Suweon, South Korea — Until late 1980, Korean electronics firms manufacturing color television sets were orphans without a home. They had invested heavily in new facilities to turn out over a million sets a year. But not a single one could be sold at home due to government reluctance to approve color broadcasting.
Exports were the only salvation, and even this lifeline began to look horribly fragile when the United States -- by far the best market -- suddenly imposed a severe quota system that left Korean assembly lines running at only one-third to one-quarter of capacity.
Take the example of Samsung Electronics, which in 1976 established an integrated factory to produce most of the key components and assemble color televisions at Suweon, some 25 miles south of Seoul.
Its president, Kang Jin Ku, says without hesitation: "Color television production is vitally important to the health and stability of the entire Korean electronics industry, and we are no exception."
With the domestic market for monochrome television sets having run its course -- with over 7 million sets in operation, about 90 percent penetration of local house- holds -- the industry based its new strategy heavily on the assumption that the Seoul government would permit color broadcasting, and that there would be no major hindrance to exports.
Over the past two nail-biting years, it lookd as though the plan had backfired badly. The government continued to be reluctant to give the go-ahead apparently out of concern that color televisions would become an unfortunate symbol of the difference between rich and poor and would undermine efforts to creat a more "austere," less consumption-oriented Korean life style.
At the same time, the American market that had been expected to take up to 750,000 Korean-made sets annually suddenly shrank to just over 200,000 as the Carter administration imposed a stiff import quota.
And with the economy suddenly collapsing around their ears at home, the electronics companies found themselves with a domestic sales decline of somewhere around 40 percent last year.
A faint ray of hope occurred on Aug. 1 when the government finally lifted the ban on domestic color TV sales, but that made little impression when it still gave no hint of approving the start of color broadcasts. This finally came in mid-November, when the green light was given for a Dec. 1 launch.
The entire electronics industry went from one extreme to the other. Sales zoomed in December to 120,000, stripping shops and warehouses of every available set.
Recalls Deputy Finance Minister Yoong Jung In: "We made an inventory check one day and could only find four sets available for sale anywhere."
At Samsung it was chaos. Company president Kang says: "We sold 50,000 sets in December. But with firm overseas commitments to meet as well we had to turn out 850,000 sets in all. Our assembly lines were running flat out almost around the clock."
The fever lessened in the early part of 1981 -- always an off sales period as families have heavy financial commitments like school bills -- but there is still optimism of great things ahead.
Mr. Kang describes the industry's expectations this way: "We calculate that domestically we can sell as many color as we did black and white sets . . . in other words, 7 million.
"If we can sell 1 million sets a year -- and that's quite feasible -- then we can achieve our target in seven years . . . by which time the replacement sales will have begun. We shouldn't rush too much, though . . . I'd like to see output for the local market kept at around 1 million."
Meanwhile, the United States has also partially relented. The Koreans received a new quota in June 1980 that will average at about 450,000 sets this year and next. That will represent about half the total Korean exports.
With the future reasonably secured, therefore, the emphasis at Samsung is now on improving technology and overall quality to challenge Japanese domination of world markets.
At Suweon, long lines of young girls and men carefully insert each tiny part into its wooden chassis moving down the assembly lines. Because of the Korean wage structure, it's still cheaper to do it by hand than through automation.
But company president Kang knows that the machines will have to come if Korea is to stay price competitive and get on par with the Japanese on quality control. In a small room at the Suweon plant, an experiment in automated component insertion is now under way using Japanese machinery. The company plans to begin its investment in full automation next year.
But one problem is that foreign electronics firms jealously guard the advanced technology they have developed, so that Samsung feels it will have no alternative but develop its own automated equipment somehow, no matter how long it takes.
The Korean industry already has come a long way since black and white television production was first established with Japanese help 10 years ago.
The Japanese are fast losing interest in this "primitive sector" of electronics, enabling Korea last year to emerge as the world's largest exporter of monochrome sets -- some 5,144,000, about one-fifth of the global total.
Total domestic capacity is now some 6.5 million sets a year spread over eight manufacturers.
Local content long ago reached 100 percent, and the Koreans are now exporting their technology to other parts of Asia.
Samsung's president thinks there is still plenty of life in the old dog yet. "We reckon that for at least the next 10 years there is going to be worldwide demand for at least 20 million black and white sets annually. Remember there are still a number of developing countries who haven't got television yet."
The company currently exports about 2 million sets annually, about half of the United States, where at under $100 each they appear to be bought primarily as second or third sets for children's rooms.
With the color television breakthrough achieved, the Korean industry is now moving on to video tape recorders, but officials say that although domestic sales have been brisk since they began 18 months ago, the level of available technology is not sufficient to make exports worth the risk of damaging Korea's image.
Samsung is now negotiating with the Japan Victor company (JVC) in the hope of obtaining its VTR technology under license.
Having suffered a heavy financial blow due to the delay in domestic color television sales, the industry is now trying to generate the sort of profits that will enable manufacturers to plow back capital into research and development and quality control in other areas.
Beginning to feel healthy again, leading companies are hopeful they can gain a niche in world markets with a whole range of house- hold products, particularly microwave ovens (now beginning to sell well in the US, Central and South America, and parts of Europe), washing machines, and refrigerators.
The companies, however, say they have been damaged by government fixed prices for their main lines which, in the words of Samsung's Mr. Kang "were not based on cost realities, but only on benefiting consumers. there simply wasn't enough profit for the sound growth of the industry."
But the controls will be lifted in August 1981, when a new law will permit the industry to set prices on a competitive basis.
Hence, the smiles in the boardrooms of Samsung et al.