2010-07 - Korea IT Times

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Policy Let’s Make Korea an Undisputed IT Powerhouse! Jeong Marn-ki, Director General for Electronics & IT Industries at the Ministry of Knowledge Economy Is Korea an IT powerhouse in real terms? The phrase "IT powerhouse Korea" has been often used in the media as well as in daily conversations. At the same time, we are also aware that some are skeptical of using the phrase. Many online comments say that "Korea is a telecommunications infrastructure powerhouse, not an IT powerhouse." If so, we'd better pay due attention to the reasons why some refuse to refer to Korea as an IT powerhouse. First of all, in North America and many western nations, IT is short for information and technology. In Korea, however, IT stands for information and telecommunications. "Information & technology" and "information & telecommunication" seem similar at a cursory glance. Yet, taking a closer look at them, we can realize how different they really are. When "information and technology" is searched for in Wikipedia, the result says "Information technology (IT) is the study, design, development, implementation, support or management of computer-based information systems. .....computer hardware and software..." Then, we need to raise the question of whether Korea excels in computerbased information systems, hardware and software. The answer is unfortunately "no." This is because Korea does not have many computer-related industries whatsoever in either the hardware and software sectors. In the early 2000s, the venture business boom gave rise to a lot of IT venture companies, but when IT bubbles collapsed only a few small and medium sized IT firms managed to stay above the water. Yet, in terms of information and telecommunications, Korea seems deserving of the title "IT powerhouse" because Korea has bigger industries than any other nation in the communications technology (CT), sectors like mobile phones, fiber optic Internet access, digital TV and DMB (Digital Multimedia Broadcasting). Also, these industries are growing at a fast clip. If so, what can we do to make Korea a genuine IT powerhouse in both information & technology and information & telecommunications? In search of the right answer, Korea IT Times sat down with Jeong Marn-ki, Director General for Electronics & IT Industries at the Ministry of Knowledge Economy(www.mke.go.kr) to approach this issue from a policy point of view. Identifying weak links should be the first step toward a undeniable global IT powerhouse. "The Korean government's policy for the IT industry is fivefold. The first step is to identify where the Korean IT industry is the most vulnerable and raise their competitiveness," said Director General Jeong Marn-ki. "As of now, domestic development and production of information and technology -- such as computer software, hardware, broadcasting equipment and network equipment - is almost nonexistent. Korea has been solely dependent on imports when it comes to software industry in the information and technology sectors. A foreign research institute has recently concluded that the level of Korea's softeware industry is lower than that of the Philippines," he continued. Korea' software industry is the weakest link in the information and technology sector. However, domestic software development does take place on a small scale. A few major companies have continued to develop computer-based software like computer vaccines, map and video players and about 15 percent of the 38 KOREA IT TIMES | July 2010
Policy broadcasting equipment is Korean-made. Still, the Korean IT industry's level of globalization is as low as that of underdeveloped nations. As for broadcasting equipment, demand-based joint technology development needs to be pursued, in which parts and materials suppliers team up with demanders who pro-mise to purchase the finished goods. Do-mestic broadcasters can be the buyers of jointly developed broadcasting equipment that also needs to be exported to other nations. Director General Jeong Marn-ki continued, "Most of the Korean software in use is far from globalization. For instance, a comparison between maps provided by some Korean company and Google Earth shows that while the map offered by some Korean company does not go beyond the Korean peninsula, Google's map services allow users to explore every nook and cranny of the world. Therefore, Internet users living abroad have no access to Korean-made products and a majority of Koreans prefer Google Earth to Korean counterparts. Take computer vaccines for example, most Internet users think that foreign-made vaccines are better in performance and interpretability and relatively light compared with Korean ones. Although Korean vaccines are good at fighting against domestically wellknown viruses, they are vulnerable to foreign-born viruses. As a result, the competitiveness of the Korean software industry can be strengthened only through globalization." Competitive industries have also weaknesses. "Competitive industries such as semiconductors, mobile phones, displays, fiber optic Internet, digital TV and DMB also have vulnerable areas that need to be reinforced. As for displays, Korean display panels' global share exceeds 50 percent, but most of the raw materials of display panels are imported. Over 80 percent of the core equipment related to exposure, deposition, etching and heat treatment is imported. This is true of semiconductors as well. Korea is often called a semiconductor powerhouse. But it is true only in terms of memory semiconductors like DRAM and flash memory. Korea has almost nothing when it comes to non-memory semiconductors like SoCs (System on Chip)," explained Director General Jeong. In the case of Korea's display industry, if Japanese and US display equipment manufacturers fail to supply global leader Samsung Electronics and LG Display with key equipment, the two display makers have to bring their entire production lines to a halt. Moreover, the global SoC market has been a playground for US giants like Intel, Qualcomm and Broadcom (a combined share of 60 percent), Japan (20.5 percent), the EU (10.9 percent) and Taiwan (5.1 percent). Korea's share in the global SoC market is less than half of Taiwan's. Director General Jeong mentioned, "The Ministry of Knowledge and Economy plans to unveil Plan for the Development of the SoC Industry," under which KRW 2 trillion in public-private funds will be invested by 2015 to raise the exports of SoCs and its global market share to as much as USD 33 billion and 9.5 percent respectively. The plan also includes four strategies. Firstly, implementation of a project in which system manufacturers and fabless semiconductor companies jointly develop SoCs, creation of an SoC cluster in Pangyo, building a KRW 70 billion fables cluster fund and fostering SoC experts. Along with the four strategies, 13 sub-tasks will be hammered out to fully implement the plan next year. What's more, factoring in the fact that development of next-generation equipment costs tens of billions of won, the Ministry of Knowledge and Economy plans to provide a total of KRW 500 billion in R&D funds so as to achieve "demand-based localization of equipment development and production," in which equipment makers participate in joint development projects two to three years before scheduled commercialization. Deregulation is not an option but a must. When President Lee Myung-bak took office he said, "Since 2000, companies' facility investment has stood at a mere 2.2 percent, which greatly stunts economic growth. The sluggish facility investment can be blamed on various kinds of government regulations." Government regulations on companies are a very serious problem. The Federation of Korean Industries (FKI) and Korea Economic Research Institute (KERI) have recently evaluated about 5,000 government regulations and concluded that 1,664 of them need to be reformed. In other words, three out of 10 regulations are unnecessary. Director General Jeong said, "The Electronics and Telecommunications Research Institute (ETRI) developed WIPI (Wireless Internet Platform for Interoperability), which is Korea's standard mobile platform that standardizes mobile carriers' different mobile platforms to allow them to offer the same contents. Although WIPI itself is so well-intended, use of WIFI is not an option but a requirement. As a result, Black- Berry, developed by Canadian company Research In Motion (RIM), failed to break into the Korean market two years ago due to the requirement of using WIPI. If it hadn't been for the regulation, Koreans would have got their hands on smartphones much earlier." Thus, the Ministry of Knowledge and Economy (MKE) is determined to scrap or scale back conventional and perfunctory industry-wide regulations imposed on broadcasting & communications, the media and the IT industry's R&D. In particular the "2009 MKE Plan for Regulatory Reform" has been implemented to lower the entry barriers in 29 sectors for foreign investors. Those sectors will be opened in stages this year through consultations with relevant ministries. An era of convergence The IT industry's growth is not as impressive as it used to be. Its growth had www.koreaittimes.com 39
Page 1: July / August 2010 | Vol. 73 / 74 C
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