With Chinese enterprises pursuing at a frightful speed by means of an industrial spy or imitating industrially advanced nations, the technology gap between chief industrial corporations of Korea and China was found to be narrowing at a fast rate. According to the Korea Institute for Industrial Economics & Trade (KIET) on Sunday, a research conducted November last year, on 608 major companies in 10 core industries such as automobile, electronics, shipbuilding and semiconductors, evaluated the overall technology gap between Korean and Chinese manufacturing industries at 3.8 years. Technology gap between Korea and China had been evaluated at 4.7 years in 2002, 4 years in 2004 and has continued to narrow down.[1]
Now, I really have no idea how you would effectively measure this; it seems so onerous and dubious, yet at the same time it does seem to me that Cherry cars are about 4-5 years behind Hyundai cars and Haier is about the same length behind Samsung in electronics. But, I am not so sure how far you can go with this. For instance, there really are no major Korean lap top manufacturers out of Korea that we see competing on a global level on a daily bases. Moreover, when was the last time you saw a Korean telecom company try and bid for a US telecom company. Moreover, Chinese companies are on spending sprees to buy technology abroad - and they currently have much deeper pockets than their rivals in Korea. For that reason and the following additional reasons, we think this convergence will accelerate in the coming months:
1) Economies of Scale - Korea cannot possibly compete with China in numbers or foreign reserves to buy companies/technologies abroad
2) FDI - China is just crushing Europe here, let alone Korea
3) Technology transfer - astute China policy necessitates this in many investment deals
4) Reputation - now this needs some qualification. I am referring specifically to biotech and an incident in which one of Korea's most famed scientists, Hwang Woo-suk, falsely advertised successful fabrication of human embryonic stem cells by cloning. You will not see many Americans going to Korea for stem cell surgery - but they're flocking to China. The technology gap here in terms of revenues per unit of technology is most likely in China's favor and if not it will be within a year or two, not four.
[1] Korea-China Technology Gap Narrows to 3.8 Years 2 March (c) 2008 Maeil Business Newspaper
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