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The Development of Korea’s Electronics Industry During Its Formative Years (1966-1979)
KDI School
2016. 12.
List of Chapters


Chapter 1


1. Stages of Korea’s Electronics Industry Development

2. Organization of the Study

Chapter 2

Industrial Policy and the Electronics Industry

1. Industrial Policy Debate

2. Definition and Characteristics of the Electronics Industry

Chapter 3

Background and Initial Conditions

1. Birth of Korea’s Electronics Industry and Early Policy Response

2. Initial Conditions before the Introduction of Promotion Policy

Chapter 4

Electronics Industry Promotion Policy

1. Five-Year Electronics Industry Promotion Plan (1967-1971)

2. Policy Recommendation and Background Report for Electronics Industry Promotion

3. Electronics Industry Promotion Law and Basic Plan

4. Implementation System

5. Major Policy Instruments

5.1. Strategic Domestic Market Protection

5.2. Financial and Tax Benefits

5.3. Industrial Complexes

5.4. Education and R&D

Chapter 5

Corporate Strategy

1. New Entry vs. Resistance by Incumbents

2. Vigorous Competition and Capacity Development

Chapter 6

Assessment and Conclusion

1. Assessment 

2. Conclusion

  The assembly segment of the electronics value chain provides a relatively easy point of entry for developing countries because it is labor-intensive, but compared with garments and footwear, the electronics industry has a high income elasticity of demand and a rapid pace of productivity improvement and provides significant spillover effects for other industries. Electronics can thus play a dual role in a nation’s industrialization by not only creating jobs
but also facilitating structural transformation.
  After searching for new promising industries beyond garments in the mid-1960s, Korea began to nurture electronics as an export-oriented strategic industry by drafting the Five-Year Electronics Industry Promotion Plan in December 1966. The government benchmarked regional early movers such as Japan and Taiwan and consulted with the academic and business community to formulate comprehensive plans to support the development, production, and exports of electronic products designated for promotion. In 1969, the government enacted the Electronics Industry Promotion Law and drafted the Basic Plan for Electronics Industry Promotion (1969-1976) to provide the legal basis and action plan for the promotion of the electronics industry. For the implementation system, the Ministry of Commerce and Industry formulated promotion policy, while the Fine Instruments Center (FIC), National Industrial Research Institute (NIRI), and Korea Institute of Science and Technology (KIST) provided support for overseas market development, quality control, and research and development (R&D).
  The government provided space for Korean firms to grow by restricting the inflow of foreign imports in the early stage of the electronics industry development; however, to ensure that Korean firms develop their own capabilities instead of depending on protectionist measures indefinitely, the government provided incentives for them to develop, produce, and export electronic products and compete vigorously both in the domestic and global market. In addition, the government provided financial and tax benefits, while taking externalities into consideration. An industrial complex dedicated to the electronics industry was established to realize agglomeration economies, and the education and R&D system was strengthened as well. However, the government maintained an anti-consumption bias during the 1966-1979 period, impeding the expansion of the domestic electronics market.
  Korean firms established partnerships with foreign companies, but accumulated their own capabilities without losing ownership. They improved their competitiveness by carrying out their own R&D, starting with the “reverse engineering” process of disassembling and reassembling foreign products. Over the long run, firms that proved successful were those that managed to develop capabilities to produce final products, components, and materials
through R&D and vertical integration and to generate synergies from product diversification ranging from household appliances to information and communication sectors. By contrast, firms that stuck with labor-intensive assembly or only household appliances had to move their operations abroad or face a decline in performance.
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