EPA-EFE/YONHAP SOUTH KOREA OUT
What a jerk will make South Korea to be among the technological outsidenew last day of April the President of the Republic of Korea moon Jae-In visited the manufacturing complex of Samsung in Hwaseong. Today Hwaseong (40 km from Seoul; population about 800 thousand people) is the main object of industrial investment by Samsung, who will become the center of the semiconductor cluster (which also includes Kichen and Pyeongtaek), the company and new technological base, the South Korean electronics and engine of the country’s development in the era of the fourth industrial revolution.
After reviewing the production and listening to children’s choir, who sang a cheerful song about the desire for a brighter dream, the President officially unveiled his vision of the semiconductor industry.
First, it noted the achievements in the production of memory chips. Here Korea is the undisputed leader, with more than 60% of the world market. In addition to Samsung as a key player is SK Hinyx (the former Hyundai Electronics, was bought in 2012m the largest South Korean Telecom SK Telecom holding), with varying success fighting for second place with American Micron Technology.
But, secondly, memory is only about 40% of the semiconductor market (and, most likely, this share will decline). There is a lot more that Korea is very vague called “system chip”, or simply “not memory”, and this is not only microprocessors and microcontrollers. And here Korea is almost not represented, and in many positions the share of import reaches 100% (Samsung, however, has its own ARM processors for smartphones, but, for example, almost all automotive electronics in the country is imported). And because the President has tactfully silent about the analog–to-digital components, power semiconductor devices, special purpose products. And it is a question not only and not so much market share as global competitiveness in the era of artificial intelligence, robotics, unmanned vehicles, Internet of things and 5G communications. Not to mention the security of the country.
So, thirdly, we need a paradigm shift. In January, the Blue house (the official presidential residence) held a meeting on economic development issues, and then the conversation with the Vice President of Samsung Lee Jae-Yung (he carries out the current management of the company, the head of which is still his father Lee gon-Hee, who is already 77 years). Moon Jae-In directly asked for expansion in the field of semiconductor components in addition to memory chips. Talk about the fact that the South Korean electronic industry needs new guidelines go a long time. And Samsung takes a direct part in shaping not only the agenda, but the specific content of industrial policy, in the end, here are concentrated the main technological expertise, management experience, human and financial resources, and Samsung have major work on the implementation of ambitious plans.
So, fourth, the country will have to make the next leap: while maintaining global leadership in the production of memory chips by 2030, Korea has become the No. 1 in the world in the production of semiconductor components of all types, and to occupy 10% of the world market fables.
Over the last few years the global landscape for the semiconductor industry changed dramatically. Traditionally manufacturers were engaged in a full cycle of designing and manufacturing chips. Samsung is one such manufacturer. However, the rapid rise in technology and equipment led to the fact that at the turn of 2010 many people began to abandon their own production and have opted for the so-called silicon factories (foundries), specializing in mass production of chips. The largest such factory — Taiwan’s TSMC (more than half the world market) and UMC (which year after year booster GlobalFoundries us, holding on the second place). Giant capital costs make the business profitable only if the power at least partially used for customized production; to download them for yourself is almost not even the largest players.
To add to this radically reduced the timing of technology upgrades: the account went on for months. That’s only in 2018 in Hwaseong launched the 7-nanometer processor (Galaxy S10 is 8-bit Exynox), and in April, TSMC announced that the second half of this year begins churning out 5-nanometer chips for Apple. In response, Samsung is going to 2021-mu master 3-nanometer technology. Last year alone Samsung spent on this technology race with about $20 billion, which is approximately 80% of all capital investments of the company (for comparison: in 2018, Russia’s military budget amounted to about $46 billion). And according to the investment program of Samsung, by 2030 the company will spend about $116 billion on semiconductor technology (and more than half of the amount will go to R & d).
On the other hand, in large numbers began to appear the so-called fabless–company — English fabless (sometimes they are called “busfabriken production”). These companies design chips, not so much, as for their products, and the production is placed on the silicon FABS. The market share of these companies is growing steadily. And now the specialization has gone further: a manufacturing contract testing circuits. This helps to significantly save money and significantly reduce the time of bringing products to market. So full swing the race is not only technological, but also business innovation. And given the scale of the task required the construction of complex ecosystems at the level of national economies, too much is at stake.
Rice around the head
So Korean plan looks quite reasonable: on one’s memory does not go far. But you have to understand that Korea memory chips is not just a product. It’s almost like for us the conquest of space.
In February 1983 the founder of Samsung Lee Byung-Chul (grandfather of the current Vice–President Lee Jae-Yong), while in Tokyo, made an important statement (later called the “Tokyo Declaration”), which became a milestone for the company and for the whole country. At that time Samsung for about 10 years was engaged in manufacturing (mainly Assembly) electronics: in 1981, some black–and-white TV was released over 10 million units, and its partnership network included more than 2000 companies. But Lee Byung-Chul looked on, already in the XXI century: he is targeting the semiconductor market, which he called “rice of industry”. If he spoke Russian, you would use the word “flour” because it is the bread which, as you know, around the head.
Lee Byung-Chul knew that his strategy would cause a fair amount of skepticism: global memory market was a fairly modest and very volatile (definition of “modest” quickly became irrelevant, but the volatility has not gone anywhere so far). But Lee Byung-Chul was determined to reach the goal. The issue price amounted to $133 million — a huge sum, especially to the level of the then Samsung. But it’s only been six months, and in Kichine the plant was built. And in 1984м was released the first 64-kilobyte DRAM (dynamic random access memory), and after just three months of DRAM and 256 KB.
Today, when we measure RAM in gigabytes, it can seem ridiculous. But at that time it was a serious technological breakthrough, great success in business (he was not shattered even happened soon another collapse of memory prices) and an important psychological moment for the whole country. Korea just went on to another market, but also gained a fundamentally new place under the sun. And although it took several more years to firmly stake out, all looked to the future with enviable optimism.
By that time the country has got used to that it has a success. The Korean economic miracle has become a universally recognized fact. Here, however, the explanation for this fact is disputed. In Korea itself all (almost) all is clear: its success to the country’s special social culture, the extraordinary diligence of the Korean people, his entrepreneurial and other talents. It is curious that this opinion prevails in Russia, where South Korea believe powerful economic and advanced scientific and technological power. In the West much more pay attention, for example, the role of the military dictatorship, a very special relationship between government and business, large-scale direct and indirect assistance, numerous privileges and preferences, which the country enjoyed for decades, and the like. Some experts even believe that it was no miracle — if such conditions do not come to success would be difficult (that’s really it really would be a miracle!). But the fact is that transnational, mainly American, companies simply built they need logistics, production and marketing chain, where all who need, determined their place and helped it to grow roots. Special piquancy of the situation makes the fact that partners in the Asia-Pacific region was warmly integrated into the new Japanese keiretsu — financial and industrial group, forming horizontal networks that came after the war in a hierarchical (family) conglomerates of the zaibatsu.
The road to success
Much less controversy is the fact that “Asian tigers” was a special way of technological development. Greatly simplifying the picture, we can say that in the second half of the twentieth century, there were three standard models of the business process (although in pure form, they almost never occur).
First, the old product model. Everything is clear: companies compete, trying to create the best product. Their core competencies — R & d, and the main asset is intellectual property, which they carefully guarded. This model gives the possibility to use the advantages of the pioneer, and that the long-term benefits (we are talking about years and decades). This way, and now continue to go many Western companies.
Second, the process model. They often say that it was invented by the Japanese, although it is not. But the Japanese have successfully applied and popularized it, simultaneously enriching Western management a bunch of words from your language. Here at the forefront is not the product itself, and the processes to effectively balance the cost, quality and speed of output markets. The harder to keep secret (and no one really tries), but much harder to reproduce in other conditions. However, the benefits are medium-term. We are talking at best about a few years. It is therefore critically important become the permanent business innovation.
And finally, thirdly, the so-called diffusion model, which with some variations was implemented by South Korea and Taiwan, later to Singapore and Malaysia. Still later, the elements have begun to use China and other countries in Southeast Asia and not only Asia.
Key assets is access to technology and to some important (not necessarily unique) resource. In the case of Korea and Taiwan in this resource were initially high-quality and relatively cheap labor. In addition, we need a special relationship with the authorities. They need appropriate policies in the areas of demography, education, social development and effective control for low social costs of economic maneuvering. But most importantly, we need a serious trade preferences from some countries where there is a large market with a good solvent demand. If all of these components available, you can start shamelessly exploiting the hard work and other admirable qualities of the people (eventually people too will benefit from it). The challenge is to quickly find locally–effective combination tested on the experience of products, technologies of their manufacturing and business processes throughout the supply chain. This provides a significant, although short-term (already for months) advantages. The point of the system is not what benefits it creates, and its ability to constantly generate something that becomes an advantage here and now, and rapidly disseminate successful experiences (which “diffuses” throughout the system, hence the model name).
The success of many companies and their revving. Those who kindness advocates for the wide adoption we have Korean experience, is usually overlooked that this is not a model for one or even several companies. This economic model for a large orchestra, where the conductor is not just a stick, and a good sturdy stick, which he unhesitatingly uses, when deemed necessary.
The mention of firm stick, not just a metaphor. In South Korea, corporal punishment in schools was officially abolished in 2011 (the first was the decision of the government, and then gradually abolished by school districts), but in fact they are used so far. Before all thrashed constantly, and not a soft rod, as in Europe, and especially not with a belt, namely, solid stick (there were even rules for schools: thickness up to six inches in diameter). Beat both boys and girls, mostly on the buttocks, the calves, the thighs. A separate issue — corporal punishment. And, perhaps, no expression that can be heard in a Korean firm: “Live now!”
This system is really very effective. She for many years provided the Korea economic growth and helped to overcome major crises. The fact is indicative that the periodic attempts to play this game on a foreign field generally ended in failure (you may recall how Korea and Taiwan tried to develop a biotechnology or Aeronautics). In the best case it is possible to occupy a new niche production, such as happened with the Korean automotive industry (Taiwan not given). But to create its own technological basis still does not work.
The diffusion model, of course, has not yet exhausted itself. But the world has changed. And Koreans really want to play in a different League. At least the online healthy optimism they have. Just remember that this is not the only resource that will be required for success, and that “gingerbread, by the way, are not enough for everyone”
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