate governance structures which served Korea so well throughout its 'catching up' phase might prove singularly inappropriate in conditions of such technological uncertainty. The challenge facing Korean firms is therefore to continue to reap the rewards from scale-intensive production areas and to devise new strategies and structures to keep up with the fast changing pace of digital multimedia technology.

* A fuller summary of the presentation is presented in Dr. A. Hayward's (editor of Pacific Business) resume of our presentation, prepared for APTS 1996/97 compilation. For further information please contact Dr. Ran Kim (Sussex European Institute, Sussex University, 01273 606755)

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