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The Development of Korea’s Electronics Industry During Its Formative Years (1966-1979) Birth of Korea’s Electronics Industry and Initial Conditions

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The Development of Korea’s Electronics Industry During Its Formative Years (1966-1979)

Sub-Theme 1 | Birth of Korea's Electronics Industry and Initial Conditions


In 1959, Goldstar (today’s LG Electronics) produced Korea’s first radio based on vacuum tubes. Goldstar used its accumulated technical knowledge in plastics manufacturing to produce plastic cases for the radio, instead of bulky wooden cases. Imported components such as speakers, resistors, and volume controls accounted for one-third of the components used for the radio. A number of firms followed suit by producing basic electronic products, largely relying on imported parts and components.

Starting in the early 1960s, the government provided protection to Korea’s electronics industry by cracking down on smuggled goods and applying high import tariffs. It also provided support by conducting a campaign to send radios to rural villages. In July 1965, the Ministry of Commerce and Industry included "radios and electric devices" among 13 designated export specialization industries. However, the electronics industry had no special place. It was just one of the 13 industries deemed to have bright export prospects, including silk fabrics, ceramic products, rubber products, plywood, cotton fabrics, garments, and leather goods.

In fact, until 1966, there was no government body to formulate and implement a comprehensive plan to promote the electronics industry. The Electric Industry Division, established in 1964 as part of the Second Industrial Bureau at the Ministry of Commerce and Industry, covered electricity, communications, electric wires, batteries, and lights. It was only in early 1966 that consumer electronics was added to the portfolio of the Communications Sub-division.

In 1966, domestic production accounted for 87% of domestic consumption for radios, but only 35% for black-and-white TVs. Also, as shown in Table 2, the localization rate of most components was below 40%. For core components such as semiconductors (transistors, integrated circuits, etc.), electronic tubes (vacuum tubes, cathode-ray tubes, etc.), and ferrites, 100% were being imported.

 

[Table 2. Localization Rate of Electronic Components (1966)]
 
Component Annual Demand Local Products ($Mil.) Localization Rate (%)
Million Units $Million
Semiconductors 10.3 2.03 0 0
Electronic Tubes 0.62 0.25 0 0
Electrolytic Cap 7.52 1.75 0.53 30
Paper covered Cap 1.72 0.03 0.01 33
Magnetic Cap 11.8 1.18 0.18 15
Fixed resistor 23.4 0.19 0.06 31
Variable resistor 1.2 0.16 0.13 81
Ferrite 4.3 0.32 0 0
Speaker (Magnet) 1.14 0.23 0.07 30
Variable battery 1.1 0.30 0.18 60
Printed board 1.1 0.12 0.04 33
Chassis 1.1 0.77 0.54 70
Others - 0.27 1.02 80
Total   7.60 2.76 36

 
Source: KIST (1968).


In sum, by the mid-1960s, the Korean electronics industry had developed capabilities to assemble and manufacture basic electronic products such as radios using imported core components, but had yet to realize its full production and export potential, compared with its neighboring economies. In 1966, the U.S. imported $500 million of electronics products from the Far East, with Japan accounting for 80% and Korea, only 0.35%. In terms of industry share of exports, electronics was ranked second for Japan, fifth for Hong Kong, sixth for Taiwan, but only 10th for Korea.