Even if Korea implements additional advanced technology policies, it will be increasingly difficult for Korean firms in advanced industries, like electronics, semiconductors, machinery, and autos, to compete against Chinese firms that are backed to the hilt by the Chinese government. China's innovation mercantilism playbook is to steal or coerce the transfer of technologies its firms and industries need to succeed, then back an array of national champions with massive subsidies while squeezing foreign competitors out of the Chinese market. From that assured "aircraft carrier" base of growth, Chinese firms then launch attacks on the global market share.
But as Rob Atkinson writes in The Korea Times, this strategy is particularly dangerous in innovation-based industries like semiconductors and electronics because they have relatively high fixed costs and low marginal costs, so added sales are key to earning enough to invest in the next round of innovation. Once that scale is eroded, there is often a tipping point at which a challenger gains a decisive advantage and effectively crushes its competitors. China has done this successfully in a host of industries, including what was once a Korean strength, the LCD TV industry. Once China gained market share there, it eroded the earnings and R&D of the leaders while boosting its own, all the while moving up to the next most complex technology, in this case, OLED displays.
Read the commentary.
