The Leading Edge is a best-selling IBM-compatible personal computer that doesn't quite live up to its name. "It's a good, but not great, computer," said one retailer, who insisted that there's nothing "leading edge" about it. "The reason it sells so well is that it's cheap," he said.
Made in Korea by the giant Daewoo Group Ltd., the Leading Edge machine symbolizes the strengths and weaknesses of its native land in electronics high technology -- it is well made and inexpensive, but far from state of the art.
With a bright, cheap labor force, Korea is superbly positioned to capture the low end of the world's electronics markets through aggressive pricing, experts say. "I think they can beat the pants off Japan in consumer electronics," asserted Larry Krause, a Korea-watcher at the Brookings Institution.
But Korea's toughest challenge will be to put itself on the leading edge of technology to compete with Japan for a share of the more lucrative industrial marketplace.
"We are still far behind in both high technology and capital," said S. I. Chun, the Washington representative of the Electronic Industry Association of Korea. "In the short run, we are focusing on consumer electronics. In the long run, we want to sell to the industrial side."
The country's leadership has vowed to increase exports -- currently an estimated $40 billion -- by 10 percent a year through the turn of the century. According to Korea's Institute of Electronics Technology, "The electronics industry may become the largest sector of Korea's total manufacturing components, exceeding automotives or machine tools."
"Korea is the next turn of the wheel," said Joseph Klein, director of marketing for Gold Star Electronics International in the United States, a subsidiary of the $9 billion a year Lucky Goldstar group. "Japan has the reputation and the technical skill but, let's face it, their cost of manufacturing is now at the upper end."
Indeed, Korea now dominates the black-and-white television market worldwide. Korean video-cassette recorders now sell in stores for prices approximately $100 less than those of their Japanese counterparts.
"They're in a position to dominate the low end of the consumer market if they so choose," asserted Bob Gerson, who tracks consumer electronics trade for Television Digest.
But Korea recognizes -- as Japan did in the 1970s -- that low-cost manufacturing is not enough. Innovation in product and process technology is a key to profitability and new markets. Without it, the nation would have to be content to remain merely a manufacturer of low-margin technological commodities.
Although Korean electronics firms have strong manufacturing infrastructures, their design capabilities and understanding of complex process technologies such as factory automation are sorely lacking. And for a variety of reasons, they are finding it difficult to develop their own advanced technological capabilities.
Indeed, there are persons who doubt that Korea ever will be able to match what the Japanese have accomplished in this area. But if the country does fail to reach its goals, it will not be for lack of trying.
The Korean electronics industry -- backed by the government -- has launched an extraordinarily aggressive campaign to create, build or acquire the technological skills it thinks it needs to become a global force in electronics.
Every weekend, for example, groups of Japanese engineers and technicians fly into Seoul to "moonlight" for Korean electronics companies seeking to benefit from their expertise. "They have also had luck recruiting retiring Japanese technical staff," said Seoul-born Yu Sang Chang, professor of the Asian Managment Center at Boston University.
This quasi-surreptitious form of technology transfer reflects Japan's reluctance to participate in more formal arrangements for fear that sharing technology with Korea could lead to low-cost Korean imports successfully competing with Japan's home-grown electronics. "They are afraid of the boomerang effect," said the EIAK's Chun. "The reluctance of Japanese manufacturers to transfer technologies has left us no alternative but to seek U.S. partners."
Indeed, alliances and joint ventures with U.S. companies have become the linchpin of Korean industrial efforts to stay abreast of technology. Historically, Korea has paid handsome licensing fees to acquire the rights to U.S. technology; now it wants the potential benefits of an American partner.
Goldstar now has ties with American Telephone & Telegraph Co. for the design and manufacture of silicon chips; Samsung, a $10-billion-a-year electronics firm, has joint ventures with General Electric Co. for medical equipment and with Hewlett-Packard for the manufacture of minicomputers and associated computer peripherals.
In effect, Korea's electronics companies are dangling the lure of their low-cost, high-volume production muscle to bring in American companies that have superb technical strengths, but a hemorrhaging manufacturing base.
"They're doing joint ventures much faster than the Japanese," said Richard Drobnick, director of the University of Southern California's International Business Education and Research program, which trains Pacific Rim executives for multinational management. "The Korean personality seems to be much more amenable to the joint venture than the Japanese personality."
Although joint ventures offer Korea a quick infusion of technology and capital, the country is struggling to develop an infrastucture that will enable it to create a leading technical edge of its own. Although thousands of Koreans have studied engineering and electronics at American schools over the years, the country has yet to develop an advanced research and development facility.
"That's the biggest weakness in their drive to industrial electronics leadership," Boston University's Chang maintained. "It will take some time for the infrastucture for electronics engineering training to catch up. Basically, you need talented people to close the gap."
Brookings' Krause added, "The shortage in human skills in Korea is never at the top, the shortage is in middle management. There's been a lot of brain drain."
The problem is that Koreans, unlike most of the Japanese who study in the United States, often take a liking to this country and put down roots here. The United States offers more entrepreneurial opportunities to many of the talented Korean engineers who study here, and many are prepared to exploit them.
"The Koreans are much more extroverted, much more individualistic and more risk-oriented than the Japanese," USC's Drobnick said. While those characteristics have contributed to Korea's brain drain, they simultaneously spark hope that Korea can harness those traits to generate a more entrepreneurial economy.
Chang pointed out that Korea's economic dynamism has encouraged many talented Koreans, who wish to raise their children in the home country, to return. Moreover, Korea now is liberalizing its laws to encourage the formation of venture-capital funds to finance new ventures. Last year, the government proposed measures to create an "over-the-counter" section within the main Seoul stock exchange, Chang said. That also could encourage the formation of new high-tech, high-growth companies.
However, there are ominous signals that Korea never may attain a significant fraction of what Japan has accomplished in its rise to economic-superpower status.
Like Japan, Korea is counting on its success in consumer electronics to build a foundation for a thrust into industrial electronics. Many experts question whether this is realistic. Because Europe and Japan remain relatively protectionist, the United States offers the greatest potential for Korean electronics penetration, according to USC's Drobnick. Yet the U.S. market is not likely to prove the bonanza that Korea is counting on. "The dollar is falling; income growth is slowing," Drobnick said. "That makes the market smaller."
What's more, Japan is well-positioned to slug it out with Korea in a price war -- if it wants to. Thus, Korean industry may discover that it has to "buy" market share by slashing profit margins -- or dumping.
Although that may give Korea a significant stake in the U.S. market, it doesn't provide the Samsungs or the Goldstars with the economic base upon which to build a serious industrial effort.