China’s IT clout climbing; some fear core leaks

China is rising as a country with strong information technology skills, and sentiment to “watch out” for China is spreading in the Korean industry. Industry insiders say the gap is closing between Korea and China and that the increase in acquisitions of small and medium-sized Korean IT firms by Chinese companies may lead to leaks of core technology. According to the Information Ministry, the gap between Korea and China’s IT skills was 2.6 years in 2003, but 1.7 years this year. In specific areas where Korea has strong skills, such as next-generation mobile communication and broadband-integrated networks, the technology gap was 1.5 years and 1.1 years, respectively. As the technology levels of Korea and China converge, the exports of Korean IT products are also dropping at a rapid pace. Between January and July of this year, the exports of IT products such as semiconductors, computers and wireless communication devices to China rose by 7.4 percent compared to the same period last year. Although the scale of exports did increase, the growth rate was significantly down compared to last year’s increase of 28.7 percent. Since exports of IT products to China rose by 121 percent in 2002, the growth rate has been falling every year. Industry personnel are also worried about attempts to transfer technology through acquisitions of Korean firms, according to Samsung Economic Research Institute. Recent examples of acqusitions are the takeover of Hynix Semiconductor’s TFT-LCD sector by China’s BOE Technology Group, as well as the Chinese game firm Shanda Entertainment’s purchase of Actoz Soft. According to a report provided by the Office for Government Policy Coordination to Grand National Party lawmaker Kim Yang-soo yesterday, five out of seven cases of technology smuggling discovered by authorities were being attempted into China. The report said damage from the technology leaks could have amounted to 20 trillion won ($21 billion). Specialists note that prevention of leaks should take place on corporate and government levels. “In the case of core industries directly related to national security, Korea should create laws that prevent related companies from being sold to foreign firms, such as the Exxon-Florio bill adopted in the United States,” said Jang Sung-won, a researcher at Samsung Economic Research Institute. by Lee Hyun-sang, Kang Joo-an