[The Heart of Innovation, Corporate Research Institute⑭] Evolving with the Times and Direction... Corporate Research Institutes Enter the Era of R&D 2.0

Companies Absorb Technology through M&As
Reducing Costs Compared to In-House Development
Securing Proven Talent in the Process
Hyundai Motor Group Catches Up in Robotics
by Acquiring Boston Dynamics in the U.S.
Samsung Electronics

Editor's NoteThere is a growing call for a new driving force to revitalize the Korean economy, which is losing its momentum. The research institutes owned by corporations were once the heart of our economy. However, there is little attention paid today to what corporate research institutes are focusing on. IBM, a giant in the American IT industry, overcame its 'lost decade' and made a comeback. A key factor in its revival was the rebuilding of its research institute. The founders of Korea's leading conglomerates once unanimously advocated for 'technological nationalism.' In the industrial sector, there are arguments that the founders' spirit should be revisited and that the Korean-style research and development (R&D) DNA should be re-embedded in corporate research institutes. Asia Economy will publish a four-part series exploring the research institutes of global companies, offering insights into the role of technology and policy recommendations for this era.

As time passes and market trends and societal landscapes shift, corporate research institutes in Korea are entering a new phase. We are now in the era of 'R&D 2.0.'

With the advent of the artificial intelligence (AI) era and the growing importance of related technologies, there is no disagreement that the position of research institutes, the outposts of R&D, has become even stronger than before. Anyone running a company cannot talk about management without mentioning R&D and research institutes. Every company recognizes the necessity of research institutes, and the government is making every effort to establish and support them. Amid this, the operation of research institutes is becoming more diversified. This is largely due to the changing tendencies and directions of third- and fourth-generation corporate leaders. Some strengthen and subdivide existing research institutes, while others acquire or merge with different research institutes. There are also critical voices regarding these changes, arguing that the founding philosophy and principles of research institutes should be maintained continuously. Research institutes have the mission of focusing on developing technologies needed in their time, so they must follow the trends. However, it is also true that their philosophy and principles should be preserved. The challenge ahead is to achieve both. Can today's corporate research institutes in Korea accomplish both goals?

Technology Hunting through M&A and Specialization

Recently, many Korean companies have turned to mergers and acquisitions (M&A) to address their technology R&D needs. This approach is becoming established as a trend. Instead of developing the required technologies in-house, companies are choosing to acquire firms or research institutes that are already ahead in the field. This is seen as a strategic move, as M&A can be less costly than direct R&D and allows companies to secure proven talent in the market at the same time.

The bipedal humanoid robot 'Atlas' from Boston Dynamics (BD). Hyundai Motor Group acquired BD in June 2021 by investing 996 billion KRW. BD

In June 2021, Hyundai Motor Group chose to acquire Boston Dynamics (BD) in the United States as a way to catch up with Japan's Honda, which had a 20-year lead in robotics R&D. Hyundai Motor Group invested 996 billion KRW at the time to bring BD, a company demonstrating the world's fastest technological advancements, into its fold. The humanoid robot 'Atlas' developed by BD not only boasts impressive athletic abilities such as backflips and high jumps, but also has reached a level of sophistication where it can perform delicate movements using three fingers. Atlas is scheduled to be piloted at major production facilities, including Hyundai Motor Group Metaplant America (HMGMA) in the United States, within this year.

The company has also made significant moves in autonomous driving and software R&D. In 2020, it invested 2 billion USD (approximately 2.8 trillion KRW) each with American autonomous driving startup Aptiv to establish the robotaxi company Motional. Hyundai Motor Group has invested a total of 5 trillion KRW in Motional to date. It also spent over 1.4 trillion KRW to acquire '42dot,' a company founded by former Naver Chief Technology Officer (CTO) Song Changhyeon. Acquired in 2022, 42dot is responsible for transitioning to a software-defined vehicle (SDV) system.

Samsung Electronics acquired the American Internet of Things (IoT) startup SmartThings in 2014 and officially entered the smart home service market. Samsung Electronics

Samsung Electronics has also secured core technologies through M&A. In 2014, it acquired the Internet of Things (IoT) platform developer SmartThings, enabling the implementation of smart home services. 'Samsung Pay,' a favorite among Galaxy users, is based on technology from LoopPay, a mobile payment company acquired in 2015. To strengthen its audio business, Samsung acquired Harman for 9 trillion KRW in 2017, and in May of this year, it signed a contract to acquire the audio business division of American company Masimo for 350 million USD (about 500 billion KRW), eight years after the Harman acquisition.

Samsung has also adjusted its own R&D infrastructure. It has individualized and specialized its research institutes in line with the times and business directions. Currently, Samsung Global Research analyzes market trends and develops management strategies. It is responsible for consulting on technology development, while Samsung Research Institute operates under the Device eXperience (DX) division, and Samsung Semiconductor Research Institute operates under the Device Solutions (DS) division, each developing technologies needed by their respective divisions. Samsung Advanced Institute of Technology, which once developed technologies across all fields, is now reportedly focusing on semiconductors under the DS division.

Lim Hyungkyu, former president of Samsung Electronics, stated, "The era of developing technologies by searching for completely new business areas is over. The paradigm has broadened so much that there is almost no business left untouched in Korea," adding, "Now is the time to find differentiated technologies for each business, and in that regard, the current changes in research institutes are heading in the right direction."

Concerns over Declining Philosophy and Restructuring

The calligraphy "Infinite Exploration" left by the late Hoam Lee Byung-chul, former chairman of Samsung. Samsung

Whenever there is a wave of change, there is bound to be resistance. The reality of Korean corporate research institutes is no exception. Recently, in discussions about Samsung Electronics' 'semiconductor crisis,' research institutes have been cited as a contributing factor. The core argument is that research institutes such as Samsung Advanced Institute of Technology, once considered the best, have not been properly managed, causing the company to fall behind in semiconductor technology competition. Researcher A, who previously worked at the Advanced Institute, said, "Even though we have the talent and equipment to develop AI foundation models, the institute is currently limited to finding defects in memory processes," adding, "Such research could be sufficiently handled by other organizations within Samsung Electronics, such as the Semiconductor Research Institute, or even outsourced to startups."

Research institutes are fundamentally vulnerable to existential threats. When a company faces difficulties and undertakes organizational restructuring, research institutes are often the first to be considered for downsizing. This is especially true because they are not organizations that can immediately generate profits. Lim Woohyung, co-director of LG AI Research, explained that in the case of LG AI Research, the financial 'contribution' of AI research to the performance of each LG affiliate is quantified and measured internally, but he generally agreed that there is a risk of restructuring. He also emphasized the importance of having interim evaluation processes in place, given that AI research is a long-term endeavor, stating, "Having mid-term checkpoints is very important for the operation of research institutes."

In Taiwan, Research Institutes Come First... "A Shift in Thinking Is Needed"

The world's leading foundry (semiconductor contract manufacturing) company, TSMC, was founded with the foundational support and full initial funding from the Industrial Technology Research Institute under Taiwan's Executive Yuan. In Taiwan, when a company is in its early stages, a research institute is established to serve as an 'incubator.' Reuters Yonhap News

Kim Joungho, a professor at KAIST who led the development of high-bandwidth memory (HBM) and helped Korean companies dominate this market, emphasized, "Research institutes must be operated with a combination of short- and long-term goals." He argued that the days of waiting indefinitely for good technologies to emerge are over. He believes that while pursuing long-term goals, research institutes must also respond to rapidly changing trends and deliver short-term results. This is seen as a fundamental solution for research institutes to maintain their philosophy without falling behind market trends.

There are also calls in the industry for a 'shift in thinking' to realize this. Overseas cases should also be referenced. In Taiwan, which competes with Korea in the semiconductor market, most companies build research institutes before factories. The world's leading foundry, TSMC, also started as a research institute. The Industrial Technology Research Institute under Taiwan's Executive Yuan laid the foundation and provided all the initial funding. In Taiwan, research institutes are established at the birth of a company to serve as 'incubators.' They then naturally become the company's forward base, maintaining their founding principles while operating flexibly. Building research institutes before factories-it's time for Korean companies to reconsider their approach.