S. Korean Firms Eye US Market

LAST year South Korea, a developing country, invested more in the United States than vice versa.

Why?

South Korean firms want to win both a stable share of the rich US market for their exports and access to America's high technology, Korean experts say.

"Many Korean companies are way behind in R&D, such as software development. To acquire this much-needed technology, Korean companies have no choice but to invest in the US," says Jong Ki Bae, director of the Korea Institute for Industrial Economics and Trade in Washington.

Although South Korea has been wrestling with a growing trade deficit with the US, which climbed to $335 million in 1991, it invested about $400 million in the US last year. The US, however, with a per capita income four times greater than Korea's $5,400, put only $300 million into the Asian country.

The US is Korea's largest export market, absorbing 26 percent of total exports. And more than a third of last year's $18.6 billion of goods arriving in the US were electronic products.

Korean electronics companies are in a transitional period. Over the last 30 years, the country's electronics industry has concentrated on low-tech items, including radios and cassette players. But with less developed countries such as China, Indonesia, and Thailand producing the same goods more cheaply, Korean firms can no longer compete.

As a result, Korean companies have moved into the high-technology field, Korean experts say. But they have had little help from their Japanese neighbors.

"The Japanese have refused to share new technology with us," Bae complains, and have forced Korean companies to turn to the US. Here, they can invest in small- and medium-size research and development facilities in California's Silicon Valley.

Two months ago, Hyundai Business Group, one of South Korea's giant corporations, decided to move its computer manufacturing facility from Seoul to San Jose, Calif. Hyundai plans to invest at least $50 million over the next two years, according to Edward Thomas, president of Hyundai's PC operation.

"Hyundai was very slow to develop new computer products and respond to the US market," says a Korean trade official in New York who asked not to be identified.

Locating manufacturing facilities nearer the customers is more economic and will cut the 12- to 18-month product development time in half, Mr. Thomas says.

With a faster market response and aggressive pricing, Hyundai hopes to capture 3 to 4 percent of the US personal-computer market by 1993, Thomas says.

Other major Korean companies such as Samsung Group and Lucky-Goldstar have established research and development centers in Silicon Valley. Last year Goldstar bought 5 percent of Zenith to gain access to American TV technology.

Samsung, the No. 1 player in the Korean electronics industry, will open its new office in Ridgefield Park, N.J. next month, and consolidate business operations in the US.

Despite the growing volume of Korean money pouring into the US, less than a third of Korean companies have recovered their original investment, according to the Korean Foreign Trade Association (kfta).

Unlike some US firms investing in Korea for short-term profits, Korean companies in the US are looking for long-term gain, Bae says. But a sluggish American market, growing trade friction between Korea and the US, and a tight credit crunch at home will hold Korean investment here down, some analysts say.

In addition, a number of Korean-owned corporations operating in the US are under Internal Revenue Service investigations for allegedly under-reporting their US profits, says Y. S. Rhee, manager of the KFTA.

"This kind of atmosphere is not conducive to future Korean investment in the US," he says.

About these ads
Sponsored Content by LockerDome

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...

Save for later

Save
Cancel

Saved ( of items)

This item has been saved to read later from any device.
Access saved items through your user name at the top of the page.

View Saved Items

OK

Failed to save

You reached the limit of 20 saved items.
Please visit following link to manage you saved items.

View Saved Items

OK

Failed to save

You have already saved this item.

View Saved Items

OK