Small IT firms cry the blues

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Small IT firms cry the blues

The information technology industry is enjoying a bull run, as industrial production grew 25 percent in the first quarter, more than eight times that of other industries, according to the Ministry of Finance and Economy. But while major conglomerates producing such items as semiconductors, cellular phones and display panels are doing a booming business, the majority of small and medium-sized information technology companies are struggling, the Ministry of Information and Communication said. At a meeting among officials of the information ministry and executives of small and medium technology companies last week, Kim Dong-yun, vice chairman of Telson Electronics, said, “We have independent technological capability and established market competitiveness, yet banks have cut off our financing.” Other executives, including Yang Ki-gon, president of Bellwave; Kim Ho-young, president of Giga Telecom, and Lee Dong-hoon, vice president of Turbotek, had similar complaints. A company whose annual sales amount to 300 billion won ($260 million) said since last year it has repaid 95 billion won of loans from a bank. A company official said the repayment essentially was forced since the bank did not roll over the loan. “We couldn’t even think of new investment or new recruiting,” the official added. “Because major conglomerates are taking the lowest bid prices for technology products that small and medium companies put a lot of effort into, most small and medium companies have trouble even recovering their costs,” said Koh Si-yurn, chairman of the Promising Information and Communication Companies Association. Mr. Koh said most of the small companies that provide wireless content such as games and music to major telecommunications companies frequently struggle as a result of the conglomerates’ bidding system that pushes down the prices of products or services provided by small companies. “Recently our company was [virtually] forced to give up on participating in new services for a major telecommunications company,” said a vice president of a company that provides streaming service to cellular phones. “As our company’s sales increased to several billion won, the major conglomerate simply chose another competing smaller company.” In an effort to improve the situation, the information ministry said it will form a task force consisting of representatives from the government and small and medium information technology companies. “The task force will stabilize the anxiety of investing in small and medium companies by providing performance data on those firms that are doing well, and study a support plan that would help resolve the problems of the small and medium companies,” said Hyung Tae-gun at the ministry. by Chung Sun-gu, Yum Tae-jung
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