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Beyond the Sweatshop
South of Seoul, the urban grit of the capital gives way to lush, rolling, low hills dotted with office parks that would not be out of place in a suburb of San Francisco or Boston. In the planned community of Kiheung, one especially large complex – a set of four low, parallel structures cut through by a central corridor – houses the Samsung Advanced Institute of Technology, probably Korea’s premier private research center.

The institute is largely the vision of Samsung chair Lee Kun Hee, who established it soon after he took the company’s helm in 1987. Samsung is one of South Korea’s chaebol, the giant family-controlled holding companies that still dominate the nation’s economy. At the time of Lee’s accession it was, like most Korean electronics companies, an exemplar of what is sometimes dismissively referred to as “sweatshop electronics” – taking advantage of the nation’s low wages to undercut manufacturers in wealthier areas. It sold most of its products as commodities to better-known corporations, many of them in nearby Japan, which stuck them in boxes and slapped their own names on them.

Lee, the third son of Samsung’s founder, argued that the company’s – and Korea’s – growing success would inevitably attract competition from even lower-wage nations, especially China. Samsung, he said, would have to enter new businesses to survive; “Change everything except your wife and children!” was his rallying cry. In practice, this meant concentrating on higher-end, higher-profit products. Samsung would have to become a brand name, a symbol of quality like Sony or Honda.

To that end, Lee argued, Samsung would have to innovate, which in turn meant drastically increasing its research and development efforts. The Samsung Advanced Institute of Technology was the logical result. Slowly but constantly expanded since its creation, the laboratory now employs 950 staff, about a quarter of whom work on Samsung’s core business of semiconductors (the company is the world’s biggest manufacturer of random-access memory chips). According to company representative Lee Hyunji, institute researchers collaborate with about 120 universities and research centers in 15 countries.

Samsung now sells cutting-edge products, from superthin DVD players to video game chips. It has become the world’s third-biggest cell-phone manufacturer, with a wildly popular premium line of handsets with crisp color screens. In a list of the “most admired” electronics companies of 2003, Fortune magazine ranked Samsung fourth in the world. Samsung spent $2.9 billion on R&D in 2003; gross sales that year for the Samsung group as a whole rose almost 11 percent from 2002, to about $55 billion.

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