Asia’s best kept secret

It’s been 14 years since I last visited Seoul, a place I like very much, but I admit to being increasingly troubled by what’s going on (or not going on) on the Korean peninsula: Specifically, the mounting tensions between North and South. There are some 23 million North Koreans, living on a per capita income of something like $735 per year, many hungry and close to starvation, and likely cowed by their military government into believing they under siege. The mentality of North Korea’s government is probably closer to World War I than World War II: They see themselves in the trenches against Americans and South Koreans, who, any minute now could decide to go “over the top” and come streaming across the DMZ. As the shelling of Yeonpyeong Island proved, they are not averse to slinging artillery shells across the border at South Korean targets, just to remind us they’re there, waiting. One commentator suggested that the shelling was meant to distract the North Korean people from their loathing of Kim Jong Eun, but that doesn’t make them any less dangerous: We don’t know yet whether these folks have any self-control with regard to the types warheads they put on these shells.

North Korea’s nuclear armament capability is a lot more substantial that anyone would have admitted, prior to Professor Hecker’s visit, considering their roads and infrastructure are reported to be in a horrible state of disrepair. The purpose of showing off their uranium enrichment capability was not so much as to intimidate the West (North Korea had already successfully detonated a nuclear weapon in October of 2006), but rather to advertise to nuclear wannabes (like Burma) that they have stuff to sell. When you combine this obvious weapons development with the hostile, belligerent language the North uses toward the west, and repeated assaults on South Korean targets, you may have justification for a strategic strike against the North’s nuclear facilities, something similar to what the Israelis mounted against Syria in 2007 (and decades earlier against Iraq). But this led National Public Radio commentators to suggest this would bring on a nasty retaliation against the South, possibly a leveling of Seoul with more than two million casualties.

This is damn scary, I think, but how close does it come to the things we’re worrying about right now? How many Americans, on the down side of the economic spectrum, obsessed with unemployment and job growth, will empathize with two million South Korean nationals? Does this sound callous or accusatory? Let me bring the situation a little closer — at least, for my colleagues in Silicon Valley: Some 50% of the world’s DRAM production is within a sloppy missile toss across the DMZ. (I said a sloppy toss, not a precision one.) Never mind nuclear warheads: The North Koreans, with the push a button, could severely cripple the worldwide electronics industry for many years to come.

The making of an electronics juggernaut

Apart from a 300mm facility in Austin, Samsung Electronics manufactures the bulk of its memory chips on the South Korean peninsula. The consumer electronics juggernaut, with roughly $121 billion in revenues in 2009, is the world’s largest TV supplier, a supplier of its own TFT-LCD displays, and among the first to promote and use white LEDs as LCD TV backlights. And, by-the-way, it is the world’s largest semiconductor memory supplier. Its semiconductor business, which includes graphics processors and cell phone chip sets, grew almost 60% to $28.3 billion in 2010, according to Gartner’s preliminary market share estimates. The company was one of the few to retain capital equipment investments during the recession — investments which will enable the company to retain leadership in DRAM and NAND Flash production — even as the fabrication technology moves below 40nm.

I'm not sure if anyone wants to retrace the history of Samsung Electronics, how it came to be such a worldwide powerhouse. Samsung certainly benefitted from a accumulation of investment capital in big, clannish chaebols, but also from a protectionist environment which forbid foreign companies from taking holding positions in Korean concerns — or from importing their own goods into Korea without prohibitive tariffs or hefty technology concessions.

I do not fully understand the transfer and possession of intellectual property that allowed Samsung to displace the Japanese as the most formidable supplier of memory chips. We do know that the South Korean government effectively required foreign telecommunications equipment manufacturers to license semiconductor technology to Korean companies in return for access to the Korean market. We do know that the 1990’s recession in Japan seemed to encourage downsizing and to squelch off capital equipment investments in Japan, while Korean investments continued. We do know that processors and memory are the most capital-intensive parts of the semiconductor business — requiring many billions of dollars in reinvestment each year — and the number of manufacturers capable of keeping up with the geometry shrink can now be counted on the fingers of one hand. But Samsung was already on its way to a leadership position in memory in the late 80s, thanks to a 1983 technology transfer from Micron in the U.S. and Sharp in Japan. Samsung became the first Korean manufacturer to produce 64-Kbit DRAM chips. It later partnered with other Korean manufacturers, brought together by the government-sponsored Electronics and Telecommunications Research Institute, to produce a 1-MBit DRAM (and later, in 1989, a 4-MBit device).

A Korean National Tragedy

At the time I traveled in South Korea, in the mid-1990s, Korean manufacturers were so married to memory production that the local press was treating the fall of memory prices as a Korean National Tragedy. Daewoo and Lucky Goldstar (the predecessor to LG Electronics), were still in the semiconductor business — at least, they were using EDA software tools to design ICs. I was the technical program organizer for what was then called the EDA&T (Electronic Design Automation and Test) Conferences, a traveling conference and exhibition put on the Asian Sources Media Group. Over dinner at an elegant hotel restaurant, I chaired a focus group for engineers and project chiefs — EDA tool users — at Samsung, Daewoo and LG. I was probing them to see, first, how familiar they were with the publication I worked for (“Asian Electronics Engineer”) and, next, what would it take to get these authorities to submit papers for the conference, and encourage their colleagues to turn out to hear them.

Apart from me and the Canadian who set up the dinner, everyone at the table —ostensibly unrelated and meeting each other for the first time — was named “Mr. Park.” Park, it turns out, is common name in Korea. (The country’s long-term president, the one credited with the development of South Korea’s industrial development and export philosophy from 1961 to 1979, was Park Chung-hee.) Other ubiquitous Korean names include Kim and Lee, as common in Korea as Smith, Jones and Williams in the States. I would address my focus group participants individually with their company affiliations — “Mr. Park from Samsung” — and each time they’d chuckle at my bewilderment.

Global Sources' (then called Asian Sources) promotional handle for American and European semiconductor and components suppliers was “we’ll show you how to market in Asia (particularly in China).” The formula was simple: advertise in our publications, present papers at our conferences, buy space at our exhibitions, and we guarantee you an exposure to Asian system builders who may become consumers for your products. In addition to providing `editorial support for “Asian Electronics Engineer” and “Electronic News for China” (later: “EETimes Asia”), I would recruit speakers from American and European semiconductor makers to give talks at Asian Sources’ conferences. There was an IC applications conference in China (the IIC, which still runs today), and a multimedia conference that would run in Taiwan. The EDA&T Conference, which I chaired several years, would open in Beijing, shift to Seoul and finish in Taiwan, two days in each location.

As semiconductor companies became more sophisticated about marketing in Asia, setting up their own offices in Hong Kong and Shenzhen, my recruiting job became complicated, as I had to work, for the first time, across widely divergent time zones. Where I once called California companies from New Jersey to recruit technical speakers, I was instructed to call Asia, 12 hours removed. It was the overseas sale offices who were increasingly empowered to make decisions about what conferences and trade shows to support. But initially, before those offices sprang up, my recruitment job was easier. Companies, in fact, proud of their participation in IIC or EDA&T would ask me for advice about how to word their press releases. “Should we refer to EDA&T ‘in South Korea’?” one press agent asked, “or is it ‘in Korea’?”

I had to think out loud on that one: “The United States government does not recognize North Korea,” I suggested. “Therefore it would appropriate to say ‘the Republic of Korea’.”

 

 

 Opening the circle

As visitors to the 1988 Olympics discovered, Seoul can be a pleasant surprise. The Koreans like classical music, for example, and I was delighted to find more FM radio stations on the dial for that in Seoul than there were in New York City. (I still have a well-made yellow sweatshirt, bought from a street market vendor in Itaewon, with the Korean flag embroidered on the front with the words, meant to encourage us to view Korea as a tourist destination, said “Asia’s Best Kept Secret.”) You can get bargains on clothing and leather goods in Myeong-dong and Itaewon, and cheap electronic goods in Yongsan (Seoul’s counterpart to Tokyo’s Akihabara). The streets were wide and clean (immaculate, as if someone had scrubbed their crevices with a tooth brush). The boulevards and avenues were deliberately paved wide, following the leveling of the city in the 1950s, someone told me, to facilitate combat troupe movements, though no one could ever tell that from the persistent traffic jams. The cars were all Korean, when I was there: Hyundai or Daewoo. Imports are restricted by a heavy tariff, though a recent trade agreement with the U.S. is promising to change that.

Like San Francisco, Seoul is very hilly. On its own latitude, Korea experiences four seasons. The hillsides in autumn, as in New England during leaf season, glow yellow, orange and red. There is a spectacular vista of the City, including the Hanggang River and its bridges from J.J. Mahoney’s, a disco bar in the hilltop Grand Hyatt. Young Korean women would congregate there, many quite gorgeous, ostensibly to dance, but there was a subtext: Korea was a viciously chauvinistic society. Women were treated with indifference (or worse) by Korean men. In corporate life, women could get fired for crossing an age threshold and no longer being considered pretty enough to serve. There were no laws to protect them from this sort of discrimination. American expats in Seoul commented on the availability of responsible housekeepers — former corporate managers — who lost their jobs after hitting that unfortunate threshold. Not surprising, one life strategy for Korean women was to latch to an American male, and get the hell out of there (though American visas for Korean visitors — even talented workers — were then in terribly short supply). At J.J. Mahoney’s, the women would dance in circles of four to six. If a young American crossed the dance floor, they’d invite him to dance with them by opening their circle.

My personal memories of Seoul, as I’ve said, are 14 years old. A lot may have changed. I did have the opportunity to experience nightlife in Seoul as a native might experience it, at the invitation of some of the women who handled registrations for the EDA&T Conference. We did something of a “pub crawl,” though I should say at the outset, Koreans are not drinkers. There are native beers, wines and cordials, but the wines are forgettable by California standards and (perhaps because of the import tariffs) the drinking establishments don’t stock much booze. My colleagues at Asian Sources advised me in fact that if I wanted cocktails with the celebration meal, after the conference closed, I should buy some bottles from the Duty-Free cart on the plane ride over. The bars I visited on my pub crawl were less like taverns than living rooms, addendums to someone’s house, which happened to open out onto the street. Though the crowds were mixed, men and women, I had a sense that these were couples rather than men or women drinking alone. I wonder now whether this was a variation on the “separate cultures” among men and women I had observed among the Taiwanese and, especially with regard to drinking, among the Japanese. In these living room gatherings, the proprietor was invariably a middle-aged woman, perhaps one of those threshold-crossing former executives, or an auntie of one of the woman I was with.

A thousand years of history

Koreans are very proud of their family heritage, one of them told me. Every self-respecting Korean family had a lineage chart posted in a prominent place in their house, like the front foyer. Each family’s lineage knew no national boundaries, hadn’t seen shelling or belligerence, and went back a 1000 years. It turns out, all those Parks I had trouble distinguishing among were all related, 750 or 1000 years ago.

Surveys among South Koreans offer some support for Korean unification; a good 25% of South Korean residents originally came from the North, albeit before the war, or still have living relatives in the North. But the South Koreans have trepidations about the costs of reunification — the costs of feeding those starving people. They fear a “Night of Living Dead” scenario: Armies of starving people streaming across the border, eating everything in sight. Studies on reunification strategy put together by another Mr. Park (Park Jong Chul, who had studied the reunifications of Germany and Vietnam) insists the North Korean economy needs to get within range of South Korea’s for reunification to become feasible. The reunification of Germany, one of the world’s most successful economies cost an estimated $1.6 trillion dollars; the reunification of Korea, where the per capita income of a typical North Korean is 1/10th of a South Korean’s, is estimated at $600 billion.

Not surprisingly, a pole among South Koreans, conducted prior to the December 20th joint U.S.-Korean military exercise found that 90% of the respondents said, let family ties be damned: If the North Koreans start shelling us again, we should strike back! And the North Koreans, who had previously promised to react with an angry show of force on contested territories, watched the shooting of 1800 rounds of artillery, the rockets fired off by F16 fighter jets — and didn’t say boo. []

Comments

[David Pinto]

Hi Steve,

Your piece sure brought back some Seoulful memories of EDA&T and IIC (from when it did take place on the Korean peninsula). I remember getting flak for the headline "Wu Gives a DRAM" as in "Frankly, my dear I don't give a D...". Reckon that should change to "Park gives a DRAM", given Korean dominance (and vulnerability, thanks to the North's proximity) in that sector.

Raising a virtual glass of soju to your health (and that of the DRAM industry)!

Best,
Mr. Point

[Steve Ohr]

I thought you'd appreciate the reminiscence, David. Let me join you in wishing Health to the DRAM industry. Best always, S.