Korea Communications Commission (KCC) Chairman Choi See-joong, left, shakes hands with Ericsson CEO Hans Vestberg, second from right, and Swedish Trade Minister Gunnar Wieslander, right, after a meeting in Stockholm Saturday. / Korea Times

Swedish Firm Denies That $1.5 Bil. R&D Center Will Be Set Up in Korea

By Kim Tong-hyung
Staff Reporter

The South Korean government proudly proclaimed about securing a 2 billion won (about $1.56 billion) investment commitment from Ericsson. Too bad the Swedish tech giant was the last to know.

A day after the Korea Communications Commissions (KCC) announced that Ericsson will build a Korea-based research and development (R&D) center and create more than 1,000 jobs over the next five years, a company spokesman Monday said the announcement was merely a government ``guesstimate.''

The company has no plans to set up an R&D center here, the official said, when it hires about 3,500 engineers combined for its R&D centers in China and Japan.

Granted, Ericsson will establish something here, something dubbed as a ``competence center,'' which was vaguely explained as a unit to explore business opportunities with Korean telecommunications firms and encourage technology cooperation.

Unlike the government announcement, Ericsson has never promised to expand its Korean workforce from the current 80 to four figures, and it's not likely that the company will hire that much in a country where it has no intensions of building a research center.

``The exact role and functions of the competence center have not been finalized. We will later announce more detailed plans regarding it and the size of our investment,'' said an Ericsson spokesman.

``Ericsson sees Korea as an important market, an efficient test bed and a bridge to other Asian markets. We will hire more employees if we need to.''

The news regarding the Ericsson R&D center has hit the country hard, considering that the company is the biggest global backer of Long Term Evolution (LTE), a wireless technology that is competing with mobile WiMAX in the fourth generation (4G) standards wars.

Korea had been honking the horn of the mobile WiMAX bandwagon, rushing to commercialize a local variant of the technology in WiBro, short for ``wireless broadband.''

But, with WiBro faltering in the domestic market, the country has been showing signs of hedging its bets, and the love calls to Ericsson were considered an indicator of the changing stance.

Countering accusations about sending mixed signals and discouraging the WiMAX front, KCC officials have claimed that Korean companies jointly developing core LTE technologies with Ericsson would have a crucial impact on the competitiveness in foreign markets once the 4G era arrives.

However, with Ericsson denying any interest in establishing an R&D center, it will now be difficult for Korean policymakers to dodge the criticism they grabbed the short-end of the stick, allowing Ericsson to expand its LTE territories here without making any serious commitment to local device and equipment makers.

This is not the first time that the policymakers of the Lee Myung-bak government, overzealous to secure foreign technology investment, have jumped the gun regarding R&D centers.

Earlier this year, the Korea Trade Investment Promotion Agency (KOTRA) hinted that Qualcomm, the San Diego-based chipmaker that holds the patents for code division multiple access (CDMA) technology, would establish an R&D center here. However, in a May interview with The Korea Times, Qualcomm chief executive Paul Jacobs denied making such a promise, although saying that the company is exploring investment opportunities in Korea through its venture capital arm, Qualcomm Ventures.

Last year, there were also talks about Microsoft, the U.S. software giant, investing $60 million over the next three years. However, government officials later admitted that the plans had nothing to do with an R&D center, but rather a program to expand the use of Microsoft products in companies and schools.

``I wouldn't say right now we are going to build a building and put a bunch of Ph.Ds in there or something like that. We intend to build our R&D capabilities in a more organic way, or maybe we will make an acquisition,'' said Qualcomm's Jacobs.

The R&D centers that foreign high-tech companies did establish here so far have yielded mixed results. Intel established an R&D center in Seongnam, Gyeonggi Province, in 2004, but closed it after minimum results in 2007, citing the company's restructuring process.

Hewlett Packard's R&D center, also established in 2004, is now closed as well, and Korea is still waiting for Bell Lab to deliver on its 2005 promise to build a center here.

According to report by the Samsung Economic Research Institute last year, more than 60 percent of the R&D centers operated by foreign companies hire less than 20 employees, most of them dedicated to basic-level research work.

``Many foreign high-tech companies consider R&D centers as one-time events. The government must be more careful in supporting these companies, taking a closer look at their commitment, including the amount of capital they are willing to spend,'' said Lee Hwi-sung, chief executive of IBM Korea.

thkim@koreatimes.co.kr