Oral-History:J. Kwon Lee
About J. Kwon Lee
J. Kwon Lee was educated at Seoul National University and began his career working for the Korean government, first for the Ministry of Defense and later for the Ministry of Telecommunications. He then moved to Lucky Gold Star (LG) and moved up the ranks to eventually become Vice Chairman of the Corporation. In this interview, Lee speaks about LG's early days, its creation of military technology as well as its competition and collaborations with other corporations. Lee also speaks about Gold Star's marketing strategies and his role in the Korea Manufacturers' Association.
About the Interview
J. KWON LEE: An Interview Conducted by Andrew Goldstein, Center for the History of Electrical Engineering, August 23, 1996
Interview # 311 for the Center for the History of Electrical Engineering, IEEE History Center, The Institute of Electrical and Electronics Engineers, Inc.
Copyright Statement
This manuscript is being made available for research purposes only. All literary rights in the manuscript, including the right to publish, are reserved to the IEEE History Center. No part of the manuscript may be quoted for publication without the written permission of the Director of IEEE History Center.
Request for permission to quote for publication should be addressed to the IEEE History Center Oral History Program, IEEE History Center, 445 Hoes Lane, Piscataway, NJ 08854 USA or ieee-history@ieee.org. It should include identification of the specific passages to be quoted, anticipated use of the passages, and identification of the user.
It is recommended that this oral history be cited as follows:
J. Kwon Lee, an oral history conducted in 1996 by Andrew Goldstein, IEEE History Center, Piscataway, NJ, USA
Interview
INTERVIEWEE: J. Kwon Lee
INTERVIEWER: Andrew Goldstein
ALSO PRESENT: Unnamed Interpreter
PLACE: Seoul, Korea
DATE: August 23, 1996
Education and Early Work for the Korean Ministry of Telecommunications
Goldstein:
I'm recording this interview with Vice Chairman Lee of Lucky Gold Star on Friday afternoon of August 23. Vice Chairman Lee, thank you for meeting with me. Can we start by telling me about your education, your early life and your education?
Interpreter:
He graduated from the middle school and high school from Seoul National University. In Korea, as you know, the Seoul National University is the top school in Korea.
Goldstein:
So you graduated in 1956?
Interpreter:
Yes. He joined the military.
Lee:
I spent three years conducting scientific research for the national defense department.
Goldstein:
Three years at the Ministry of National Defense?
Lee:
Yes. And, my second job was as at the Ministry of Telecommunications.
Goldstein:
What sort of work did you do for the Ministry of Defense?
Interpreter:
I worked on researching and developing the electrical components and for the electric submarine.
Goldstein:
For radar systems?
Lee:
No, elementary research.
Goldstein:
Would there have been many people there who had your level of technical training at that time?
Lee:
Yes.
Goldstein:
Yes. Mr. Kim told me that your class at Seoul National University had maybe 25 people. Is that about right?
Lee:
Yes.
Goldstein:
Tell me why you left the ministry of national defense to go to the ministry of telecommunications.
Lee:
Because Korean people must serve military duty.
Goldstein:
So you could serve your obligation to the army by working for the ministry of defense?
Lee:
Yes.
Goldstein:
And then at the ministry of telecommunications, what did you do there?
Lee:
I worked as an overseas telegraph operator for passivity and domestic wireless telecommunications
Goldstein:
Were you designing these systems?
Lee:
Yes.
Goldstein:
How would you plan the projects? Where would you order equipment from and who were the customers?
Interpreter:
At the end of 1950's, he worked on the wireless telecommunications system planning for overseas and for domestic purposes so most of the equipment might be imported from overseas countries. Most of it was from the United States.
Goldstein:
Were building these systems difficult? Was it hard to plan the building of these systems?
Interpreter:
The ministry of telecommunication advised Philco Corporation, a US company, and also they had experience from around the world, so it was not so difficult to handle planning that kind of project at that time.
Work with Gold Star (LG)
Goldstein:
Why did you leave the Ministry of Telecommunication?
Interpreter:
He worked for the ministry of defense and ministry of telecommunication for a total of six or seven years so he spent a lot of time working for the government. His major was telecommunication engineering. So eventually joined Gold Star, formerly named of LG.
Goldstein:
So you were an engineer at the factory?
Lee:
Yes.
Goldstein:
What products did you begin working with?
Lee:
A radio design
Goldstein:
These were for sale in Korea?
Interpreter:
They were in the beginning stages for domestic use.
Goldstein:
Do you know how Gold Star planned to compete with foreign manufactures in radios.
Lee:
In Korea? No, there was only Gold Star.
Goldstein:
But were outside companies also selling radios in Korea?
Lee:
No.
Goldstein:
So, the Gold Star radios were the very first available.
Lee:
Yes.
Goldstein:
How big a market was it? How many broadcasters operations were there?
Interpreter:
There was only KBS which belongs to government.
Goldstein:
I see. And, so KBS broadcasted even before Gold Star sold radios or they happened at the same time?
Lee:
Yes, KBS was before Gold Star.
Goldstein:
So then people could not get radios until Gold Star began making them?
Interpreter:
Before Gold Star started manufacturing the radios some of them would smuggle them [inaudible phrase].
Goldstein:
Can you tell me why Gold Star existed since the forties? What made them go into the radio business, the electronics business?
Interpreter:
Their sister company Lucky Chemical - actually the name changed from LG Chemical. But they produced toothpaste, soap and things like that. They also produced plastic molding. And, around that time overseas manufacturers used radios with plastic cases. The management decided to start to produce a radio with that kind of plastic cases so that's why and also around that time Philips started to manufacture radios but they failed.
Lee:
It was maybe two years or three years before we started Gold Star.
Goldstein:
So Philips tried it in say 1960 or 61?
Lee:
Middle of 1960.
Goldstein:
I see. By the time Gold Star began making radios was there any other Korean electrical manufacturers?
Lee:
No.
Goldstein:
No. So all the others came after Gold Star.
Lee:
Yes.
Goldstein:
Were you hired by Gold Star to begin the radio project? Was that your job specifically?
Interpreter:
Actually he joined with Gold Star three years after they started up the company. But, at the time Gold Star was ripe to expand their business into the telecommunication business. That's why he joined that company. They tried to manufacture telecommunication products but at the time they were not ready to produce that kind of communication equipment.
Goldstein:
What did he do to help Gold Star get ready to make other telecommunication equipment?
Interpreter:
At the time Korea had a few manufacturers manufacturing small components for communication systems [inaudible phrase] manufacturer of the telecommunication system.
Goldstein:
This is what I understand up to now that Gold Star manufactured radios and wanted to expand their business and then Vice Chairman Lee came to help do that. So, I wanted to know what you did to help Gold Star spread out into these other businesses.
Interpreter:
After Gold Star manufacturing the radio, he joined working at the factory. The process of expanding business was done by the head office.
Goldstein:
So at the factory what did you have to do? Did you have to design production equipment?
Interpreter:
He did design equipment and he also acted as the general manager of the production department. He then became the plant manager.
Goldstein:
Were all of these businesses profitable for Gold Star?
Interpreter:
The company annual growth rate was forty two percent at the time, it was very profitable.
Goldstein:
The electric power distribution network was well developed in Korea?
Interpreter:
Around the time which Gold Star manufactured that kind of home appliances, the power distribution network was well established. At the end of the 1960s, there was seventy to eighty percent coverage in South Korea.
Goldstein:
So in some areas you could not sell this equipment?
Interpreter:
It was spread all over the country.
Gold Star and Korean National Planning
Goldstein:
In 1961 the government developed a five year economic development plan concerning how Gold Star's activities relate to that plan.
Interpreter:
Even the [inaudible phrase] five years plan before [inaudible word] actually the [inaudible word] carried out the program. So, he started smuggling out the industrial product. Also he had [inaudible word] manufacture of the industrial product so he did kind of [inaudible phrase] the power system. They expanded from that time our power distribution. But that is why Gold Star started the watt hour meter business because the power network was about to expand the power company [inaudible phrase]. They estimated that maybe around thirty percent of radio, AC radio for factory use [inaudible phrase].
Goldstein:
Did a company like Gold Star have input into the five year economic plan or any economic plan?
Interpreter:
The government may consult with the business men in Korea but mostly it's controlled by the government.
Goldstein:
But in consultation?
Interpreter:
Yes, they may add something to the plan.
Goldstein:
From your prospective as a Gold Star employee was the plan a good one for the economic development of the country?
Interpreter:
It was offered to the program [inaudible phrase].
Gold Star's Competition
Goldstein:
Who did you see as Gold Star's competition?
Interpreter:
The Cable company. They produced electric cable but around the middle of 1960s they started to produce the television fans and stuff like that. And the other small company was a [inaudible word] and these companies belong to the [inaudible phrase] electric company. They produce the electrical products with Japan's Sharp Company.
Goldstein:
So they had an alliance with Sharp Company?
Interpreter:
Yes. Around the end of 1960s Samsung started a home appliance business. So, from the 1970s they are competing with us.
Work at Gold Star (Contd.)
Goldstein:
Can you tell me how you became an executive at Gold Star?
Interpreter:
After he finished as the plant manager he was the head of the business unit the time he was a [inaudible word] executive. He was transferred to the Tokyo office of Gold Star from 1971 to 1973 as the head of branch office.
Goldstein:
So I guess at that time Gold Star was selling products in Japan?
Interpreter:
He did the [inaudible word] component to produce our products and also the technical patterns, to secure the technical partners for our productions.
Gold Star's Technical Partnerships
Goldstein:
So can you give me some examples of who the technical partners were and what the products were?
Interpreter:
Most of technical collaboration was done with Hitachi of Japan and also there were many buying offers with American companies like General Electric, Zenith and other companies. So when he was in Japan even television business sales to the US were through the General Electric or the other companies office in Japan. Even at RCA they had to test what we had in Tokyo. When we exported to the US we did our tests on the television and radio in Tokyo. So it was convenient for us.
Goldstein:
When did these exports begin with products like TVs?
Interpreter:
In case of radio Gold Star exported to Southeast countries or to South America from the beginning of 1960's and television exports from the beginning of 1970s.
Goldstein:
Okay. Mr. Kim told me that when Gold Star began to form technical partnerships they approached many companies in Japan and many companies refused but Hitachi agreed. Do you know why Hitachi agreed?
Interpreter:
The founder and his staff discussed and visited Japan from the 1960s then before the diplomatic relationship between Japan and Korea they went to Japan.
Interpreter:
The founder of our group had been to Japan many times so Hitachi was more positive than the other companies in Japan.
Goldstein:
It was a personal relationship with them?
Interpreter:
Around that time in Korea, it was not much of an industrialized country so when he had been there we don't know what was the exact reason but Hitachi people were positive more than the other people so that is why their relationship was very good. There is no specific reason why Hitachi was positive to us. Around that time Japanese business men or e other people thought that Korea had no background of industrialization so they had doubts about the industrialization of Korea. Other people, even when someone came to their company, they assumed not much interest because Korea doesn't have a background in industrialization.
Gold Star and Military Technology
Goldstein:
We've talked up to now about Gold Star's consumer products, the ones you worked on. I wonder whether Gold Star was involved in military contracting and development of military electronics? Did Gold Star also develop technology for military use?
Interpreter:
Our sister companies developed products for the military.
Goldstein:
Did that experience contribute to Gold Star's technical capabilities? Did the experience from Gold Star's military work help to contribute to Gold Star's technical capabilities in all areas?
Interpreter:
The military industry thought that we had developed that kind of military equipment and out of the electronic equipment stuff like that and our government thought that we had to localize. So from the beginning of 1970 the government thought that for example Gold Star specialized in electronics so they tried to develop certain electronic products for military weapons. That's why the private companies like Gold Star developed products for the military.
Goldstein:
And they did it using knowledge that they had acquired from developing consumer products?
Interpreter:
It might have been some hundred percent [inaudible phrase]. In the 1960s or 1970s during the Vietnam War, the US people's anti war protesters stopped the war and also the US government would take the military from Korea to US. The Vietnam War was finished so the tension between North Korea and South Korea was very high so the government thought that most of the military weapons and the systems equipped with American products [inaudible phrase] situation [inaudible phrase] we have to develop our own military weapons that's why the government thought about manufacturing in Korea. Gold Star for example, did electronic business and so some related electronic related military weaponry that would be developed by that kind of company. They have some knowledge but not the whole knowledge of the military weapon so it may for be easier for them.
Goldstein:
It’s interesting because in the United States much of the knowledge came from research for the military and then went into consumer or industrial applications. The flow was in that direction. Can you compare the size of Gold Star's consumer division, industrial division, and military division? How do those divisions compare in size?
Interpreter:
The home appliance business is the largest, we don't have exact figure but around 8 billion US dollars and the industrial around 2 billion US dollars, but the military expenditure would be hundred million.
Goldstein:
A hundred million? And what year was that?
Interpreter:
After the mid 1970's.
Lee:
There is a raise, small size raise up. It was 1975 or 1976 when there was a liaison with Raytheon in the United States.
Goldstein:
You worked with Raytheon but that wasn't until the 1970s. So in the 1960s it was mostly consumer products, some small industrial products?
Interpreter:
Yes and no.
Work with Gold Star (Contd.)
Goldstein:
Did Gold Star have a long term strategy at that time? When you moved into the executive offices what was Gold Star's long term growth strategies?
Lee:
[inaudible phrase] long plan telecommunication business
Goldstein:
Yes.
Interpreter:
Gold Star started home appliance business from the radio. After that they thought about telecommunication systems, power distribution and transmission systems. It was mostly electronics with some electrical fields so that's why we started from home appliances and expanded to telecommunications and power distribution.
Semiconductor Production at Gold Star
Goldstein:
I wonder did Gold Star vertically integrate? Did it get involved in distribution in retail?
Interpreter:
They produced home appliances and after that telecommunication systems and then the industrial equipment. They are now producing semi-conductors.
Goldstein:
I think I understand when you are talking about the different products. How did Gold Star decide which of these businesses to go into and when? For instance, semi-conductors, when did Gold Star get involved in semi-conductors?
Interpreter:
We thought about the semi-conductor business around fifteen years ago.
Goldstein:
And what would you have had to do to get started in that business?
Interpreter:
In 1970 we thought that the semi-conductor business was a prospective business and also the existing business needed that kind of business field too. Gold Star's existing business even the home appliances, needed that kind of semiconductors.
Goldstein:
So Gold Star could supply their own semi-conductors. Did you need to build research and development facilities to get started?
Interpreter:
At the beginning stage we [inaudible passage] R and D system but in the beginning stage mostly we brought technology from our holding company. We produced that production machinery.
Gold Star's Business Model and Success
Goldstein:
I see. Well what does Gold Star have to do in a developing country to make it competitive with other companies?
Interpreter:
To compete our country has to be westernized not especially for the domestic market but for export. Overseas business has to be more of a priority because we can [inaudible phrase] the domestic and overseas. During the 1960s and 70s the government gave money to those kind of companies that favored export.
Goldstein:
What could the government do to help companies export?
Interpreter:
In the 1960s or 1970s our country didn't have enough foreign currency. So when that company exported the product and received foreign currency, the government gave that company a right to use the foreign currency even with lack of foreign currency in Korea. So a company can get a right to use that foreign currency from government so they can buy the production machinery and expand. They even get a passport to go abroad.
Goldstein:
I see. Any other examples?
Interpreter:
Even the tax was a favor. Japan had similar situation maybe earlier than us but they had that kind of program for a company who exports their products overseas. And also it was a little easier to borrow money from the bank than the other people.
Goldstein:
But then didn't Korea also have an agriculture problem because so little land can be used to grow I heard that the government protected the land for agricultural use forcing companies to build factories on overpriced land. So did that hurt companies?
Interpreter:
Now?
Goldstein:
Or throughout history. Do you know what I mean? The land use policy drove the price up for production facilities.
Interpreter:
If as long as our income is increasing, land was limited and also the land price increase that's why it was a little difficult to expand our production to the area the plant the size and everything. It made it difficult for the manufacturers.
Goldstein:
So the government both helped manufacturers and in some cases did things that didn't help them?
Interpreter:
Before 1970 the government maybe directly or indirectly had [inaudible word] manufacturers.
Goldstein:
It was really was that due to a change in priority or even a political change in the government?
Lee:
The world trade movement has changed [inaudible phrase] the government is away from the private sector.
Goldstein:
But it hasn't really hurt Korean industries which have prospered greatly during the 70s and 80s, right?
Interpreter:
As I explained to you before, in 1970 the government gave some to the private company but after that almost twenty-five years passed so we were accustomed to government not helping industry. So we expand our business with our own risk not related to government help. Nowadays the government hopes that companies grow bigger and bigger and give more taxes to the government, but not to help the company.
Gold Star's Marketing Strategy
Goldstein:
Does Gold Star consumer products have trouble stimulating demand for products in Korea? Does Gold Star have trouble stimulating demand for new products or do people seem to automatically want new products?
Interpreter:
We are not facing that kind of problem. We are leading our marketing demand so Gold Star in the home appliance and electronic fields is developing products for customers.
Goldstein:
When you say leading market demand does that mean that Gold Star has to create the market demand or does Gold Star respond to the market demand?
Interpreter:
We started in 1950s, the home appliance business. They were a number one manufacturer of appliances so were leading the Korean market.
Goldstein:
I understand that but I wonder does the market constantly crave new products or does Gold Star's marketing department have to generate interest in new products?
Interpreter:
They generate interest. They interview customers and conduct other research. They search out what the customers need so we get information for developing products. Even though Korea is a small country this is a free market area. So this is free market for example for the home appliance business even Korea and the other country was the same, the free market. That's why the Korean manufacturer and the Japan company are competing with each other in this country even though our work was based on their research and development of their know-how.
Goldstein:
In America companies there is concern that the American people are too interested in products, that their consumerism is out of control. Do you know what I mean? And I wonder is there anything like that in Korea?
Interpreter:
Commercialization?
Goldstein:
Did people spend too much of their money on their consumer products?
Interpreter:
They spend a lot of money for the commercial products? In the 1950's, 60's and 70's the market was not saturated but today the home appliance market is.
Goldstein:
Can you tell me how you moved into industrial systems from consumer systems?
Interpreter:
He worked for Gold Star's electronics field for twenty five years so he started with Gold Star from the beginning stage until it was fully developed. He was vice president of Gold Star at the time and the company management thought that he had to develop the industrial electrical field with Korea.
Role in the Korea Manufacturers Association
Goldstein:
Now you are an official in the Korea Manufacturers Association. Is that right? Can you tell me what that association has done to help Korea's electrical industries?
Interpreter:
The electronic machinery manufacturers association started much earlier than the electrical manufacture's association. The electrical manufacturers association was to be set up to improve electrical technology in Korea. That is why we set up the Korea Electric Manufacturers Association in 1989.
Goldstein:
What does it do to help the industry?
Interpreter:
Its major customer for industrial electrical manufacture is the Korean Electric Power Corporation, KEP. So the Korea Electrical Manufacturer Association has a connection with KEP and the government. The government backed up and arranged the KEP investment for 25 million dollars for five years from 1991, for the purpose of developing the electrical technology in Korea which will expand 50 million in ten years. It will also simplify the test procedure and the delivery process and payment to the manufacturers to help them with developing the technology.
Goldstein:
Those manufacturers include Gold Star and other companies?
Interpreter:
Yes. A number of the members of the Korean Electrical Manufacturers Association began as members in 1989. It started with 140 members. It is now around 200 members belong. He is chairman of that association. Next month he will be in the United States to visit Washington D.C.
Goldstein:
Now that there is a manufacturers association does the industry work more efficiently as an industry?
Interpreter:
Yes.
Goldstein:
Can you tell me from your memory what problems you saw that made you want to set up the manufacturers association?
Interpreter:
In Korea we have a different fields of associations for example automobiles, electronics, machinery. The Electrical Manufacturers Association started developing a speed [inaudible phrase] other self confidence was lower than that of some companies so that's why he tried to build it up in the likeness of the other associations.
Goldstein:
So, the auto industry was growing and the electrical industry was not growing as fast, is that right?.
Interpreter:
So he tried to make this association like the automobile association.
Goldstein:
Okay, I see that it is already late.
Interpreter:
If you need me to explain things in more detail, just let me know.
Goldstein:
We can stop now
[End of interview]
