[Viewpoint] No shame in buying technology

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[Viewpoint] No shame in buying technology

The global industrial battleground is getting fiercer everyday, and few can survive with traditional technology alone. Corporations and even governments devote great effort to developing and rolling out new technologies to respond to intensified global competition.

But the enigma of the global market is that new technology seldom assures a win. In fact the odds of success are very low. The diversified American technology company 3M says the chances of a company successfully making inroads into a market with a new product or technology amount to 1 or 2 percent.

There are three ways to acquire a new technology. A company can develop one completely on its own, borrow from some other company and pay patent or licensing fees or purchase the technology from the patent holder outright. The choice is pivotal for any corporate manager.

Developing a technology can take months to years, sometimes even longer. One cannot initiate development without conviction and long-term investment. Even after a technology is developed, it usually takes an equally long time for the new product to hit the market and eventually make it to households. The competitiveness of consumer products is usually tested in a couple of months on the market, but industrial products aren’t that simple. Reactors whose life spans reach up to five decades can be abandoned despite heavy investment.

Borrowing technology is no less costly. Use of patent rights sometimes guarantees a share of the existing market, making initial entry much easier. Because the original patent holder supplies next-generation and upgraded technologies, its manufacturer can safely claim a portion of the market.

But the catch is that the user is perennially beholden to the patent provider, obliged to meet its royalty demands for fear of losing its share of the market. In the end, a company may realize it could have developed the technology itself and saved the money it now has to pay to the patent holder every year. It may inevitably face criticism that it paid for the technology too hastily.

Telecommunications technology is the best example of an exorbitant imported innovation. Korea imported and commercialized the wireless technology dubbed code division multiple access, or CDMA, from American telecom company Qualcomm Inc. So far, the country has paid nearly $5 billion for use of the technology. Many now shake their heads at the mention of imported technology because of the lesson learned from CDMA and emphasize the significance of original technology.

Lastly, there is the method of buying the technology. One would have to make an attractive offer, as few would want to let go of a cash cow. But the purchase can be worthwhile, as the original technology brings trademarks and market share. It can prove more effective and faster in penetrating the market than nurturing the technology from the initial stages. Most of all, it means taking control of the human resources involved in the making of the technology. Some say we could have bought the CDMA technology for less than $1 billion. But at the time, few raised the option amid the bleak prospects for the novel wireless technology.

A few years back, Toshiba Corp. of Japan bought Westinghouse Electric Co. from British Nuclear Fuels for $5.4 billion. As the acquisition included other businesses, Westinghouse’s core nuclear reactor technology was actually sold for about $2 billion. But now nuclear technology has emerged as the only option amid climate challenges and skyrocketing fuel costs, and experts expect global nuclear demand may one day reach 300 trillion won ($258 billion).

We need to abandon the idea that we need to make and develop everything. The government should not stop at supporting research and development. We should turn more attention to the world market in search of lucrative businesses to purchase. We need to be more aggressive. If there is an original technology out there that can benefit our industry, the government should solicit a deal.

*The writer is the chairman of the board of directors at the Chung-Ang University Foundation.
Translation by the JoongAng Daily staff.

by Park Yong-sung
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