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Oct 2, 2011

Korea is Falling Behind China in Innovation

Sang-Hun CHOE posted a great article in the New York Times quoting IPG’s Senior Commercial Advisor Tom Coyner in an article entitled - Korea: Connected Yes, Competitive Maybe.

Mr. CHOE emphatically notes that:
But being hyper-connected is not the same as being hyper competitive. Connectivity on its own does not bring productivity or happiness. It does not necessarily even bring foreign investment. And for all its positives, Seoul’s connectivity comes with some downsides.
For starters, the city is home to the headquarters of global hardware giants like Samsung and LG, but the companies have built their success largely by copying and improving existing products rather than by innovating or moving into new technology frontiers.
Korea is still a blue-collar manufacturing country that has failed, to date, as noted by Mr. CHOE to create truly innovative products and move into new technologies.  China, in many cases, is years ahead of Korea in innovation, because of its willingness to actively promote FDI and liberalize its investment environment.  We also find China to be much more welcoming to foreign products than Korea.

Mr. CHOE goes on to note:
Today, Seoul is a place where a digital rush collides with industrial-age regulation and mind-set.
Until Apple’s iPhone made a splash here, advertisements for foreign electronics were all but nonexistent; the market was almost completely dominated by local brands like Samsung and LG. Electronic home appliances are almost entirely South Korean-made. The phenomenon said as much about an implicit buy-Korea mentality as the products’ growing competitiveness.
Korea is one if the not the most nationalistic nation in Asia.  The Chinese are proud to be Chinese, but they also know the benefit of foreign investment and foreign technology.

This Korean mindset, coupled with the burdensome regulatory environment, is leading Korea to only live off its past manufacturing glory, a glory that is increasingly being eaten away at by the more competitive China.   The majority of the major Korean companies, today, produce more of their wares outside Korea than in Korea.  Most of the major Korean companies have large manufacturing plants in China, Vietnam, the Philippines, India and in North America.  Many of the R & D centers have also moved off-shore.

Mr. CHOE has worked for the New York Times for the majority of his career as a journalist.  He is a recipient of the Pulitzer Prize.  His work appears in the International Herald Tribune and the New York Times.  Mr. CHOE's article maybe found at:  Connected Yes, Competitive Maybe.
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SeanHayes@ipglegal.com