Korea's IT Exports Continue Their Year-on-Year Surge

The volume of Korea's information technology exports continued to increase, year-on-year, in August.   As reported by the Joongang Daily, exports last month were 26.4 percent higher than August of last year at $13.4 billion.

The increase was mainly due to exports of semiconductors and display panels. Shipments of semiconductors increased 64.9 percent to a record $4.7 billion, mainly led by the improved memory chip industry. Exports of display panels also jumped 25.4 percent to $3.2 billion as product demand was high, especially in China, Hong Kong and the European Union.

Meanwhile, the export of cell phones decreased 18.4 percent in August to $1.8 billion, due to a drop in export unit costs, increased overseas production and low demand for ordinary cell phones.
Though smartphones are gaining popularity worldwide, local manufacturers started releasing devices relatively recently.

So, Korea remains an IT export powerhouse for the time being, but the decrease in mobile handset exports is clearly an important indicator of developments in the global marketplace and Korea's place in it.

North Korea's Software Industry

Although the digital divide between North and South Korea may be the largest in the world by many measures.  However, as with most generalizations, there are exceptions to the rule.  In the case of North Korea, one of these may be found, somewhat surprisingly, in the are of software and programming.  Bloomberg reports that programmers for North Korea's General Federation of Science and Technology developed a 2007 mobile phone bowling game based on the 1998 film "The Big Lebowski," starring Jeff Bridges, as well as "Men in Black: Alien Assault."

North Korea's growing software industry is championed by Kim Jong Il and contracting with North Korean companies is legal under United Nations sanctions unless they are linked to the arms trade.  Volker Eloesser, a founder of Pyongyang-based Nosotek, notes that the technological education of graduates from North Korean universities has become significantly better.  North Korea’s information technology push began in the 1980s as the government sought to bolster the faltering economy.

Today Nosotek advertises itself as "the first western IT venture in DPRK (North Korea).  Its web site expands upon this as follows:

• In DPRK, software engineers are selected from the mathematics elite and learn programming from the ground-up, such as assembler to C#, but also Linux kernel and Visual Basic macros. 


• Among them, Nosotek has attracted the cream of local talent as the only company in Pyongyang offering western working conditions and Internet access. 


• In addition to the accessible skill level Nosotek was set-up in DPRK because IP secrecy and minimum employee churn rate are structurally guaranteed.<
  Nosotek sells direct access to its 50+ programmers jointly managed by western and local managers. 


• Services can be invoiced through a Hong Kong or Chinese company. 


• Benefit from North Korea's opening, outsource to Nosotek.

From the government's point of view, the activities of such companies as Nosotek is no doubt appreciated since they generate foreign exchange.  However, as noted by Andrei Lankov, a North Korean expert based in Seoul, "These activities help to fund the regime, but at the same time they bring knowledge of the outside world to people who could affect change."  The dilemma facing North Korea, a subject of earlier posts (and also this one), seems to be growing and not diminishing.

Korea's Response to Google and Apple

To readers of this blog, please know that I'm still alive and well.  It is just that I've been a bit busy with other things at work and at home and have not been able to post much in the last several weeks.  However, I have been following the press and the trade publications that cover South Korea's IT sector and cannot help but comment on the overall response to the popularity, worldwide and in Korea, of products being sold by Google and Apple.

Today, for example, The Korea Times carried a report that LG was about to unveil the "1st Smart TV."  This would be a television set equipped with "Netcast 2.0" for web-connected televisions.  This move by LG was clearly a response to moves by Apple and Google, along with its Korean arch-rival Samsung.

The situation is somewhat similar with smart-phones and notepad sized devices.  Samsung and LG are scrambling to come out with their own devices that might compete with Apple's iPhone and Android-based digital devices.

What is the common denominator in all of the reports I'm reading? It is simply that South Korea is still heavily reliant on the manufacture of communications hardware, rather than content or software.  It is the latter that not only makes up the bulk of the global ICT market, but also represents the major hurdle for Korea to continue its remarkable advance as an "IT Powerhouse" or a knowledge economy.  The transition to greater emphasis on software and content in Korea has begun, but it will be a long-term challenge for the country to succeed.  This challenge will be the subject of future posts.