Korea's information-technology exports are showing signs of recovery following a lackluster performance that has lasted more than two quarters.

While a better world economy and exchange rate trend favorable to Korean exporters are playing a part, industry insiders believe there may be a more fundamental reason for Korea's apparent unwavering strength in the information technology market.

Chang Jae-chul, an economist at Samsung Economic Research Institute, argues that the global economic boom alone is not a sufficient factor explaining that Korea's export growth has been one of the highest in the region since 2003.

According to Chang, contribution from improved productivity to export growth has increased to 49 percent during 1998-2004, compared with 34 percent in the 1991-97 period.

That compares to the exchange rate's contribution to exports in these two periods, which has plummeted from 27.9 percent to a mere 2.3 percent.

"This dramatic change in the two key drivers prompts us to believe that Korea's exporting companies have found a way to beat the competition by significantly improving their competitiveness in technology, product quality and product design," Chang said.

A combination of factors, including the price decline of major products and the Korean won's appreciation against the dollar, had slowed down the growth of Korea's information-technology industry for the better part of this year.

Except for the 13.4 percent growth marked in January, growth plummeted, sliding all the way down to negative 2.3 percent in May. Industry watchers warned Korean companies against complacency especially given the challenge posed by China's growing influence in the world's IT market.

Exports reached $6.91 billion (7.2 trillion won) in September. In October, they grew 5.4 percent year-on-year to reach an all-time high of $7.13 billion (7.4 trillion won).

In the product arena, exports of semiconductors, including parts, jumped 8.2 percent on-year in October, thanks to a whopping 57.4 percent rise in exports to China and growing shipment of flash memory.

By export destination, exports to China (including Hong Kong) and EU grew 39.6 percent and 10.8 percent, respectively. On the contrary, exports to the United States and Japan fell 35.3 percent and 7.1 percent, respectively.

The Korean Ministry of Information and Communications said that October performance signaled a full-fledged recovery of IT exports. The ministry forecast exports will grow at similar rates in November and December amidst steady recovery of the global economy, including that of the United States and China, and foreign exchange rate trends favorable to Korean exporters.

Hyundai Research Institute forecast that domestic demand, exports and output of the IT industry will grow 8.1 percent, 10.6 percent and 8.7 percent in 2006, respectively.

According to Hyundai, recovery is expected for Korea's main IT sectors, including semiconductor, thin film transistor-liquid crystal display and mobile handsets on the back of slow, but recovering world economy.

By category, the think tank expects an upturn in the semiconductor business as inventories are cleared up and lowered prices lead to new demands. Rapid growth of the NAND flash memory market is also predicted to contribute to the sector's recovery. NAND flash, which stores content even after the power is turned off, has emerged as the optimum storage device for mobile applications, including digital cameras, MP3 players, cellular phones and game machines.

Korea's chipmakers have advanced in the global market to take leadership positions through aggressive investment and swift launching of innovative products.

For example, Samsung Electronics Co., the Suwon-based manufacturer that is Asia's most valued high-tech company, outspent its closest rivals by a factor of $1 billion (just over 1 trillion won) to $2 billion (2.08 trillion won) in investment for the next-generation production lines.

With Samsung Electronics in the lead, Korean chipmakers have also been quick in generating new technologies and products, and making them commercially available in the market.

A memory card made of two of these chips can store data equivalent to 200 years of a 40-page broadsheet daily newspaper or 8,000 digital music files. The breakthrough comes at a time when the 80-nano technology is viewed as the general design rule to produce memory chips.

Mobile phones business is also expected to revive thanks to the start of digital multimedia broadcasting service in Korea and manufacturers' release of new products for the EU market.

Korean mobile phone vendors have delved out a solid presence in the global wireless market by launching a series of brand products with value-added features, including built-in camera, MP3 player and digital multimedia broadcasting features.

Currently, Samsung Electronics ranks third in the world's mobile phone market, with its signature Anycall Brand valued at $3 billion (3.1 trillion won). Rival LG Electronics Inc. is placed fourth.

Pantech Group, hitherto focused on the domestic market, is poised to become a global trendsetter whose products are tailored for customers in competitive markets such as North American and Europe.

Pantech is eyeing to take advantage of the current market environment where third-generation mobile telephony is starting to spread in North American and Europe after a slow start a few years ago.

Pantech is in the process of finalizing a takeover of rival SK Teletech Co., the handset affiliate of top mobile operator SK Telecom Co., in a $300 million (313 trillion won) deal, a move aimed at better positioning itself to compete against Samsung and LG.

The company also hopes SK Teletech's advancements in research and development will help diversify its product lineup for international markets.

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