Korea Faces Eroding High-Tech Competitiveness

Once a rising power in the high-tech business, South Korea now is facing mounting competitive pressure that is slowing or even reversing its advances in key product areas, according to Derek Lidow, president and chief executive officer of the market-research firm iSuppli Corp. Speaking at the Seoul Digital Forum 2006 yesterday, Lidow warned that South Korea is losing market share and leadership to overseas competitors in several segments, including LCD panels, LCD televisions and mobile phones.

"South Korea is being out-spent and out-maneuvered by competitors on multiple fronts," Lidow said. "To remain competitive, the nation must change its approach to the high-tech industry, focusing more on entrepreneurial innovation and less on lower-margin commodity products."

After years of gaining share in the mobile-phone market at the expense of other nations and regions, South Korea in 2004 emerged as the world's second-largest region for phone production, following Europe, according to data from iSuppli's Design Forecast Tool. However, South Korea's mobile-phone market share reached a plateau in 2005, while Europe rebounded and the United States continued to grow.

"Recent European and U.S. product successes have halted Korean market-share gains," Lidow noted.

Lidow cited marketing as the reason why European and U.S. mobile-phone makers are outperforming their South-Korean counterparts.

"The effectiveness of target marketing for the global leaders in the mobile-phone business is improving at a faster pace than it is for the top Korean manufacturers," Lidow said.

With Korea facing challenges on multiple fronts, the nation must change its approach to high-tech competition, shifting its focus from commodity products to value-added goods and services, Lidow advised.

"Korea must encourage entrepreneurial innovation through the creation of more competitive private investment funds and industrial incentives, including both venture capital and private equity investment funds," Lidow said.

"This will result in a gradual shift away from lower-margin, capital-intensive and slower-growth consumer-electronics hardware and toward more innovative products and services. It also will stimulate more innovation and investment in local firms."

Posted to the site on 25th May 2006