Want Innovation? Hire A Russian

Korean companies are cashing in by signing up low-cost engineers

Few companies have made a bigger splash in global markets in recent years than Samsung Electronics Co. The South Korean company has blasted past its Japanese and U.S. competitors to take a big share of the international electronics and mobile-phone markets. Last year it boasted profits of $5.1 billion on revenues of $37 billion. And one key to Samsung's success has a surprising address: 1 Bolshoi Gnezdnikovsky Lane, Suite 300, in Moscow.

That's the home of the Samsung Research Center. Opened in 1993, it now employs 80 engineers and scientists and was largely responsible for 50 international patents in 2003 alone. Among the Russians' achievements: frequency-filtering technology, which vastly reduced noise on Samsung's now-ubiquitous mobile phones. "Russia is our No.1 destination for technology outsourcing," says Cha Dae Sung, who is in charge of "global technological cooperation" for Samsung.

And Samsung is not alone. LG Electronics, Daewoo Electronics, and hundreds of smaller companies rely heavily on Russian engineers, who labor either from Korean suboffices in Moscow or in the office towers of Seoul. "There's an enormous pool of scientific and engineering talent we can tap into in Russia," says Song Yong Won, Russia specialist at the state-run Korea Institute of Science & Technology.

COOLING PIPES. Examples of Russian technical prowess abound. It was a Russian scientist, Elena Klalkina from Moscow State University, who ironed out problems in developing the highly efficient cooling pipes that are a crucial component of LG air conditioners. Another Russian played a role in the invention of the long-lasting carbon-coated recording heads that helped Daewoo sell 4.2 million VCRs last year. And it was Russia's Institute for Information Transmission Problems in Moscow that helped develop the image-processing chips in Samsung's digital TVS.

Why are so many Russians working for Koreans? Partly because Russia itself has been so slow to develop its homegrown industries. Moreover, Korea can no longer depend on its traditional industrial patron, the Japanese. It was Mitsubishi Motors that taught Hyundai Motor to build cars, Nippon Steel that helped build Posco's first steel mill, and Sanyo that introduced television technology to Samsung. Now these companies are Japan's fiercest competitors, and Tokyo is not so generous with its expertise.

So Korea's industrial chieftains turned northward to exploit Russia's underemployed educated class. An electrical engineer working for a Korean company pulls down $3,000 to $5,000 a month, five times more than a similar job pays in Russia. "The beauty of employing Russian engineers is that they offer excellent stuff at a much lower cost than their Western equivalents," says Han Jeung Su, a director at Salus Biotech Corp. Salus' claim to fame: It has sold 70,000 vials of a hangover remedy, called KGB, based on a treatment developed to remove toxic substances from the bloodstreams of Russian cosmonauts.

Uses have also been found for technology developed by the Soviet military. ChungHo Nais Co. of Seoul has adapted an electronic plate that was once used to cool Soviet tanks in Afghanistan for use in chilling drinking water. The technology was also used for a three-compartment appliance that chills, ferments, and stores kimchi, the spicy pickled cabbage found on every Korean dinner table.

If the Korean government has anything to do with it, the Russian contribution will get stronger. Seoul is helping some 60 Korean startups with $19 million in grants and loans to tap underused Russian technology. "We want to act as a go-between to match Korean startups with Russian scientists," says Kim Sang Hwan, an exec at the state-run Korea Techno-Venture Foundation. And as long as the money is good, the Russian inventors will never say nyet to prospective Korean employers.

By Moon Ihlwan in Seoul

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