0. ICT Investment Environment And Strategies in Korea
September 13, 2007

1. Overview 1. Korea's status in the global ICT market
2. Foreign investment in Korean ICT industry
3. Korea’s ICT investment environment
4. Purchasing strategies of key players
5. ICT investment strategies of foreign investors

2. 1. Korea's status in the global ICT market

3. 1. Korea's status in the global ICT market
ICT producer and exporter
Korea accounted for 7.8% of global ICT production in 2006
-World's 4th largest producer following China, the United States and Japan
The export volume of Korea's ICT industry reached USD 100 billion in 2005
-Korea became the forth nation to achieve accumulated export volume of USD 100 billion in ICT following China, the United States and Japan
< World ICT market share >
< Korea's ICT export >
(in millions of USD)
114,705
China
20.0%
Others
35.3%
102,704
96,651
74,661
61,171
United States
19.4%
Germany
4.5%
Korea
7.8%
Japan 13.0%

4. 1. Korea's status in the global ICT market
World best competitiveness
Korea has secured a large market share in such cutting-edge sectors as semiconductor, display and mobile handset
- Korean companies such as Samsung, LG, and Hynix are rapidly growing
- Nine Korean IT companies are among the 1,000 largest companies in the
world(United States 43, Japan 36, France 2, Canada2, China2, Germany 1)
< Export volume and global market share >
Semiconductor
($100 million)
Global M/S in 2006
374
Mobile handset
Display
(PDP)
40.7%
(56.0%)
World 1st
(World 1st)
300
Display
191
Mobile handset
(CDMA)
18.7%
(42.0%)
World 3rd
(World 1st)
168
123 47
Semiconductor
(Memory)
10.2%
(49.5%)
World 3rd
(World 1st)
2005
2006
2005
2006
2005
2006

5. 2. Foreign investment in Korea's ICT industry

6. 2. Foreign investment in Korean ICT industry
Foreign Investment to Korea
In 2006, the Korean ICT industry recorded 239 cases of foreign investment totaling USD 1.8 million
- Investment into semiconductor and LCD is growing
- Japan is the largest foreign investor, occupying 68.0% out of the total,
followed by the European Union with 10.1% and the United States with 9.3%
< Foreign investment → Korea>
< Foreign investment composition>
(case)
(in millions of USD)
300
3,000
2,949
252
239
Others
12.6%
240
274
2,400 EU
10.1%
Japan 68.0%
194
188
1,041
180
1,800
1,799
120
1,200 US
9.3% 60
517
600
299
(as of 2006)
2002
2003
2004
2005
2006

7. 3. Korea’s ICT investment environment

8. 3. Korea’s ICT Investment Environment
Both the government and companies are progressively establishing
cutting-edge industry clusters
- Medical equipment, fiber-optic businesses, LCD,
raw material & components
- The government has secured and supports residental areas
dedicated to foreign investors and businessmen
Cluster
(Materials & components)
Banwol/Siwha Industrial Complex
(Medical instruments)
Wonju Industrial Complex
(LPL)
Paju LCD Industrial Complex
(Samsung)
Semiconductor/Digital Valley
(Samsung)
Tangjeong Crystal Valley
(Digital electronics)
Gumi Industrial Complex
(Fiber-optics)
Gwangju High Tech Industrial Complex
Private
Government

9. 3. Korea’s ICT investment environment
There is a rapid increase in the number of ICT employees
and graduates
- Government is actively supporting the training and
nurturing of these skilled workers
* Industry/education partnerships, human resources
development, field training, and recurrent education
Human
resources
< ICT worker education level>
<Korea worker composition>
66,564
77,689
68,662
IT industry 1,446
57,018
IT 10.8%
9,546
9,027
(in thousands)
Overall 13,386
(person)
Total BA
MADoctorate
IT workers account for 10.8% as of 2003
- Korea 11.0%, Japan 6.8%, United States 6.3%
As of 2006
- IT graduates increased by 16.7% compared
to 2005
- They make up 19.1% of all college graduates

10. 3. Korea’s ICT investment environment
Korea-US FTA will change the IT industry trade environment
- Korean companies will secure price competitiveness in the
US market and raw materials at reasonable prices
* Exports of appliances, communications devices and
wafers to the United States are expected to grow
Korea-US
FTA
< Korea-US FTA >
Korea
United States
96.1%
Immediate
tariff elimination
95.9%
Medical equipments
Concession item
Color TV, white goods
Import
Items
17,652 (95.9%)
732
10,676 (96.1%)
959
Immediate elimination
391 (2.1%)
20 (0.1%)
342 (1.9%) 8 10 27
United
States
84 (0.7%)
41 (0.4%)
308 (2.8%) 5 58
Korea
Within 10 years
Within 5 years
Within 3 years
Category

11. 4. Purchasing strategies of key players

12. 4. Purchasing strategies of key players
1. Korean IT production trend
Finished products decreasing, compartment production increasing
- Semiconductor, display, wireless communications device parts
- Surge in compartment export and increase in compartment
segment share
< Product share>
< Electronic compartment >
55.4
37.4
53.1
31.2
60.5
51.1
58.8
20.7
18.9
15.5
48.9
46.9
10.7
44.6
17.8
41.2
6.1
39.5
12.6
(%)
12.2
(%)
2002
2003
2004
2005
2006
2002
2003
2004
2005
2006
finished product
compartment
export
import

13. 4. Purchasing strategies of key players
2. Compartment purchasing plan
In 2007, the compartment purchasing of major companies will increase by 5.1% to reach USD 40 billion
- STB (66.4%), HDD (36.9%), printer (23.1%) purchasing will rise
- DVDP (-68.6%), TV/monitor (-22.0%), ODD/VCR (-15.5%) purchasing will drop
(in millions of USD)
5.1
39,983
38,055
Total
3.2
8,306
8,050
Display
12.8
22,436
19,882
ICT
3.5
4,973
4,803
Home appliance
-19.7
4,268
5,320
Videosound device
Increase/decrease
2007
2006
　Category
5.1%
(in hundreds of millions of USD)
400
381
(E)
* including monitor (combined data of the six major companies in Korea)

14. 4. Purchasing strategies of key players
So far in 2007, purchasing from domestic sellers accounts for 65%,
a 10.5% rise from 2006
- Compartment buying from Europe increased from 7% in 2006 to 9% in 2007
< Purchasing from domestic sellers>
< Purchasing from other regions >
(in millions of USD)
39,983
38,055
35.0%
38.2%
-3.7%
45%
46%
China
Foreign
sellers
23%
Southeast Asia
21%
65.0%
10.5%
14%
Korean
sellers
61.8%
United States
16%
11%
Japan 8%
2006
2007 (E) 7% 9%
Europe
2006
2007 (E)

15. 4. Purchasing strategies of key players
3. Compartment purchasing strategies of Korean companies
Strategic compartment purchasing,
increases in purchasing from domestic sellers
Corporate needs
Government policies
SPEED (L/T minimization)
Develop compartment companies
Technology sharing
Nurture IT experts
Consolidated partnerships
Provide support to foreign investors
※Share of domestic vendors
2005
(%) 88 89 80 79 82 69 72 81 61 87 50 42 33 23
PMP
Camera
module
LCD-TV
Mobile handset
DMB
LCD raw material
compartment
OLED

16. 5. ICT investment strategies of
foreign investors

17. 5. ICT investment strategies of foreign investors
Advancement of US Companies
Korea-US FTA will increase US export in the segments where EU companies
have consolidated their position
- Elimination of tariffs of non-ITA items  EU products will be replaced by US products
- Broadcast & communications devices, measuring equipments, and medical equipments
Exports of non-ITA items from the United States will rise
- Core part & material, and broadcasting & communications devices
Communications devices
8% tariff  immediate elimination
Market share in Korea: United States (22%),
European Union (20%), Japan (19%)
Measuring device
Weak competitiveness in the Korean market, advancement into
the Korean market through technology partnership
Market share in Korea: United States (36%),
European Union (32%), Japan (18%)
Medical equipment

18. 5. ICT investment strategies of foreign investors
Technology partnership
Technology partnership is recommended in the fields where domestic
sellers occupy a small market share
-Establishing a joint venture makes advancement into the Korean
market easier and reduces invesment risk
-Foreign companies can secure compartment purchasing competitiveness
by consolidating the production base
Minimize regulatory process
Reduce logistics costs and L/T
Company
launch
Avoid
excessive investment
in facilities
Cost
Joint
Venture
Investment
risk
Secure customer base
Customer
Technology
competitiveness
Production
Enhance competitiveness
through partnership
Consolidate production base

19. 5. ICT investment strategies of foreign investors
Semiconductor and display test device production
SEIKEN (Japan) established a joint venture in Korea with 70% ownership
The joint venture enables domestic companies to buy compartments in the domestic market, freeing them from their dependence on imports
Technology transfer/equity investment
SEIKEN
JAPAN
SEIKEN
KOREA
enhanced price
competitiveness
rapid delivery
raw material
purchasing service
Investment profit/ Agency sales
Enhanced competitiveness
Clients in Korea
Raw material
producer in Japan
Compartment purchasing from
domestic market
Secure market share
Rapid delivery
Logistics costs reduction
Improved customer satisfaction
Advancement into Korean market
Secure production base in Korea
Secure stable transition networks
Agency profit (raw material
purchasing service)

20. Thank you!