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Electronics Industry Promotion Policy

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Electronics Industry Promotion Policy06



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Title Electronics Industry Promotion Policy
Similar Titles
Material Type Report
Date 2015
Language Korean
File Type Theme
Subject Industry and Technology < Science/Technology
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Abstract

Sub-Theme 2 | Electronics Industry Promotion Policy





In December 1966, the Ministry of Commerce and Industry released the Five-Year Electronics Industry Promotion Plan (1967-1971). To promote the electronics industry as an export-oriented strategic industry, it highlighted key action items such as the priority allocation of funds, establishment of an electronics industry center, and creation of an electronics industry cooperative. The Five-Year Electronics Industry Promotion Plan aimed to achieve $100 million in electronics exports by 1971, as shown in Table 3. This was a rather ambitious plan: In 1966, Korea’s total exports amounted to $250 million, and the electronics industry exports accounted for only $3.6 million. However, aside from the accuracy of the projections, the export targets served as benchmarks against which progress could be measured. Moreover, since the targets were based on exports rather than domestic output, ##3D_LAYER## the plan emphasized international competitiveness from the outset.##3D_TEXT: The actual figure for electronic exports in 1971 would turn out to be $88.6 million, falling short of the $100 million target. However, electronic exports would quickly increase to $142.1 million in 1972 and reach $1,845.0 million in 1979.##3D_LAYER_END##




[Table 3. Export Targets in the Five-Year Electronics Industry Promotion Plan

(1967-1971)]


 





















































































































































































































Company Export Items Export Targets (thousand USD)
1967 1968 1969 1970 1971
Goldstar Radio 1500 2000 3000 5000 8000
Samyang Radio, Resistor 341.5 876.8 1220 1250 2050
Dongnam Radio, TV 2225 5100 7700 9450 12300
Chunwoo Radio 1730 2500 3000 3500 4000
IDR Transistor Radio 400 800 1500 2100 2500
Marvel Korea TV 566.7 3661.2 3709.9 4705.1 4705
Orion Volume 1116 4128 5136 6996 7760
Donghwa TV 240 600 840 960 960
Daeyang Volume 337.8 600 1000 1000 1200
Komi Transistor 2103.1 3400 5100 6800 8500
Korea Micro IC 3448.5 5517.6 11035 17272.8 22370.4
Signetics Korea IC 1540 1870 1980 1980 1980
Bumhan Silicon Transistor 51.8 974.4 1349.9 1600 1900
Sudo Piano Electric Guitar 680 870 945 1020 1320
Samhwa Battery, Condenser 300 750 1200 1600 2500
Sammi Volume, Radio 160.4 506 2190 6790 11878
Sunny Chrystal 857.1 4067.2 4307.2 4787 5072.2
Korea Electronics CRT 77.5 96 117 140 180
Namsung Radio 1620 3325 5320 - -
Central Trading Radio 1065 5050 4150 6250 7350
Jeonwon Battery, Condenser 120 210 338 450 670
Total 20,510.40 46,902.20 65,138.00 83,650.90 107,195.60



Source: O (1996:307)

Note: Only three (Goldstar, Samhwa, and Namsung) out of the 21 companies on the list remain active in electronics business in Korea as of December 2016. Samsung Electronics is not on this list because it was established in 1969.





In September 1967, Dr. Kim Wan Hee, Professor of Electrical Engineering at Columbia University, briefed President Park Chung Hee on promoting the electronics industry. In 1968, in a 1,000-page report, Dr. Kim submitted a detailed action plan in support of his 1967 recommendation. He made it clear that Korea should not settle for the labor-intensive assembly segment of the electronics industry. What was required was not merely a shift from garments and footwear to electronics, but development of capabilities suited for activities that demand greater coordination and innovation. Dr. Kim made three policy recommendations:

(1) enactment of the Electronics Industry Promotion Law,

(2) securing and releasing funds for the promotion of the electronics industry, and

(3) establishment of the Electronics Industry Promotion Center. Dr. Kim emphasized that a legal basis must be established to foster the electronics industry, citing Japan’s 1957 Law on Provisional Measures for Electronics Industry Promotion. He recommended that the Electronics Industry Promotion Law include the following provisions: designation of priority electronic products to be promoted, financial and tax benefits, education and training of technicians, localization and industrial division of labor, and promotion of exports. Dr. Kim envisioned that the Electronic Industry Promotion Center would pioneer R&D and move on to pilot prototype production, market diagnosis, improvement of the prototype, minimum volume production, and market development, basically laying all the groundwork for volume production by the private sector. At the same time, he also recommended that large Korean business groups enter the electronics industry, instead of overly relying on foreign direct investment (FDI).



In 1969, the government enacted the Electronics Industry Promotion Law and set localization and export targets in the Basic Plan for Electronics Industry Promotion (1969-1976). Promotion strategies included: (a) establishment of an industrial development system through systematization (specialization) among devices, components, and materials; (b) development of electronics as an export-oriented strategic industry by actively attracting foreign investment and international division of labor, as well as strengthening international competitiveness; (c) improvement of the localization rate through tax exemption on newly developed products and expansion of the market. Here, "localization" did not mean replacing foreign products with domestic products even if the quality of domestic products was inferior. Rather, it meant commercially viable import substitution by developing and producing exportable domestic products. The Ministry of Commerce and Industry designated 95 items for promotion, including electronic devices (e.g., color TV, electronic calculator), electronic components (e.g., cathode-ray tube), and electronic materials (e.g., semiconductor materials). ##3D_LAYER## Companies that submitted workable business plans to develop and produce these designated items received financial support.##3D_TEXT: For more detailed information, see Lim (2016: 82-83), Table 4-7 ##3D_LAYER_END## Subsequently, in conjunction with the heavy and chemical industry (HCI) drive launched in 1973, the government designated electronics as one of six priority industries, with steel, non-ferrous metals, machinery, petrochemicals, and shipbuilding. To promote Korea's electronics industry, the government utilized various policy instruments such as strategic domestic market protection, financial and tax benefits, establishment of industrial complexes (e.g., Gumi Electronics Industrial Complex), and support for education and R&D. These were familiar instruments that were employed to promote other industries as well.



What was noteworthy about electronics industry promotion was the degree to which the government relied on vigorous competition and contest to produce designated priority products, rather than a national champion (e.g., POSCO in the steel industry) or private-sector oligopoly under state-supported financing (e.g., Hyundai, Daewoo, and Samsung in shipbuilding). In fact, the Ministry of Commerce and Industry did not establish a director-level position in charge of the electronics industry until July 1971. Not until 1978 was the Electronics and Electric Industry Bureau established. With a limited number of government officials involved in electronics industry promotion, the Ministry focused on creating incentives for private-sector companies to develop, produce, and export electronic products, rather than engage in large-scale projects or intervene in the details of electronic industry development by establishing new agencies or state-owned enterprises. Instead of creating a new electronics industry promotion center, the government used existing organizations as implementing agencies: namely, the Fine Instruments Center (FIC), National Industry Research Institute (NIRI), and Korea Institute of Science and Technology (KIST). The latecomer’s advantage and the relative lack of scale economies in electronics had much to do with this policy choice, but the entrepreneurship of the private sector also played an important role.