The South Korean Firehose

The drive into Seoul from Inchon International Airport takes about an hour if you’re lucky — but you need not fret. Just switch on your cell phone to pick up one of the eight channels of streamed television.

Or maybe you forgot to change money at the airport — no problem. Just dial up any local bank, submit your credit card number and give the address of your hotel for delivery. Or better yet, just open a telephone account and don’t bother with cash — it is so old-fashioned.

You can learn a lot by watching your cab driver. If he turns off the freeway onto a bumpy local road, it is because his phone has a tracking device that allows road watchers to monitor him and tell him when and where to bypass an upcoming traffic jam.

Once you get to your hotel room, turn on your TV or connect your computer and download your favorite movie — not one from the hotel’s menu, but whatever movie you want. This is a real broadband connection, at 20 megabits per second.

About 75% of Koreans have this kind of connection and, in less than ten years, they will have 100 megabits per second.

Think of this as a firehose compared to the little garden hose of U.S. broadband that, even now, only 20% of Americans have. Don’t even mention dial-up. No one in Korea knows what it is.

You notice that the television is a flat panel hanging on the wall — no need for a huge armoire with swinging doors to house a bulky cathode ray tube TV set.

Naturally, it is high definition. While the panel could not have come from the United States, it might have been produced by one of several Korean electronics companies.

Chances are good, however, that Samsung — the $53 billion colossus leading the global high-end television market — made it. Samsung is also the world’s largest producer of LCD flat-panel computer monitors.

But Samsung does not stop there. It is the world’s second largest and fastest growing semiconductor producer, with a 53% increase in sales in 2004.

Although all but one of the U.S. producers got out of the dynamic random access memory (DRAM) business years ago, Samsung makes a nice profit out of being the biggest DRAM producer.

In the fall of 2004, it joined with Sony and IBM to develop a microprocessor that could one day challenge Intel’s dominance in that field.

Indeed, if you ask Intel’s chairman, Craig Barrett, to name his most dangerous competitor, he will tell you it is Samsung.

Samsung is also coming on like gangbusters in mobile phones, having shot past Motorola to gain second place in the global market — while growing at 49% between 2003 and 2004.

It would be a little awkward to take a dishwasher, refrigerator, microwave oven or rice cooker to the United States — all of which Samsung is also a leading producer. But you should get yourself a hidden antenna, flip screen, digital phone camera.

You can use the 5 megapixel pictures it takes to prove to your friends back home that you are not lying about all the high-tech stuff in Korea that you cannot find in America.

For Samsung and other Korean companies, the rise of China has been nothing but good. They are selling more to China than they ever did to the United States.

Korea has a trade surplus of $29 billion with China and is gaining most of its growth from the Chinese market. But Korea Institute of Industrial Technology president Doug-young Joe says China’s rapid progress is forcing Korea to adopt more aggressive industrial strategies aimed at retaining and promoting high value-added manufacturing.

“Our success did not happen by chance,” says Joo. “It happened through R&D and significant technological breakthroughs in manufacturing.”

The Korean government played a major role in two ways. On one hand, it deregulated key industries like telecommunications and opened up a number of markets to competition by cracking down on insider dealing by the giant chaebol conglomerates.

On the other hand, it has never been loath to imitate President Wilson’s RCA initiative or the DARPA Internet project.

The broadband capacity is in place because the Korean government mandated development of high-speed Internet capacity as a top national mission — and put $60 billion in its budget to make sure it worked.

To keep ahead of China, Korea is dramatically increasing spending on R&D and education. With one-sixth of the U.S. population, Korea already turns out about half as many engineers, and in a recent international assessment of math literacy for 15-year-olds, Korea scored second behind Finland, and far ahead of the 24th-ranked United States.

Nor is Korea anxious to share its hard-won technological gains. When rumors circulated that the flat-screen TV maker Orion Electric might be acquired by a Chinese competitor, a senior company executive said he received an unusual phone call from the National Intelligence Service: “Why do you want to sell overseas? Can’t you raise capital at home?”

Although the NIS denies making the call, the Korean government is introducing legislation that would require government permission for certain companies to engage in sales or investment that might transfer key technology abroad.

Seoul is particularly worried about Chinese companies that are acquiring or merging with advanced technology firms. But the horse may be out of the barn already.

In 2004, China’s BOE Technology Group acquired Korean flat-screen maker Hydis, and is now building a factory near Beijing that will produce 60,000 glass sheets for LCDs per month.

Other Korean companies in the hands of creditors as a result of the 1997 financial crisis are also anxious to be bought.

Ultimately, this will almost surely become a major issue of reciprocity between the two countries and perhaps between all the countries of East and South East Asia.

All of them are committed to strategic economic development and to industrial policies that assure continual movement of the scale of value added and of technological sophistication.

While Korea and others may not be able to or want to prevent Chinese or other investment in their industries, they will certainly insist on reciprocal access. It may well be that this is how Asia will eventually come to achieve a broad, integrated regional economy.

Adapted from the book, “Three Billion New Capitalists: The Great Shift of Wealth and Power to the East” by Clyde Prestowitz. Copyright © 2005. Reprinted by arrangement with BasicBooks, a member of the Perseus Books Group (www.perseusbooks.com). All rights reserved.