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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 complexa set of four low, parallel structures cut through by a central corridorhouses the Samsung Advanced Institute of Technology, probably Koreas premier private research center.

The institute is largely the vision of Samsung chair Lee Kun Hee, who established it soon after he took the companys helm in 1987. Samsung is one of South Koreas chaebol, the giant family-controlled holding companies that still dominate the nations economy. At the time of Lees accession it was, like most Korean electronics companies, an exemplar of what is sometimes dismissively referred to as sweatshop electronicstaking advantage of the nations 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 Samsungs founder, argued that the companysand Koreasgrowing 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 Samsungs core business of semiconductors (the company is the worlds 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 worlds 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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