BUSINESSWEEK ONLINE : NOVEMBER 27, 2000 ISSUE
INTERNATIONAL -- ASIAN COVER STORY Beyond the Lab (int'l edition) Researchers are hanging up their white coats to start businesses Some 150 kilometers south of congested Seoul, and further still from the smoke-belching steel, auto, and chemical plants that made South Korea an industrial powerhouse, Taedok Science Town sits like a Shangri-la. The burg is dotted with dozens of glistening, white modern research complexes nestled amid rugged hills and maple, gingko, and poplar trees. For two decades, since it was founded to fulfill the grand visions of late strongman Park Chung Hee, thousands of the country's brightest scientists have toiled in this serene setting. They are white-coated soldiers in Korea's campaign to close the gap with the West and Japan in technologies ranging from semiconductor materials to aerospace. But life at Taedok has not been entirely idyllic. Most technology developed at the big labs there never made it to market. Starting in 1989, for example, engineer Kim Jae Guen was part of Korea's drive to catch up with the likes of Lucent, Nortel, and NEC in superfast optical transmission systems. But bureaucracy at the state-funded Electronics & Telecommunications Research Institute (ETRI), where Kim worked, was achingly slow, and getting lethargic Korean telecommunications companies to use his technology was difficult. ''It was frustrating,'' he says, ''to have to sit on our research in this competitive area, where technology develops by leaps and bounds each month and prices drop by half within a year.'' So last year, Kim, 48, decided to do what many Western scientists would have done years before: He recruited 10 other engineers and started his own company. After raising $5 million in venture capital, Tellion Inc. is about to hit the market with a line of networking equipment that will transmit and receive 2.5 gigabits of data over optical telecom networks. Tellion Inc. hopes to generate hundreds of millions of dollars in annual sales. Although rivals include such fierce competitors as Nortel, Kim's goal is to drive down the cost by half, shrink its size, and be there when the market is ready for 10-gigabit equipment. A LOT OF DARING. Kim's risk is the kind of plunge being taken all around Taedok, where the aftershocks of the 1997 financial crisis are finally pushing hundreds of scientists out of their cloistered government- and conglomerate-funded labs and into new businesses. The result has been a welcome revelation: Long derided for its over-reliance on me-too industrial commodities and plodding, giant companies, it turns out that Korea Inc. is loaded with innovative technology and small entrepreneurs who are willing to take big risks. Indeed, given the opportunity, Korea's high-tech scene may be every bit as dynamic as Taiwan's. ETRI has proved a particularly rich mine of entrepreneurs. In 1998, to cut its budget, the institute fired 400 of its 2,000 employees, mostly engineers and researchers. To help many of them get jobs, it set up incubators offering cheap rent and lab facilities. The government also changed rules that once prevented researchers from collecting royalties on their intellectual property, which in the past was simply given to Korean chaebol, or conglomerates, for free. This year alone, former ETRI engineers have spawned 59 startups, compared with 13 in 1997. And they're not just dot-coms. The Taedok area is buzzing with specialty chip-design firms, makers of wireless and optical telecom devices, and software houses. And old-line chaebol are opening their wallets for big research collaborations. ''We are so remote from Seoul that Taedok was almost forgotten by government officials for 20 years, and the chaebol didn't appreciate all the technology they got for free,'' says ETRI President Chung Seon Jong. ''Now, Taedok is getting all sorts of attention.'' Many new entrepreneurs are grateful to be liberated. Until he left ETRI in November, 1998, Ryum Byung Ryul, like Tellion's Kim, felt that he had been wasting his time. He had led Korea's decade-long bid to catch up with IBM and NEC in silicon germanium, a next-generation semiconductor material. ''I developed a technology that was very comparable to IBM's,'' Ryum says. ''But we failed to transfer the technology to any company.'' Now, Ryum has his own Taedok company, Advanced Semiconductor Business Inc., which owns 35 international patents. He is collecting royalties on his silicon germanium and production processes and is producing a variety of specialty chips. Among the most promising are devices for wireless telecom and for use in auto navigation systems. Other Taedok labs also are generating spin-offs. The Korea Research Institute of Bioscience & Biotechnology (KRIBB), which boasts 150 PhDs in fields ranging from molecular biology to human genetics, began a small-business unit in 1998 that so far has generated more than 20 new ventures and hopes to produce 500 in the next three years. The institute is spearheading the government's plan to invest $5 billion over the next five years on basic life-sciences research and development and industry collaborations in a bid to accelerate Korea's biotech industry. One such tie-up is with Samyang Genex, a producer of corn syrup that diversified into biotech in the 1980s. Teams of KRIBB and Samyang researchers are working on gene therapy and programs for developing anti-cancer treatments from plant cells and an anti-arthritis treatment that now are in clinical testing. ''The institute used to have a very poor concept of industry,'' says Samyang Executive Vice-President Lee Hyun Soo. ''Now we work with them very closely and license their technology.'' Not all analysts are yet convinced that Korea has finally found the secret to a dynamic high-tech sector. One economist at the Korea Development Institute, a government think tank, contends that the country is still investing too much of its limited resources and human talent trying to develop from scratch technologies that would be more easily and cheaply attained by licensing them from the U.S. or by forging ventures with multinationals. That, he says, is because the state continues to allocate resources rather than letting the private sector do it. LONG TRIP. If there is another flaw in Korea's tech environment, it's that many startups are still overly beholden to Korean companies for money and as customers for their intellectual property. Most lack the knowhow to sell globally, and are isolated from market trends in the U.S. And since few foreign technicians and scientists move to Korea, largely because of restrictive immigration laws, local upstarts can't compete with Silicon Valley for the best talent. Plus there is the tight supply of venture capital. ''If I did this in Silicon Valley, I could have raised $10 million,'' figures Choo Heung Ro, another former ETRI scientist who together with his partners had to use $200,000 of his own savings to found XL Photonics Inc., a Taedok maker of chips used for transmitting and receiving light signals for optical networks. Still, for such a tradition-bound business culture, Korea has come a long way in two years. What's more, few of Taedok's new entrepreneurs say they can imagine going back to academic isolation or to the chaebol. They also say that the new generation of scientific talent is even more determined to strike out on its own. Having lived an isolated and subsidized existence for so long, the time may finally be coming for Taedok to make its big contribution to Korea's economic future. By Pete Engardio and Moon Ihlwan in Taedok _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Asia's Future (int'l edition) COVER IMAGE: Asia's Tech Future TABLE: The Tech Future Beyond the Lab (int'l edition) CHART: Startup Explosion The Chips Are Up (int'l edition) TABLE: Betting Big Chasing the Dream to Shanghai (int'l edition) Minds over Matter (int'l edition) CHART: Going, Going... A Biotech Hub (int'l edition) CHART: Genetic Express Rewriting the Rules (int'l edition) TABLE: Vietnam's IT Plan INTERACT E-Mail to Business Week Online

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