How South Korea came to Master Displays

In 1979 Yoonchae Cheong was an aspiring young engineering student at the Seoul National University, in the Republic of Korea. Yoonchae majored in electronics engineering, not exactly knowing what it is. Semiconductor was just a new word heard in a lecture, and he couldn’t imagine a cell phone. His family, living slightly above the poverty line, didn’t even have a phone line at home. He had no idea of what kind of jobs were ahead, as there were just two companies (LG and Samsung) making electronic products like radios and black-and-white televisions only. The economy had sunk into the worldwide recession and into some domestic instability, and he was somehow at a loss of direction for his life.

The country’s president, former General Park Chung-Hee, had been leading the nation with a tight authoritarian grip since 1961, and by 1979 the Korean people had had enough. Student activists and other protesters were demonstrating and organizing for democracy in their country, and the Seoul National University was not immune to these events. Young Yoonchae was not part of the activism, but he became aware of what democracy should look like by participating in big protests several times. The year 1979 was when his eyes opened to both democratic principles and electronics engineering. He felt more interest in telecommunications than in semiconductors, as it was more like “communication between people” for the democratic society.

Park Chung-Hee was assassinated on October 26, 1979 by the country’s own intelligence service, but it took another eight years, until 1987, for the Republic of Korea to become a full democracy. By that time Yoonchae had graduated with a Master of Science degree in Electrical, Electronics, and Communications Engineering and was about to move to Texas to work on a Ph.D. in data compression. This was after 4 years of work at ETRI, the Electronics and Telecommunication Research Industry, the Korean government-funded research institution in Daejeon, where he was part of the technical staff and TDX, the digital telecom-switch development team. Thus, his first career was in telecommunications research and development. The government-funded 4-year project was very successful, and the technology was transferred to the participating companies (which included Samsung and LG). In 1987, having a phone at home was no longer a sign of wealth. 

As the introduction suggests, The Republic of Korea, more commonly referred to as South Korea, is a country that has gone from being an unstable agricultural economy to a highly industrialized, technologically advanced western economy in a remarkably short time. In the 1960s, its GDP per capita was comparable with levels in the poorer countries of Africa. By 2004, South Korea had joined the trillion-dollar club of world economies. How did they do it?

When South Korea rose to #1 in the Bloomberg Innovation Index in 2016, the United Nations Industrial Development Organization ran an interview with Professor Heui Jae Pahk, President of the Office of Strategic R&D Planning in South Korea’s Ministry of Trade, Industry and Energy. Pahk is a former professor of mechanical engineering at Seoul National University, our friend Yoonchae Cheong’s alma mater. In 1998 he founded his own company, an R&D-intensive firm producing test equipment for LCDs, OLEDs, photovoltaics, and semiconductors. As the case with South Korea will demonstrate, research and development is a fundamental driver of economic growth and industrial development. In particular, according to Pahk, R&D is a key factor in enhancing the technological competitiveness of a developing country. It helps the country avoid the middle-income trap, from being stuck in the lowest value-added parts of global value chains. The middle-income trap is an unfortunate situation where the country’s wages have risen so they no longer compete as a low-cost country, yet they don’t have the means to create their own high-value industries. South Korea escaped this trap beautifully. 

In addition to economic growth, the country has had remarkable success in leveraging those achievements to significantly reduce poverty. It was only in 2019 that Korea applied to be released from its World Trade Organization (WTO) status as a developing country, and it was in 2021 that the United Nations Conference on Trade and Development (UNCTAD) recognized South Korea as a developed nation. 

One of the key drivers for South Korea was the decision to invest in a knowledge-driven economy. Due to the fact that the country holds very few natural resources and must import most raw materials and energy, the South Korean people understood the benefits of and bought into this strategy, eventually to everyone’s benefit.

A 2017 study “The role of the state as an inter-scalar mediator in globalizing liquid crystal

display industry development in South”, published by the Korea University in Seoul, looks specifically at how the display industry was instrumental in pulling South Korea up to the list of developed nations and top of the global innovation index. This paper argues that “the role of the national state as an inter-scalar mediator was crucial in coordinating localized growth factors

with globalizing external factors to create and develop the LCD industry”. 

Let’s see what this complicated statement means in practice.

The Korean government used the legacy of the developmental state as a springboard out of poverty. They could have, based on economic success, applied to being categorized as a developed country much earlier than 2019. They didn’t do it because being classed as a developing country brought certain benefits: International economic development organizations such as USAID and the World Bank funded and supported Korea’s economic growth. These international funds and programs, the “globalizing external factors” had essential impact as they were implemented top-down by the South Korean government.

Top-down implementation of any program in a democracy, even a young one, requires diplomacy. By being the coordinator and mediator between people with contrasting opinions, the central government brought everyone around the same table so agreements could be made, and implementation could go forward. 

From the 1950s onwards, the Korean government had used five-year plans as a mechanism to catch up with western economies. This is a common tool in socialist countries, still successfully used in the People’s Republic of China. A good example of the power of these plans is the role of banks. Under their five-year plans, South Korea nationalized banks, and this way was able to channel controlled capital to large, family-owned companies, “chaebols”, such as Samsung, LG or Hyundai. Private companies were highly incentivized to implement plans that the central government considered important, including R&D. After the banks were again privatized and five-year planning was abandoned in 1992, the government continued to encourage private companies to learn, adapt, and implement technologies from leading nations including Japan and the USA. 

After graduation, we’ve said that Yoonchae Cheong went to work for the national lab ETRI, the Electronics and Telecommunications Research Institute. As most of the country did not even have landline telephones, ETRI had been tasked to develop a digital switching system to enable building phone lines. The product they were building, TDX, time division exchange, was a success and it helped the country build critical telephone infrastructure. Two other successful publicly-funded projects at that time were the CDMA cellular network standard, and semiconductor hardware. Core scientific development was done in the government lab, but its commercialization was handed over to private chaebols; the TDX went to Samsung and LG, CDMA also went to those two companies plus newly-established Hyundai Electronics, and semiconductors went LG and Samsung as well. All of these technologies contributed greatly to the digitalization of South Korea which was exactly what the leaders of the country had envisioned. 

Between 1988 and 2019, these policies and practices resulted in real gross domestic product (GDP) growth averaging 5.45% annually. This robust performance was fueled by annual export growth averaging 9.27% in the same period. These are good numbers by any industrial standard. 

By 2003, the idea of a knowledge-based economy had proven itself, but there was more to be done. Until then, the technology industry had been growing on its own, building on the national digitalized infrastructure and the earlier public investments. The administration wanted more coordination, so they strategized resources around ten selected industries or clusters, one of which was digital TV and displays. These industry clusters were recognized as Korea’s Next Generation Growth Engines, a win-win strategy involving large companies (mainly Samsung and LG) and small- and medium-sized enterprises or SMEs. The shift from a catch-up economy to an economy that weaves the creativity and imagination of its people with science, technology, and ICT meant promoting start-ups and strengthening SMEs. 

Focusing on the ten industry clusters was not the only initiative. The central government worked with regional leaders to create regional growth engines, awarded tax benefits for angel investors, and even directly funded start-ups. The role of the regions has been the critical third leg in this success story that the Republic of Korea is today. If the central government led and funded core research which digitalized the country and created domestic intellectual property, and the large private companies productized and commercialized those chosen technologies, then it was the regions that made it attractive to build factories, employ workers and get those flat TVs, cell phones, and computers out the door and into international markets. 

Speaking of an international reach, although this is a remarkable story of one Asian country there are always good friends in these stories that help the protagonist succeed. In our case, it was co-opetition—the co-operation and competition between LG and Samsung with their rivals, companies like Sony, Nokia, or Philips. Building a whole new industry takes more than a handful of OEMs. You need a host of reliable partners including suppliers, subcontractors, distributors, marketers, and all kinds of professional groups that will lift the tide and enable this new business to succeed with continuity. As other OEMs were picking up on the same technology, they too invested in the cluster areas. Even better, these international competitors were also supported by their own governments making the cake even bigger for everyone—and serving more people in the process. 

For the Koreans to select displays as one of the ten essential industry clusters was not accident. An essential driver in the market was the trend to replace tube-based, thick, fat televisions with flat TVs that would look sleeker and take up less space in homes. People had money and they wanted their flat TVs. Liquid Crystal Display (LCD) was not a Korean invention. The research first started in the US in the 1960s, but Americans didn’t have enough interest to make the heavy investments that it would take to get this technique out of the laboratories and onto store shelves. 

LCD was the first technology that enabled thin and light displays. It was successful in both creating the market for these types of devices and making lots of money for industry players at the same time. But soon came an even better technology that enabled even better TVs: OLED, organic light-emitting diodes, is based on an organic substance that acts like a diode. The main difference between LED and OLED is that the latter doesn’t need separate background light; LCD requires a fluorescent tube, or nowadays an LED light.

Takatoshi Tsujimura, a Japanese-born scientist who has been credited with commercializing OLED technology, remembers the early days like this: 

“The basic structure of organic light-emitting diodes (OLEDs) was reported by Tang and Van Slyke at Eastman Kodak in 1987. Before any in-depth discussion of OLED display structure, let us consider the initial origins of OLED technology, which are based on early observations of electroluminescence (EL). In the early 1950s, a group of investigators at Nancy University in France applied high-voltage alternating-polarity fields in air to thin films of cellulose or cellophane containing deposited or dissolved acridine orange and quinacrine, and observed light emission. One mechanism identified in these reaction processes involved excitation of electrons. Then in 1960, a team of investigators at New York University (NYU) made ohmic (a nonrectifying charge injection, which shows linear current– voltage relationship) dark-injecting electrode contacts to organic crystals and described the necessary work functions (energy requirements) for hole and electron-injecting electrode contacts. These contacts are the source of charge injection in all present-day OLED devices.”

The involvement of universities in the background research that led to breakthrough inventions in displays largely happened outside of Korea; South Korean companies, with the help of their government, have been phenomenally successful in implementing these technologies in consumer electronics products. Who doesn’t have a Samsung or LG product in their home?

After the boom days of explosive success of displays, semiconductors, and telecom products, the public officials took a step back and allowed the market to play its course. It hasn’t been until recent years that the South Korean government started to consciously increase the nation's R&D spending. As South Korea is no longer a catch-up economy only concentrating in rapid adoption of technologies from other countries, it has recognized the need to stay at the top by relying on homegrown intellectual property. South Korea's R&D expenditures reached $75.4 billion in 2020, accounting for 4.81 percent of GDP. That made South Korea the second biggest R&D investor in the Organization for Economic Cooperation and Development (OECD) countries trailing only Israel, whose R&D investments came to 5.44 percent. 

According to the OECD, South Korean’s biggest strengths are the willingness to adopt new technologies and the high number of educated young people in the fields of engineering and science. More young people study these subjects in South Korea than in any other OECD country. Most universities provide a comprehensive subject base covering science, social sciences, the humanities as well as engineering and business. Although having stellar education outcomes linked to a phenomenal economic success, it might surprise you that universities in South Korea are largely privately funded. The Korean government invests heavily in education, but most of this funding has gone to providing basic education for everyone, creating the base for knowledge economy. In recent history, this strategy has been lifting its people out of poverty. 

Universities have not been, and likely will not become, major players in the national innovation field for the foreseeable future, as a great deal of current industrial R&D is going into developing new products and markets. The role of universities is to do basic research, publish scientific articles and studies, and to train future researchers. Today, their national labs share these goals. Innovation is left to private industry. 

By looking at the South Korean display industry, its history and success, we are revealing a government-encouraged innovation model that seems to be working for everyone. The state has played a key role in building the enabling digital infrastructure, educating its people, creating critical intellectual property, incentivizing private companies to productize, and regional governments to manufacture. The post-1987 government also realized when they were needed and when they would be in the way and knew when to graciously step back. What’s not to like?

What became of our young student friend Yoonchae Cheong? After working at Hyundai Electronics on the CDMA product, he built an international career in telecommunications, working at Nortel Networks and Samsung for a number of years. After building products in private industry, Yoonchae transitioned to the National Research Foundation (NRF) of Korea. His responsibility was to execute the R&D budget of government by making Request for Proposals (RFPs) and by selecting grantees. The technologies he covered include quantum computing, supercomputers, and convergence technologies among all tech sectors. That experience opened up a new road to Washington D.C. to facilitate the international cooperation between USA and Korea in quantum computing technology. 

Would it surprise you if I said that one of the newest crazes in display technologies is something called quantum dots? People like Yoonchae will ensure Korea remains successful for decades to come. 

KEY TAKEAWAYS:

1. Top-down governance works when a country needs a major overhaul. 
2. Government can help by creating infrastructure, education, and investing in domestic intellectual property. 
3. After incentivizing private companies, the market can run on its own.