Sep/12/06– Kevin JH Lee KITA Q306 Seminar Connecting the World to Ubiquitous Korea

KITA Q3 Seminar September 12th ,2006 Sheraton Cerritos Hotel

Jong-Hoon Lee Chief Executive Officer iPark Silicon Valley jhlee@iparksv.com

New Information Technology Paradigms and Korean IT

Competitiveness…

Sep/12/06– Kevin JH Lee KITA Q306 Seminar Connecting the World to Ubiquitous Korea

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

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Silicon Valley is the Center of VC Investment

TOTAL VENTURE CAPITAL FINANCING IN SILICON VALLEY FIRMS

Sep/12/06– Kevin JH Lee KITA Q306 Seminar Connecting the World to Ubiquitous Korea

What’s going on IT Market Battle Field?

• Economic indicators: a “mixed bag” -- positive but still cautious about high tech & impact of interest rate hikes, high oil price and War on terror in 2006

- North American IT spending grew 5.4% in 2005 reaching $892B - Silicon Valley 150 record 2004 profits of $31.4B (up 170%) and sales of $336B (up 14%) - VC’s are optimistic and are beginning to invest again. 117 IPOs in 2005 quintupled the 23 IPOs in 2004. Mobility, Web 2.0 and recently Video are hot areas - Signs of slow “Jobless recovery”. The trends of “Outsourcing IT” to China & India. The job market for IT specialists will shrink 40% by 2010

• Convergence between computing devices and appliance will be in full swing: - Personal utility: cell phone + PDA + MP3 + digital camera; - Home Digital Appliance : wireless networking + appliance/security controller + remote

access) - Video streaming and broadcast appearing in increasing number of devices - The Consumer Market becoming a larger part of IT industry

• Telecom industry is stagnant, but major consolidation/M&As is going on: - Cable & Phone co’s fighting for control of the home: phone, broadband & TV packages - Smart phone/Digital Camera markets are growing fast but still waiting for killer

applications - Broadband & VOIP gaining market momentum. Fixed-line carriers face pressure from

VoIP

• The margins for electronic commodity products are thinner than ever forcing large resellers to restructure to stay afloat. Major challenges ahead from Chinese Manufacturers along with the impact of the weak dollar in 2005

Sep/12/06– Kevin JH Lee KITA Q306 Seminar Connecting the World to Ubiquitous Korea

Silicon Valley has been a driving force of IT revolution for the last 50 years

Sep/12/06– Kevin JH Lee KITA Q306 Seminar Connecting the World to Ubiquitous Korea

The Valley garners a third of all U.S. venture capital funding, according to the National Venture Capital Association (NVCA). 4000 IT companies with IT related revenue about $200B

Silicon Valley led IT evolution with disrupting technologies..Can it continue the same trend in 2000’s and beyond?

Sep/12/06– Kevin JH Lee KITA Q306 Seminar Connecting the World to Ubiquitous Korea

Traditional Paradigms of Silicon Valley Before Dot-com burst (1960-2000)

• Huge focus on R&D: 8-20% of total revenue

• Hi-technology, Hi-technology – Epicenter of disrupting technologies– Disrupting Technologies: Semiconductor, Microprocessor, PC, Software, Internet…– Core Competitive advantage of America: Genius Scientists/Architect level engineers vs Mfg/Design Engineers– High Profit margin

• Lead the world with breakthrough IT products– Product Concept – Proof – Design – Mfg – Worldwide distribution all by Silicon Valley

• Soft-landing to the higher industry value chain: – Collapse of manufacturing – 90’s– Soft landing to high paying engineering job: Software, Network $100K+– Lack of hi-tech engineers – Foreign engineering talents. IC = India, China

Sep/12/06– Kevin JH Lee KITA Q306 Seminar Connecting the World to Ubiquitous Korea

New IT Paradigm: Beyond 2000 The Impact of Internet and Globalization is Changing Silicon

Valley Past Silicon Valley=Tech

InnovationFuture Convergence, Globalization

◈ Silicon Valley is the epicenter of disruptive technologies (Semiconductor, CPUs, PC, S/W …) . Technology Centric . Long R&D Cycle . Big R&D investment, 8-20% of Rev

◈ Major revenues from enterprise-driven products: . Mainframe, PC, Unix Servers..

◈ SV Leads the world with Technology leadership . Concept- Engineering –Mfg - Marketing

◈ Manufacturing moved away ◈High-paying engineering jobs

◈ Digital Convergence is the new trend Mobile phone, Digital TV, Ubi-network .Biz model Centric – Google, Dell, MS..

.Speed becomes more critical . Barrier to entry is relatively low

◈ Consumer Electronics Centric

◈ Asia come with trendy products faster . Mobile, Contents, Conumer Electronics . Korea, Asia become major test bed

◈ Selective outsourcing – Offshore R&D◈ Focus on core technologies/integration◈ Foreign born work force majority in SV

► The next Gold Rush will be in Digital Convergence ► Asia will be a major driving force

Sep/12/06– Kevin JH Lee KITA Q306 Seminar Connecting the World to Ubiquitous Korea

What does this Paradigm Shift mean to Korean IT Industry?Korea wants to be a center of innovation in Digital Convergence

Korean Business culture is a perfect match for the “new world”

- Speed, Risk-taking, Ongoing product enhancement Korea is best positioned to develop Digital convergence products

- Excellent Industry positioning, RND & Production facilities- Optimum test-bed for new technologies (users & infrastructure)

Conglomerates like Samsung, LG will continue its dominance in the short runNew Internet culture, Tech-Savvy consumers

Korean Business culture is a perfect match for the “new world”

- Speed, Risk-taking, Ongoing product enhancement Korea is best positioned to develop Digital convergence products

- Excellent Industry positioning, RND & Production facilities- Optimum test-bed for new technologies (users & infrastructure)

Conglomerates like Samsung, LG will continue its dominance in the short runNew Internet culture, Tech-Savvy consumers

Worldwide competitors in commodity products -China: Technology, manufacturing, India: Software, Labor …

How to move to a higher country value chain?Need innovative core technologies to stay ahead of commoditization How to foster the development of SMEs

-Most lack international sales experience-Often RND driven instead of market driven

Worldwide competitors in commodity products -China: Technology, manufacturing, India: Software, Labor …

How to move to a higher country value chain?Need innovative core technologies to stay ahead of commoditization How to foster the development of SMEs

-Most lack international sales experience-Often RND driven instead of market driven

Huge Opportunities Ahead

… And Major Challenges

Sep/12/06– Kevin JH Lee KITA Q306 Seminar Connecting the World to Ubiquitous Korea

Next Steps for Korean IT Industry: Key questions that need to addressed

• What’s the Next Business Model for Korea? - 60-70’s: Labor Intensive Industry, 80-90’s: Heavy Industry, 2000’s: ????

• Long-term IT Strategies * How to create Core Technologies?

- Issue of Education Infrastructure, Biz Culture - DMB/Wibro can be a first test case for Korea’s new challenges

• Short to Mid-term IT strategies * China Strategy

- MFG take over by China - How to create high-paying job in Korea?

- How to differentiate with commodity based Chinese products? New Cash Cow industry -- IT 8-3-9….

* How to boost small to medium-size IT companies?

Sep/12/06– Kevin JH Lee KITA Q306 Seminar Connecting the World to Ubiquitous Korea

2005 Worldwide IT Export

$78B

2004 Worldwide IT Export

$74B

PRODUCT CATEGORY

Mobile Communications $27,857M

Memory – RAM/Flash $16,248M

Semiconductor - components $20,855M

LCD/CRT Display $6,319M

Storage (Optical, HDD) $2,045M

Digital TV $1,432M

Digital Media $1,092M

Set Top Boxes $740M

Rechargeable Batteries $471M

Laptop $203M

Printers $259M

PC/Servers $434M

Packaged Software $62M

2005 Worldwide IT Export $78B

’05 Worldwide IT Exports By Korea

Sep/12/06– Kevin JH Lee KITA Q306 Seminar Connecting the World to Ubiquitous Korea

Games Online Mobile Network

Next Gen. Wireless/Mobile DevicesIntelligent Home NetworkAppliance servers, Post PC IT SoCConsumer Electronics

Vertical Solution S/WD/T Utility S/WLinux based packaged S/W

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Embedded S/WEmbedded S/W

Digital ContentsDigital Contents

Packaged Packaged S/WS/W

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iPark SV Sweet Spot (Current) Mfg/Commodity Takeover by China: Seek higher value chain - Build up key success factors for Enterprise solutions, Software&Middleware in ubiquitous network - Maximize Korean IT core competence, better ROI, quicker results, and New Growth Engines

e-Gov solutionsPOS solutionsEducation solutionsLatin American market

Sep/12/06– Kevin JH Lee KITA Q306 Seminar Connecting the World to Ubiquitous Korea

Key Issues to address - Korean IT Companies (1)

Small to medium size typical ventures companies iPark deals with

• Enthusiasm for key Technologies/Product Features• Product/Technology Centric Approach vs Customer Value/Demand

– Vs Taiwanese ventures who have root in Silicon Valley• Lack Marketing expertise with CEOs mostly R&D background• Common Issues of US Marketing Approaches:

– Vague Product Positioning– Lack of Competitive Analysis– No Brand recognition– Unclear target segment– Little or No understanding of US Channel Structure– Entry Price, Market driven pricing

• Psychological & Cultural Barrier for US market• Only a Few ready for US entry

– Stage of company maturity (no full span of products)– Financial support (Mktg, Channel Dev, Post-support )– Experience of Mgmt team (i.e., CEO)– Almost no ideas on next steps…

Sep/12/06– Kevin JH Lee KITA Q306 Seminar Connecting the World to Ubiquitous Korea

Revenue growthPenetrate

proper channelsTarget the rightmarket segments

Set up MKTG & Sales operations

Every Step Can Be A CHASM Unless Obstacles are Removed

Close deals

Key Issues to address - Korean IT Companies (2)Why They failed?

• Localization• Packaging • Local Operation & Offices • Local Staffing• Support Infrastructure• Value Chain Understanding

• Competitive Analysis• Identifying penetration segment• Differentiators• Product Positioning• Market driven Pricing• Introductory PR • Trade Shows• Incentive Schedule

• Tactical Channel Plan• Setting up Sales Team • Channel Networking• Promotion• Training of Support Team

• HQ Support for Deals• Incentive Management

Most Korean IT companies failed to cross the chasm in the US.

Sep/12/06– Kevin JH Lee KITA Q306 Seminar Connecting the World to Ubiquitous Korea

What is iPark?Ministry Information &

Communication

International Cooperation

Bureau

iPark Silicon Valley

iPark Boston

iPark Beijing

iPark Tokyo

iPark London

iPark Singa-pore

iPark Osaka

iPark Shang-

hai

iPark is a non-profit organization designed to promote Korea’s best IT

products

Silicon Valley

Boston Beijing

Shanghai

London

Singapore

Tokyo

Osaka

Sep/12/06– Kevin JH Lee KITA Q306 Seminar Connecting the World to Ubiquitous Korea

$1 Billion iParkSV RevenuesiParkSV Revenues

Strategic Partnerships

MIC Strategic Initiatives

Marketing &Promotion

Operations

New iPark Business ModelTransition to the Next Phase (2006-2010)

R&D CenterIT 8-3-9

IRMarket Intelligence

Industry Marketing – Korea Country Marketing

Tier I Shared Service ModelNasdaq, M&A, Funding, Tech Partners

(Phase II: 2004 and beyond)

SV150VCs

IncubationIncubation30 Tenant Companies30 Tenant Companies

Client SatisfactionClient SatisfactionBasic Client Marketing, Referral ServicesBasic Client Marketing, Referral Services

(Phase I Focus: 2000-2003)(Phase I Focus: 2000-2003)

Goal: $1 Billion in US Revenues by 2010

Sep/12/06– Kevin JH Lee KITA Q306 Seminar Connecting the World to Ubiquitous Korea

NASDAQ listings2 iPark Silicon Valley client companies• Pixelplus: CMOS imaging sensors solution• Leadis: Small panel display enhancement solution

AMD R&D center in KoreaInduced and steered AMD R&D center establishment in Korea

GIO ForumOpened a doorway to U.S. and global IPO opportunities

International CooperationDMB/WiBro MOU between Alberta Canada and iPark Silicon Valley

Telecom Service Providers Investment ForumConnect IT Korea to top U.S. telecommunicationsservice providers and venture capital firms

AwardsHigh Tech Businessmen of the Year - KACCInternational Business Development – GartnerInternational Partnership – IT Channel VisionBest Software Product – Retail VisionBest Product – Retail Vision

VC CircleConnect IT Korea to top 50 U.S. venture capital firms

Recent Highlights

Sep/12/06– Kevin JH Lee KITA Q306 Seminar Connecting the World to Ubiquitous Korea

Broadband/NetworkingVoIPHome NetworkingNetwork Equipment WirelessMobileSet Top Box

IT SoC (Semiconductors)MobileMultimedia

Digital Content

2004 2005 -2006 2007-2008

Digital Contents

Embedded S/W

Packaged S/W

SystemIntegration

E/SDCBcN

VoIPIPv6

Home NetworkingIT SoCRFIDNextGen PCDigital TVNG Mobile

WiBroDMBTelematicsService Robot

8-3-9

OtherOpen SourceEmbedded SoftwareSI Latin America

Consumer ElectronicsDigital, LCD TVsMP3DVRsPC Accessories CamerasPDA, GPS

Application SoftwareSecurityWeb EditingPC Suite

Target Industry Segments

Sep/12/06– Kevin JH Lee KITA Q306 Seminar Connecting the World to Ubiquitous Korea

“Our mission is to establish and promote

thriving partnerships between U.S. IT

channels & Korean IT client companies, and

provide an effective gateway for Korean IT

companies to successfully penetrate the

United States marketplace.”

Mission – iPark Silicon Valley