Academic journal article Asian Social Science

The Mixture of Fortune and Sweats: The Success of Korean LCD Industry in East Asia

Academic journal article Asian Social Science

The Mixture of Fortune and Sweats: The Success of Korean LCD Industry in East Asia

Article excerpt

Abstract

This paper investigates the success factors of the Korean LCD industry in East Asia. These factors are described in relation to two contexts: the favorable environment surrounding the Korean LCD industry and the strategies and competencies developed by Korean companies. Success, including that of a specific firm, is usually not achieved, solely, by the efforts of a single player; it requires generally favorable conditions in the outside environment. Market conditions and rivalry among competitors are discussed as environmental factors favorable to Korean companies. Regarding the controllable strategies that Korean firms took to become top of the world's LCD industry, three (technology development, investment, and manufacturing) are explained in detail. Various competencies that enabled Korean firms to develop these strategies are also mentioned. Finally, the discussion in the paper implies that business success can depend on intuition or risk-taking as well as reasoned decision making.

Keywords: LCD panel, Korean LCD industry, success factor, display, East Asia

1. Introduction

Korea's flat-panel display (FPD) industry has been very successful, especially in the thin-film transistor (TFT)-liquid crystal display (LCD) area. Korean firms, together with those from Taiwan, now account for more than 80% of the LCD panel market. Although Korean firms still import many materials and components from Japanese firms, the Korean companies Samsung and LG dominate the LCD panel market. These two big firms represent more than 50% of the world market. Furthermore, the market is expected to expand in the future, which seems likely given the LCD TV situation. Indeed, in this sector, the Korean firms' positions, at the top, seem secure for the time being.

Until the late 1980s, there was no LCD industry in Korea. All the LCD panels it needed to produce the monitors of laptop computers were imported from Japan. However, in the 1990s, Korean companies succeeded in developing their own LCD panel technologies and expanded their market share in the panel sector, although they still relied primarily on Japanese firms for materials and components as well as manufacturing equipment to produce the panels. Thus, it may seem unbelievable that, since then, Korean firms have caught up and have now surpassed the Japanese firms, who were the pioneers and leaders and in the industry. How did they manage to become the new leaders in this sector? This is exactly the sort of question researchers are curious about.

The paper was written in response to that question. Previous literature reports do not seem to have answered the question adequately. Indeed, there are few articles on Korean firms' success in the LCD industry and, those that were undertaken, were relatively basic in relation to the whole picture and were full of ad hoc explanations. However, in this paper, we explain the success factors of the Korean firms using framework that addresses two key aspects: favorable environmental factors and controllable strategies and competencies. We hope this explanation has general implications for firms in developing countries, and for other firms who want to invest their money in new, cyclical, and dynamic markets.

2. The Entry of Korean Companies in the LCD Industry

The barriers to enter in the LCD industry are extremely high for any company that wants to become involved in fabricating flat panels. If we consider the investment needed to be of the order of US $2 billion, this is not an industry for amateurs. So, what made the Korean firms interested in this kind of challenging market? Even though Korean firms began to be interested in LCDs from the late 1980s, the Koreans entered their stride in the early 1990s (LG Story, 2008). Samsung established the AM-LCD division in 1991 and launched a team in R&D in April 1991. LG built a pilot line in their research institute and the LCD division was formed within LG Electronics in 1991. …

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