The Rise of South Korea's Semiconductor Industry

Key Insight

South Korea's emergence as a semiconductor superpower was spearheaded by Lee Byung-Chul, founder of Samsung, who envisioned building a 'big, strong, and eternal' business despite Korea's impoverished state. Having diversified from dried fish and vegetables into various industries like sugar, textiles, and banking, Lee observed the success of Japanese DRAM firms and the growing importance of semiconductors. He recognized South Korea's potential as an outsourced assembly and packaging hub with a skilled workforce, supported by the U.S. government's funding of the Korea Institute of Science and Technology in 1966 and the training of U.S.-educated professors.

In the early 1980s, Lee sensed a changing environment, with fierce U.S.-Japan DRAM competition creating an opening. After visiting Hewlett-Packard and IBM facilities in 1982, he committed Samsung to semiconductor manufacturing, supported by significant government backing. The South Korean government identified semiconductors as a national priority, pledging $400 million in investment, with state-directed banks providing millions more in cheap loans. In February 1983, Lee declared Samsung would make semiconductors, initially committing over $100 million, thus transforming Samsung from a diversified conglomerate into a key player in the high-tech industry.

Crucially, Silicon Valley firms embraced Korean upstarts like Samsung as strategic partners to counter Japan's dominance. Adopting a 'my enemy's enemy is my friend' logic, U.S. chipmakers viewed Korean producers as a cheaper source of supply, believing they would undercut Japanese rivals and prevent a Japanese monopoly. Intel, for example, entered a joint venture with Samsung. Furthermore, U.S.-Japan trade tensions, particularly the 1986 agreement for Japan to limit chip sales and avoid dumping, created a significant market opening for Korean companies. American firms, including Micron, also licensed valuable DRAM technology to Samsung, with Micron's founder Ward Parkinson acknowledging the cash infusion from Samsung was 'close' to crucial for Micron's survival, effectively accelerating South Korea's ascent in memory chipmaking.