Even if the above explanation is accurate, there is still doubt that such conditions are suffi cient to allow Korean suppliers to take advantage of the opportunities and grow. How did Korean suppliers enhance their technological capability to a level at which they satisfi ed the quality and performance required by Korean FPD fi rms?
In this regard, it is noteworthy that many Korean suppliers are affi liated or partnered with Samsung and LG. A partner company is a member of the small and medium-sized subcontractor council organized by a large
20 Th e author’s interview at a Korean FPD fi rm by e-mail on 11 June 2013.
21 Th e author’s interviews at the local subsidiaries of a Japanese equipment components fi rm and two Japanese FPD materials and equipment fi rms in Korea on 5 and 7 September 2012.
company. 22 Such councils were fi rst formed in the 1980s based on the model of Japanese business groups. Since the 2000s when Korean FPD fi rms acquired the capability to innovate, the existing groups of affi liates and subcontractors have enabled Korean suppliers to improve their tech- nological capabilities. For example, although it is common during joint development of FPD components and materials for suppliers to provide prototypes developed in their own laboratories to FPD fi rms and obtain information on defects and improvements from FPD fi rms, LG Display allowed LG Chem’s engineers to attend experiments conducted at its own laboratories and carried out joint development when LG Chem fi rst launched its FPD components business. 23 Partner companies are also able to obtain roadmaps for new technology development and investment usually not disclosed by FPD fi rms, and they are preferred as partners in joint development projects. Th is special treatment has enabled part- ner companies to learn about trends in next-generation technologies before others and succeed in developing products that respond to their customers’ needs.
Th e movement of engineers from Korean FPD fi rms to their suppli- ers is also thought to have contributed to the improvement in Korean suppliers’ technological capability. As a result of restructuring and the introduction of performance-based compensation systems after the Asian economic crisis, many engineers have been forced to leave their jobs at Samsung and LG before retirement age. Korean suppliers, in particular, have accepted senior engineers who were previously directors or chief researchers at Samsung and LG specializing in technologies that suppliers
22 Korean FPD fi rms have established cooperative relationships with their subcontractors through councils called the ‘Hyup-Sung Club’ (for Samsung Electronics suppliers), the ‘Best Club’ (for LG FPD equipment suppliers), and the ‘Twins Club’ (for LG FPD component and material suppliers).
Of the Korean suppliers shown in Tables 4.1 and 4.2 , Cheil Industries, Samsung Corning, SEMES, and SFA were affi liated companies. AP System, DS, Duksan Hi-Metal, ICD, Joosung, KC Tech, Osung LST, SFC, STI, Toptec, and Wornik IPS were members of the ‘Hyup-Sung Club’. FPD- related committees were separated from the Club when the FPD business division of Samsung Electronics spun off as Samsung Display in April 2012. LG-affi liated companies included LG Chem, Avaco, and LG MMA. According to our interviews with a senior director of an FPD equip- ment fi rm (the author’s interview at a local subsidiary of a Japanese FPD equipment fi rm in Korea on 24 September 2012), the ‘Best Club’ and ‘Twins Club’ had 25 members and 30–40 members, respectively. No further details are known about their members.
23 Th e author’s interview at a local subsidiary of a Japanese FPD materials fi rm in Korea on 7 September 2012.
recognized as fi elds where they needed to improve their capabilities. 24 In the usual product development approach where FPD fi rms evaluate prototypes produced by a supplier and then modify it on their own, the prototypes often did not satisfy the FPD fi rm’s needs (Tanaka 2005 , p. 37). By having engineers previously employed at FPD fi rms who under- stand the customers’ needs participate in the development of components, materials, and equipment, the suppliers have been able to develop prod- ucts from the user’s viewpoint and speed up the development process. 25
In fact, some of the competitors and fi rms that have conducted busi- ness with Korean FPD component, material, and equipment suppliers recognize an improvement in their capabilities. For example, certain competitors evaluated the main products of LG Chem as having shifted away from middle-end to state-of-the art components and believe that its development capability was at par with leading Japanese competitors. 26 LG Chem has also developed original OLED material products, espe- cially in electron transport layer (ETL) and hole injection layer (HIL) materials. 27 Among the small and medium-sized Korean component and material suppliers, MCK’s polishing sheets for G7 LCD glass sub- strates not only were 30 % cheaper but also had double the life of for- eign products. Some Korean FPD equipment suppliers, whose products were originally copies of Japanese-made equipment and who previously had problems such as variation in the processing accuracy during mass production, have recently solved these problems and begun to manufac- ture equipment using processes that diff er from the Japanese methods. 28 A representative example is Viatron. Th ey succeeded in developing the world’s fi rst annealing equipment for SGS crystallization using a non- laser method that enhanced productivity about fi vefold as compared with the conventional laser method (KEIT 2014 , p. 96).
24 Th e author’s interview at a Korean FPD fi rm in Korea on 2 August 2013.
25 Th e author’s interviews at a local subsidiary of a Japanese FPD equipment fi rm and a Korean FPD fi rm in Korea on 5 September 2012 and 2 August 2013.
26 Th e author’s interviews at local subsidiaries of two Japanese FPD components and materials fi rms in Korea on 4 and 7 September 2012.
27 Th e author’s interview at a local subsidiary of a Japanese OLED materials fi rm in Korea on 7 November 2013.
28 Th e author’s interview at a local subsidiary of a Japanese equipment components fi rm in Korea on 5 September 2012.
Th us, Korean components, materials, and equipment suppliers have been enjoying advantages in price and location, including shorter delivery times and being able to respond quickly to trouble. Moreover, with the support policy of the government, they have made eff orts to improve quality and performance by cooperating with customer fi rms and have consequently grown rapidly in the domestic market.