The Alibaba reality

The Wall Street debut of Chinese e-commerce giant Alibaba has made a truly earth-shattering splash in the global markets. The hoopla raised by the media over its initial public offering on the New York Exchange last week was mind-boggling. Chinese technology companies are no longer aliens on Wall Street. There are already 28 listed on the New York exchange. But never has a foreign newcomer received such enthusiasm - and such hype. Alibaba opened at $92.70 and raced to nearly $100 on the first day. Alibaba shares jumped 38 percent during its debut trading on Sept. 19, the biggest first-day jump for an IPO of at least $10 billion, making the company one of the most valuable equities in the United States.

The company raised $21.8 billion on Thursday, the largest IPO ever on the exchange, and exercises of options by investment banks raised the amount to $25 billion - a global record. It is now the world’s fourth expensive technology company with a market value of around $231 billion, trailing Apple, Google and Microsoft. It is bigger than Facebook and Amazon. Samsung Electronics’ market capitalization is $170 billion.

What’s stunning is that the name Alibaba is not only foreign to South Koreans but to most Americans as well. The e-commerce company was founded in 1999 by former English teacher Jack Ma, who benchmarked Amazon and copied the business style of E-bay. It forced E-bay into packing up and leaving China after it dominated 80 percent of the online shopping market. It cleverly emulated the successful business platforms of front-runners, repackaged them it to meet the tastes of Chinese consumers, and revolutionized the way of doing shopping in China. The company has largely focused on gobbling up the exploding Chinese Internet market with no particular innovations that changed anything on the global landscape.

The Wall Street Journal interpreted the Alibaba phenomenon in a unique way. It said Alibaba was the best example of “Innovation in the Chinese Style.” It said its IPO debunked the myth that China can’t innovate and that its innovative strength lied in the creativity of adapting to and recreating what already exists. Innovation through commercialization is the key to the Chinese success story. An industrial latecomer does not seek an innovation that could create something new. Instead, it builds quickly on a proven model. Backed by a market of 1.3 billion consumers, China has rewritten the definition of innovation.

Apple, which has been fighting Samsung Electronics in courts over small design similarities, is totally mum about Xiaomi, which unabashedly calls its smartphones iPhone look-alikes. We can only envy the colossal scale of the Chinese market.

All this ballyhoo is demoralizing to Korea Inc. Korean companies have been investing heavily to come up with new innovation, believing that it is the only way to survive in the global market. They dutifully admired innovators Apple, Google and Microsoft. But Alibaba became the world’s fourth largest technology company because it copied well. Copycat Xiaomi is elbowing Apple out of the market and now Samsung Electronics in the Chinese smartphone market.

Maybe that’s why we feign coolness about the global drooling over Alibaba. The only news it got in Korea was that Softbank Chairman Masayoshi Son, who is the largest shareholder in the Chinese e-business juggernaut, became the richest man in Japan thanks to the successful IPO. Unlike investment banks in Wall Street, local analysts were skeptical of Alibaba’s sustainable growth and international competitiveness. Korea Inc., whose only resources were brains and hard work, can only view bitterly the seemingly easy ascension of Alibaba on the backs of its billions of Chinese consumers rather than its own endeavors.

Hate it or not, we have to admit that the global ICT market is now divided between the United States and China. Chinese companies are using their riches to buy up key technologies. Promising Korean startups have also become their targets. Even if Alibaba stumbles on its path to success, the growth of the Chinese consumer market won’t stop. New stars will be born every day. The market, with all its potential to grow, is by itself the only innovation that is needed.

We may have to humbly lay down our boast of being an “ICT powerhouse.” What must change is our view and attitude. Korean industry will be dwarfed by its Chinese counterpart. But we can’t let ourselves become parts suppliers to China. We have always been our best in difficult times. We must adapt to the new playing field. We must come up with our own winning strategy.

JoongAng Ilbo, Sept. 24, Page 34

*The author is an editorial writer of the JoongAng Ilbo.