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  • Hyundai Exits PC Competition Amid Lackluster Market
  • June 22, 1998 (SEOUL) -- Hyundai Electronics Industries Co., Ltd. is exiting the computer industry with a spin-off firm taking over its PC business as of July 1, company officials said.
    The new company, to be called Multicav Computer Co., borrows its name from Hyundai's existing Multicav computer series. Hyundai will take a hands-off approach to Multicav Computer, except for a token stake in the company, which will have a start-up capital of 2 billion won (US$1.43 million) mostly from employees.

    "We are taking everything with us, including Hyundai's PC brand name , production lines and distribution networks," said Kim Jeong-yol, marketing manager of the new company.

    Hyundai's quiet retreat from the PC battleground comes amid warnings that Korea's PC industry is on the verge of collapse in the wake of the country's financial crisis.

    The Electronic Industries Association of Korea (EIAK) said in a recent report that the country's PC industry is facing a major catastrophe due to a combination of mistakes in government policy and corporate strategies.

    The association said the number of domestic PC manufacturers has been reduced to four or five from about 70 in the early 1990s. It cited the example of Taiwan as being the opposite. Last year, Taiwan-made PC exports reached US$6.5 billion, or 85 percent of domestic PC production, outpacing Korea's exports by nearly 30 times.

    The EIAK said Korea's high tariffs on imported computer parts and components reaching as high as 7.9 percent, compared with 2.5 percent in Taiwan, are a main barrier to the smooth development of a PC industry.

    Also, Korean PC manufacturers put too much emphasis on domestic demand, which almost collapsed this year.

    Domestic sales of computers in the January-May period fell to around 450,000 units, down 40 percent from the previous year, due mainly to a plunge in corporate purchases. Annual sales in 1998 are forecast to fall below 1.2 million units, compared with 1.5 million units last year.

    "Unless something is done to reverse the trend, there will be no apparent end to the crisis," the EIAK said.

    Hyundai's exit leaves only a handful of local big-name PC producers vying for a slice of the shrinking pie. They include Samsung Electronics Co., Ltd., LG-IBM PC Co., Daewoo Electronics Co. and TriGem Computer Inc.

    Foreign computer vendors, most notably Compaq Computer Corp., are filling in the space left by Korean companies. The Korean producers now have severe financing problems.

    A weak Korean won also means heftier import bills for the companies, which must purchase at least 30 percent of their parts from overseas.

    "Even in this difficult situation, we will be competitive by bringing down costs," said Kim of Multicav Computer. The company will move away from high-end products geared toward corporate customers and toward low-priced computers aimed at retail consumers , he added.

    The company also is seeking partnerships with foreign manufacturers to obtain capital support. "Talks are already under way with a U.S. company for capital participation," Kim said.

    (James Lim, Asia BizTech Correspondent)

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    Updated: Fri Jun 19 16:10:54 1998