FAB / VOL. II

FIG. 02·BONUS — KOREA

SEOUL · 8 FEB 1983 — 7 JUN 1993

An Enemy's Enemy

From Tokyo
to the
memory crown.

On the evening of February 8, 1983, Lee Byung-chul picked up the telephone in his suite at the Hotel Okura in Tokyo and placed a call across the East Sea to Seoul. He told the chairman of Samsung's affiliated newspaper, the JoongAng Ilbo, that no matter what anyone else thought, Samsung was going to enter the semiconductor business — and that he should report it to the public the next morning. The call ran one paragraph. The board had not voted. The capital had not been allocated. Ten years later, Samsung was the world's largest DRAM maker.

A reconstruction · Sources: JoongAng Ilbo 9 Feb 1983 · Samsung Semiconductor history · Brie Working Paper 106 · Linsu Kim, "Imitation to Innovation" · NBER Korean industrial policy series

SUITE · HOTEL OKURA · TOKYO · 8 FEB 1983

Lee Byung-chul, 72 years old and recovering from cancer surgery the year before, has spent the week walking the corridors of MITI's preferred meeting rooms and the lobbies of NEC, Hitachi, and Toshiba.

He has asked to see fabrication lines and been politely refused. Asked for technical briefings, given marketing brochures.

Somewhere between the third and fourth Japanese factory the engineers had declined to show him, he has decided that Samsung will make memory chips.

No matter what anyone else thinks, Samsung is going to enter the semiconductor business. Report it to the public tomorrow.

Lee Byung-chul to Hong Jin-ki · JoongAng Ilbo · The Tokyo Declaration ("Two-Eight")

The compression of a decade · DRAM bits per chip, leading edge

FIRST-SAMPLES TIMELINE · LOG SCALE · BITS PER DIE

U.S. (Intel, IBM, TI)

Japan (NEC, Toshiba, Hitachi)

Korea (Samsung)

Samsung's race · five generations, eleven years

FIRST WORKING SAMPLES · GAP TO INDUSTRY LEADER

DEC 1983

64Kb

GAP TO LEADER · ~4 yr behind

First samples come off Giheung line ten months after the Tokyo Declaration. Built on a Micron-licensed design bought for "a few million dollars."

OCT 1984

256Kb

GAP · ~3 yr behind

Off the same Micron-rooted design family. Industry prices begin their freefall — by 1985 a 64K chip will sell for $0.35, down from $3.50.

JUL 1986

1Mb

GAP · ~2 yr behind

By end of 1986, accumulated losses past $300 million — exceeding Samsung Semiconductor's equity. The chaebol parent absorbs them.

FEB 1988

4Mb

GAP · ~1 yr behind

U.S.–Japan Trade Agreement floor prices hold the Japanese above marginal cost — Korean producers undercut them. By 1988, Samsung's memory line is profitable for the first time.

SEP 1990

16Mb

GAP · parity

Caught up. Two months later, ETRI's national 4M consortium — the Korean MITI playbook — closes its books.

1992

64Mb

GAP · first

World's first 64Mb DRAM. Samsung passes Toshiba to become the global memory leader. A position no Japanese, American, or European firm will dislodge in the next thirty years.

1994

256Mb

GAP · leader

First 256Mb DRAM. "Second sources, useful counterweights, partners in keeping memory affordable for American computer makers" — how the Reagan-era U.S. came privately to describe Korean producers.

1996

1Gb

GAP · leader

First 1Gb DRAM. The crown is fully consolidated. By 1998, foreign firms hold ~30% of the Japanese semiconductor market — the trade-agreement target — but the war is no longer being fought.

2013

⟶

EPILOGUE

Micron buys bankrupt Elpida — the last Japanese DRAM firm — for under a fifth of its peak value. The Boise potato-chip makers end the decade owning the last Japanese DRAM fab. Samsung is undisputed.

STREAM I · DOMESTIC

The KAIST cohort.

Park Chung-hee's regime had built the institutions a generation in advance. The Korea Institute of Science and Technology (1966), modelled on Battelle. KAIST (1971), on a blueprint from Frederick Terman of Stanford. The 1973 Heavy and Chemical Industry drive, with the chaebol as chosen instruments.

By 1983, Kim Choong-Ki's KAIST semiconductor program — Kim had returned from Fairchild and Columbia in 1975 — had been training a generation of engineers waiting for a domestic employer that could use them. His students included Chin Dae-Je, who would lead Samsung's 16M DRAM program, and Kwon Oh-Hyun, who would later run the company.

STREAM II · DIASPORIC

The Silicon Valley return.

Simultaneously with the Tokyo Declaration, Samsung incorporated DSA — Samsung Semiconductor America — in San Jose, and began recruiting Korean-American engineers out of Intel, Fairchild, and National. The pitch was domestic: come home.

It worked because the people who heard it had grown up in a country that had been a Japanese colony from 1910 to 1945. The prospect of out-engineering the Japanese in their own decisive industry resonated at a frequency that no Silicon Valley salary could match.

KEMPINSKI HOTEL · FRANKFURT · 7 JUNE 1993

"Change everything
except your wife and children."

By 1993, Samsung was the world's leading memory producer in volume terms. Lee Kun-hee had inherited the company in time to preside over the victory. He chose, instead, to declare a crisis.

In a function room near the Frankfurt airport, he gathered ~200 Samsung executives — every leader he could summon to Germany on short notice — and told them the company was complacent, its products were second-rate by international standards, and that nothing short of a complete reorganization of mindset would prevent Samsung from sliding back into the second tier the moment the trade agreement's protective umbrella expired.

The line that survived translation: "Change everything except your wife and children." The assembled executives took notes that would be transcribed into the company's New Management doctrine and circulated through every Samsung subsidiary on earth. The Frankfurt Declaration became the founding document of the version of Samsung that would later challenge Apple in phones, Sony in displays, and TSMC in foundry.