"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
