Kortek leads world in slot machine displays

Kortek, which makes displays for slot machines, has flourished thanks in part to a gamble by chief executive Lee Han-gu, above, to dabble in arcade game machines in the 1980s. By Kim Hyung-soo

23rd in a series about leading midsize companies

The name Kortek may not immediately ring a bell, but some may remember that six years ago, the family of actor Son Ji-chang scored a 10.5-billion-won ($10.5 billion) jackpot on a slot machine in Las Vegas.
It was Kortek that made the monitor on that very slot machine.
The Seoul-based company manufactured the monitors of most arcade game machines from the 1980s, including those for “Galaga” and “Space Invaders.”
Lee Han-gu, Kortek’s chief executive, has worked with monitors and displays for more than two decades. After his personal business collapsed in the 1970s, he left for Tokyo, where he developed an interest in arcade games, just as Korea began importing game machines from Japan.
Mr. Lee’s gamble paid off. Coupled with the high yen in the 1980s, his arcade machine business flourished. And when the arcade industry slowed, Mr. Lee moved fast, turning his business eye toward displays for casino slot machines.
With the soaring popularity of casinos around the world, Kortek is now the world’s top manufacturer of slot machine displays. But the path to the pinnacle was a tough climb.
Mr. Lee recalls when he had visitors from U.S.-based International Game Technology, better known as IGT, the leading supplier of gaming machines and monitoring systems. The IGT executives asked Mr. Lee if Kortek could supply monitors that would maintain the same brightness and color tone around the clock, because customers would suspect fixing if monitor presentation changed.
Mr. Lee, not aware of that possibility, answered yes anyway, and got busy working on the technology. After four years, Kortek was able to supply 12,000 displays to IGT in 10 months.
But some of the displays were defective, and Kortek made a bold decision to recall every display it shipped. It also promised IGT that it would exchange the displays for free, a move that could have bankrupted Kortek.
For two months, Kortek technicians flew to the United States and repaired defective displays. Then IGT called, saying it would entrust Kortek with all new supplies for the next 12 months, and compensate Kortek for its recall loss.
That was the beginning of a beautiful relationship. Kortek is now the primary business partner of IGT; some 70 percent of all slot machines in North America are IGT products, and monitors on 60 percent of those are manufactured by Kortek.
Because of complicated regulations, U.S. slot machine makers rarely change their display makers unless significant problems emerge. All parts that go into the production of a slot machine must be authorized by the federal government, and changes to parts require authorization.
If the supplier for the slot machine maker goes under, the manufacturer must find a new partner and receive authorization all over again. To avoid that complication, slot machine makers often try to maintain reasonable price deals with suppliers to ensure longevity of the partnership.
Kortek is kept busy because casino monitors are turned on 24 hours a day, and their life span is about two years.
Today, as displays move from cathode ray tubes to more value-added liquid crystal displays, Kortek is expected to reap some benefits. As the changes pick up in the second half of the year, “we should be able to record our highest revenues this year,” Mr. Lee said.
Kortek isn’t resting on its laurels, however.
In the future, it hopes to become a major player in high-tech monitors for public information displays, which work like a personal computer with touch-screen functions.
That goal is not feasible without research and development, and Kortek spends 4 billion won annually on R&D, about 5 percent of 2005 revenue. Of its 130 employees, 26 belong to Kortek’s research department, the second-largest unit in the company after manufacturing.
Another impetus behind Kortek’s success is the trust it has with its partners. Some of Kortek’s competitors were established with former Kortek employees, which tried to beat Kortek with low-price offers. But those partners stuck with Kortek, Mr. Lee said.
Trust also is built from within. Once a month, Mr. Lee sits down with employees for a meal and talk. He rarely skimps on incentives for those who achieve their goals.
It’s little wonder that the Labor Ministry selected Kortek as the company with the best labor-management relationship.

By Ko Ran JoongAng Ilbo [jeeho@joongang.co.kr]