[Insight & Opinion] The Driving Force Behind Korea's IT Development: Rapid Distribution and Adaptation

[Asia Economy] In the spring and fall of 2022, I stayed in Korea for the first time in a while and visited the places I wanted to go to as much as I wanted. One of them was Sewoon Sangga. While happily walking along Seosunra-gil next to Jongmyo, I faced Sewoon Sangga and was reminded of old memories. Although its status changed with the opening of Yongsan Electronics Market in 1987, it is no exaggeration to say that until then, this place was the distribution base of Korean IT.

Suddenly, I thought that rapid adoption and distribution are the words that point to the history of Korean IT. Distribution occurs when there is new demand, but adoption is only possible if there is potential for distribution. The Korean IT market had these two aspects perfectly aligned, and that became the foundation that made Korea an IT powerhouse in the early days. However, this is a retrospective story, and to truly understand the real strength of Korean IT competitiveness, we need to first find the reasons that made it possible.

First, we can propose the hypothesis of temporal advantage. Not only in Korea but also in world industrial history, there are many examples where timing determines the outcome. The automobile industry concentrated in Detroit, USA, in the early 20th century grew significantly due to exploding demand after World War II. However, after the 1970s, it rapidly declined as it lost competitiveness compared to imported cars, including Japanese automobiles. At the end of the 20th century, Korea’s IT-related demand was just beginning to increase due to high economic growth rates. Having already advanced to a middle-income country, Korea also had the production capacity for related goods. Demand and supply capabilities matched perfectly in terms of timing. In addition, there was precedent for national-level investment in new industries, so favorable government policies and support were also expected. In fact, right after the International Monetary Fund (IMF) foreign exchange crisis, the Korean government supported the development and distribution of cable modems that could connect via TV cables as part of fostering new industries. As a result, using existing cable TV lines in apartment complexes nationwide, the spread of high-speed internet access was rapidly promoted at an affordable price.

There is another hypothesis: cultural conditions. At the end of the 20th century, Koreans had experienced rapid industrialization and urbanization since the 1960s, so they had the attitude and ability to quickly adapt to fast and new changes in daily life.

Last fall, I happened to take an electric taxi for the first time in Busan. Out of curiosity, I started asking the driver various questions. The driver, who had already adapted to electric cars, answered my questions in detail. Listening to his answers, I recalled when I first installed a cable modem at a friend’s house in 1998. That friend showed me various things and explained them in detail. He had already understood and was completely familiar with it in daily life. He said that he had curiosity and was able to access it at a reasonable price. Until before the IMF, Korea’s internet speed and penetration rate were not very high. However, Korea became an internet powerhouse due to the increase of users who naturally encountered new technology and readily accepted it into their daily lives. This is the result created by the interaction of the temporal hypothesis and the cultural hypothesis. The spread of electric cars will also follow this path.

Then, how should Korean IT be further developed? It should focus on developing technologies that will open new windows in Korean IT and, more broadly, in the history of global IT. Those involved in the field probably already know this. New development in an uncertain market always carries risks. However, judging from Korea’s precedent, can we not trust the market’s response to new things? Users full of curiosity like me are curious about the new windows Korea will create and the new world we will meet through them.

Robert Fauzer, Former Professor at Seoul National University