[Semiconductor History]④ Park Jeong-hee's Failed Project 'New Korea Electronics'

Established in Bupyeong Industrial Complex in 1968 under Park Jeonghee's directive
Acquired by Anam Electronics after becoming insolvent in 3 years

[Asia Economy So Jong-seop, Trend & Weekend Managing Editor] The history of semiconductors in the Republic of Korea began on January 26, 1974, with the establishment of Korea Semiconductor Co., Ltd. (hereinafter Korea Semiconductor) in Bucheon, Gyeonggi Province. Former Samsung Electronics Chairman Kang Jin-gu recorded in his autobiography (Goryeowon, 1996) that “Kang Ki-dong’s Korea Semiconductor was the first to establish a full-fledged semiconductor factory in the then-undeveloped semiconductor field.” Korea Semiconductor later became Samsung Semiconductor and eventually evolved into today’s Samsung Electronics.

The 1960s and 1970s were an era when the state led the economy. The supreme leader decided whether a business could start or not. It was a time when it was difficult for companies to operate if they fell out of favor with the regime. Sometimes, the Blue House directly invested funds. It is hard to imagine now, but that was the reality then. Semiconductors were no exception.

Former President Park Chung-hee promoted the so-called ‘Korean-style semiconductor project’ in 1968. Regarding Korea’s situation around 1970, Dr. Kang Ki-dong explained, “At that time, many semiconductor header (cases containing silicon transistors) factories were established in Korea. In the U.S., headers themselves were too expensive and labor-intensive, and new plastic containers had been developed. Therefore, relocating this work to the Far East region became a trend in the U.S. semiconductor industry. As many header factories were established in Korea, the government designated it as a growth industry and aimed to build the world’s best header factory by recruiting American technicians. At that time in Korea, it was mistakenly believed that semiconductors meant assembly work, supported by header manufacturing.”

President Park Chung-hee and the First Lady are attending the National Product Exhibition held on July 7, 1966, and viewing the exhibited items (Photo by eVideo History Museum).

Park Chung-hee Promotes ‘Korean-style Semiconductor Project’ by Establishing New Korea Electronics

In this atmosphere, about 20 companies in Korea planned new investments and started semiconductor businesses. These included Samsung C&T, Hanjin Trading, Geumseong Corporation, Daehan Electric Wire, Minseong Electronics, and Anam Industries. The government did not remain passive either. The Blue House led the creation of a company called ‘New Korea Electronics’ in the Bupyeong Industrial Complex in Incheon. Former President Park also attended the company’s completion ceremony held in July 1968.

A report in the Chosun Ilbo dated April 12, 1969, shows President Park’s interest in this company. “(Visiting the Bupyeong Industrial Complex) President Park Chung-hee received a status report from Kim In, president of New Korea Electronics located in the industrial complex, and instructed officials to provide communication conveniences and lend 1.5 million dollars in foreign currency.”

However, New Korea Electronics became embroiled in a patent dispute over technology allegedly stolen by Technical Director Kim Byung-jun from the American company Veritron West, where he had worked. After a guilty verdict, Kim had to pay 5 million dollars, blocking New Korea Electronics’ access to the U.S. market. The company survived by producing nitrogen for electronic industry use. Even Kim In, the president who had served as governor of Gyeongbuk Province, withdrew from the company after entering the National Assembly as a Republican Party member. New Korea Electronics came under the management of the Korea Development Bank, and the Blue House eventually handed the company over to Anam Electronics. The ambitious project, promoted by the president himself as a cutting-edge semiconductor industry, ended in such a disappointing manner.

Kim Hyang-su, Founder of Anam Industries: “Acquired New Korea Electronics at the Blue House’s Recommendation”

Regarding Anam Electronics’ acquisition of New Korea Electronics, Kim Hyang-su, founder of Anam Industries, testified in the Kyunghyang Shinmun on May 10, 1993, in an article titled ‘My Entrepreneurial Life’ as follows.

“The acquisition of New Korea was not voluntary. It was due to the Blue House’s recommendation. In February 1971, I suddenly received a call to meet at the Blue House. I wondered why they wanted to meet me, who was not a chaebol entrepreneur. The next day, when I went to the Blue House, Secretary General Kim Jeong-ryeom was waiting. He immediately told me to acquire New Korea Electronics. I was puzzled and did not understand the reason. He explained New Korea Electronics with a serious expression.

“It was established in July 1968 under President Park Chung-hee’s directive to produce headers, an important semiconductor component for national defense. Due to lack of technology and management problems, it became insolvent and suspended operations, now under the management of the Korea Development Bank.” At that time, the company’s executives included Seo Jeong-gwi, chairman of Honam Oil, as chairman; Kim In, former governor of Gyeongbuk Province, as president; Kim Byung-jun as technical director; and Kim Wan-hee, a Columbia University professor of electronic engineering.

Secretary Kim insisted that I was the only suitable person in Korea to run a semiconductor business. I hesitated. I was ignorant about semiconductors, and Anam had only been in the semiconductor business for two years, so taking on another burden was a risk.

On the other hand, I could fully understand the difficulties of those supporting the head of state when a company established by the president himself became insolvent like this. Eventually, I leaned toward acquisition. After seven months of due diligence, on September 7, 1971, I met with Secretary Kim Yong-hwan and Director Shim Won-taek at the Blue House Secretariat to draft the acquisition agreement, and the formal contract was signed on November 4.”