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Misperception of realities

The liberal administration clings to start-up myths like those of Facebook and Google.
Mar 22,2018
Two headlines came out on Feb. 9. Barry Engle, executive vice president of General Motors, threatened the closure of the Gunsan factory of GM Korea in a visit to Korea. Later in the evening, a display formed by a fleet of 1,218 drones powered by Intel became a highlight of the opening ceremony of the PyeongChang Winter Olympics. Tech experts said they read ominous signs for GM Korea’s future in the drone spectacle.

Intel may have stolen the spotlight at the PyeongChang opening ceremony. But its drone extravaganza hides a sad reality facing the tech pioneer. Once an unrivaled chipmaker, Intel’s line of business relies on its mainstay central processing unit (CPU) chips that control PCs and notebooks.
Long ago, it pulled out of the dynamic random access memory chip business. It can’t compete with Qualcomm’s Snapdragon on mobile platforms and processors. It even lags behind Nvidia — a small player that used to make graphic cards for games — in artificial intelligence computing. Nvidia’s super-fast desktop graphic processing units (GPU) have overwhelming power to accelerate deep learning, analytics, engineering applications and other simultaneous tasks.

The value of shares in the companies reflects the rise of the new and the fall of the old. Nvidia’s stock jumped ten-fold in three years. Its graphic processors are selling like hot cakes with cryptocurrency miners and data centers. Its multi-task processors are favorites in self-driving cars. Intel’s stock has been in the doldrums as it failed to keep ahead in mobile and AI chips.

Drones are Intel’s attempt to remain a player in the IT playing field in the age of the fourth industrial revolution. Aerial robotics are run by a composite chipset of CPU, GPU and memory to be capable of GPS, self-piloting and Internet of Things capabilities. To catch up with Nvidia, Intel acquired Mobileye, an Israeli tech company with leadership in autonomous driving technology, for $15.3 billion.

Autonomous vehicle makers are vying to put level 4 cars that won’t need human intervention under certain circumstances on the road by 2020. Following closely behind the top tier group — Nvidia, Intel, Google, Apple and Tesla — is traditional automaker GM. The carmaker, which invested heavily in future mobility like autonomous and electric vehicles, came first in the latest self-driving tests.

GM Korea is on the precipice because of the Detroit-based carmaker’s future-looking management strategy. The Moon Jae-in administration wants to use public funds to prevent it from closing down. At the current rate, however, the Gunsan factory won’t be the only one to close shop. Unless small sedans that are rolled out from GM’s operation in Korea become popular due to a sudden spike in gasoline prices or unless the unionized workers volunteer to cut their wages to reduce production costs, GM’s pullout from Korea only will be a matter of time.

Failure to see the big picture can also be found in the Moon administration’s measures to address youth unemployment. Under the latest package, which is to be financed by a supplementary budget, the government proposes to pay 10 million won ($9,333) to each person under 30 who opts to work in a small or mid-sized company instead of a conglomerate. The government will also exempt young entrepreneurs starting businesses from paying taxes.

The liberal administration clings to start-up myths like those of Facebook and Google. But those kinds of successes are rare. According to a study by the Kauffman Foundation of 652 technology ventures in the United States, start-up activity was most active, 45 percent, in the entrepreneur age group of 35 to 44. The age group of 25 to 34 accounted for 26 percent and the 45 to 54 group 18 percent. Entrepreneurs worked more than 12 years on average after graduating college before starting a business. Entrepreneurs in their 20s were rare in the United States.

Instead of encouraging fresh university graduates to start businesses, the government should draw their attention to outsourced ventures and spin-offs under the sponsorship of large companies. While ending most of the initiatives of the previous government under ousted President Park Geun-hye, Moon kept her signature innovation centers across the nation. Moon said the centers should continue to be served as incubators of innovations. He made the right decision.

But Moon’s economic policy architects must break out of their clichéd thinking and their knee-jerk distrust of large employers and sympathy for unions.

Gov. Song Ha-jin of North Jeolla, where GM’s Gunsan factory is based, wrote in his thesis about how misperception of realities led to wrong policy designs. Misunderstandings of problems were the biggest causes of policy failures, he wrote. Song and the central government must look back on their misperceptions and try to fix them before it’s too late. The authorities and management must ask if they were negligent in restructuring GM Korea even when the headquarters had eyes on future mobility. Isn’t the government pushing young people into risky start-ups with naïve fantasies about Facebook-like success stories? Wrong diagnoses can lead to wrong prescriptions.


JoongAng Ilbo, March 21, Page 31

*The author is a senior editorial writer of the JoongAng Ilbo.

Lee Chul-ho