Latecomer Strategies:

Semiconductor Industry
in Japan and Korea

Arbiyanti Febthavia Azhar (z5047496)

Hanyu Wang (z5083119)
Juwita Widyastuty (z5050481)

Presentation Agenda

Early mover vs Latecomers

Positional Advantages of Latecomer Firms
Skills and Resources
Chaebols vs Keiretsu
Framework: Absorptive Capacity
Framework: Technology Trajectory
Comparisons of Latecomer Firms
Conclusion
Class Discussions

Early Movers versus Late Comers

A firm may have early mover advantages
or latecomer disadvantages.
Latecomers have room to overcome the
early mover advantages or latecomer
disadvantages. Furthermore, being late
affords certain advantages.

Early Mover Advantages

Switching
Costs
Consumer
loyalty
Transaction
costs
Formal
contracts

Preemption
Input factors
Production
capacity
Market-side
opportunities

Learning by
Doing
Technological
leadership
Learning curve
effect
Overcoming
market
complexities

Latecomer Advantages

Market
1. Changes in
consumer
tastes
2. Changes in
technologies
3. Free-rider
effects
Consumer
education
Information
spillover
Skipping trials and
errors

Competiti
on

The Firm

Incumbent
inertia

Enhanced level
of information

Lock-in of
assets/resources
Organizational
inertia

Resourcefulness
Shared experience
of assets

Positional Advantages of
Latecomer Firms

Environment
al

Skills
&
Resources

Skills and Resources

Japan
Sequential competency-building
and top management
leadership.
Securing take off in the new
industry
Mastering manufacturing skills
Building technological leadership

Technologically leapfrog
invest in new process
technologies
Domestic rivalry and
government support

Korea
Replicating the Japanese
strategy
Began with a particular
product segment and DRAM
Invested in the sate-of-theart manufacturing facilities
and process technologies

Entrepreneurial leadership
Domestic rivalry and
government support

Chaebols Vs Keiretsu
Chaebols

Keiretsu

Family Members
Less Family Members
Centralized
Family members in top Decentralized
More professional
management
managers
Relationship with
Relationship with
government is
government is equal
hierarchical
Bank as a center of
Financial support
Keiretsu
came from
government

Framework: Absorptive Capacity

HIGH

HIGH
Existing
knowledge
base
LOW

Intensity of
effort

LOW

Technological
capability high
and rising rapidly

Technological
capability high
but falling

Technological
capability low
but rising

Technological
capability low
and falling rapidly

Where was Korea?

Technological capability low
but rising

The Intensity of Effort

Export promotion
The hasty creation of
heavy and chemical
industries (HCIs)
Technology transfer
strategy
Crisis construction

Existing Knowledge
Base
Formal technology
transfer
Reverse brain drain
Corporate R&D
Universities and
government research
institutes

What about Japan?

Technological capability high and

rising rapidly.
o Strong R&D and education its capacity
to use imported technology efficiently.
o Increasing on imported technology and
domestic R&D.

Framework: Technology Trajectory

Advanced Countries:
Fluid: radical product innovation, new technologies,
changeable product and market
Transition: product design, mass production, competition
Specific: innovation, new entrants, incremental innovation,
lower cost
Developing countries:
Acquisition: acquire technologies from advanced countries,
production process
Assimilation: diffuse within the country, competition
Improvement: mature technologies

Japan
Acquisition 1950s: license of American
patents
Shift from thermionic valves
to transistors
Produced radios
Assimilatio
n

Korea
1965: initial investment by
Komy U.S. assembly plant
mid-1970s: foreign
investment (Toshiba)
assembly line

1964: Sharps new product

Toshibas success in DRAM
transistor electronic
have inspired Korean
calculator
companies
1968-1981: NEC increased
1980: established their
50% in corporate capital
presence on massive scale
1982: Toshiba launched
1985: Samsungs
DRAM building manufacturing
aggressive investment in
competence
manufacturing facilities and
related process techs

Improveme 1970s: NEC increased R&D

1992: 64M DRAM by
nt
expense 21%
Samsung
1970s: NEC developed N-MOS 1993: Samsung ranked top
1K and 4K
and Hyundai 9th of world
1985: Toshiba mass
DRAM production
production of C-MOS 1M
DRAM

The De
Transistor export (no. of devices)

Semiconductor sales

Source: A History of the World Semiconductor Industry &

http://www.wtec.org/loyola/kei/welcome.htm

Comparisons of Latecomer Firms

Similarities

Differences

Acquired techs from U.S.

Japan: license from U.S.

Korea: Alliance with U.S.

Find the most suitable products

and directions in the early stage
(Japan: transistors; Korea: DRAM
)

Korea: only focusing on DRAM

Investment in mass production

and related techs

Japan entered the industry

earlier than Korea; Korea got
experiences from Japan

Insightful Lessons from Japanese and Korean

Companies
o Odd timing Japanese companies adoption of new
process technologies and Korean companies
aggressive investment
o Time compression by mobilizing the direct
experiences of the suppliers who have worked with
the early movers
o Technology transfer human-embodied
technological transfer that is adopted from US firms
o Benchmarking imitate the best performers and
learning (Samsung imitated Toshibas strategies)
o Technological leapfrogging
o Resource leveraging through Keiretsu and Chaebols

Discussion Questions
1. Compared to Japan, Korea was also
known as the late entrant in
Semiconductor industry. However, in
2013 Korea became the second largest
semiconductor supplier in the world
after outpacing Japans market share
for the first time. What do you think is
the key factor of the successful of
Korea?
2. Why did Japans semiconductor
industry fall?