With the Feb. 2006 State Visit by the Indian president, following the earlier visit to India by Korean President Roh Moo-hyun to, IT links between the two countries are expected to tighten and accelerate. During the first summit meeting, President Roh and Prime Minister Manmohan Singh of India discussed bilateral cooperation on economic development. They agreed to share advancements in IT sector for further growth by combining each other's strengths hardware from Korea and software from India. Furthermore, Chin Dae-je, Minister of Information and Communication, had a meeting with India's Information Technology and Communications Minister Dayanidhi Maran. The two ministers agreed to draw up a specific plan for mutual collaboration with eight projects, including joint development of the software manpower fostering program, joint establishment of electronic government, establishment of an international research network, and strengthened cooperation in 3G and nextgeneration mobile communication. As India is emerging as one of the most attractive countries in Asia for investment, the cooperation agreement paves the way for Korea's IT industry to further move ahead even to other adjacent countries such as Pakistan. The cooperative relationship will not only serve to each country's advantage but also provide a new cooperation business model in the high-tech industry between the two countries. It has been pointed out that Korea is vulnerable in software, which is considered a critical base for the ubiquitous IT era. Last year, Korea had a shortage of 18,000 software experts and is still lacking 14,000 experts, as well as insufficient education in embedded software fields. For this, the Korean government plans to set up a Korea-India software coordination center to attract software professionals from India. Creating Cooperation Framework The government will urge the domestic companies that have entered the Indian market to increase regional investment, for example by expanding the workforce in R&D centers, making it a good combination between India's software and Korea's hardware production technologies. The Indian software sector has shown phenomenal growth in the past few years and is considered a major base for offshore IT services across the globe. The Indian software industry grew by 53% last year to US$ 5.7 billion. Software exports registering a growth of 51% rose to US$ 4 billion. 185 of Fortune 500 companies outsource their software requirements to India. Three Indian software companies are listed on NASDAQ - Infosys Technologies, Satyam Infoway and Rediff.com. Another Indian companies Silver Line Technologies has been listed on NYSE. During the next year or so 20 more companies are likely to be listed on NASDAQ, NYSE and LSE. * Out of top 300 software Indian companies, more than 170 have acquired ISO 900 certification. Of the 23 companies world wide having SEI CMM (Software Engineering Institute Capability Maturity Model) Level V, 15 are located in India. * Offshore services which now account for 42% of the exports, while onsite services account for 58% of the export revenue. Software companies in India are driving the market capitalization. India's main competitive advantage in software is its abundant high-quality and costeffective human resources. India has a huge, qualified workforce in this sector and the requirement is expected to soar to 2.2 million by 2008. Currently, India produces around 68,000 professionals every year. All efforts to meet the requirement of this human resource and its continuous development form an integral part of the government's promotional strategy. It is also anticipated that during the course of the next few years, FDI inflows in the Indian software sector could reach US$ 4 bil. per annum. * Microsoft is also investing over US$ 50 million in its India Development Centre to make developmental activities in India an integral part of Microsoft's global operations. * North America (US and Canada) consume over 62% of the Indian software exports followed by Europe 23.5%, Japan 3.5%, Southeast Asia 3.5%, Australia and New Zealand 1.5% and West Asia 1.5%. Indian companies have established expertise in various sectors -- ERP, ecommerce, e-banking, e-finance, systems integration, web content development, ASP, computer based and online training, systems on chip etc. Korean software companies, particularly SMEs can benefit from this expertise to become globally more competitive. Indian software sector is developing fast, especially on the valueadded chain in the e-commerce and IT enabled services, diversifying the range of IT service. IT enabled services or remote processing covers a wide range of services including e-governance call centers, medical transcription, data digitalization, legal data bases, revenue accounting, data processing, back office operations, web content development, animation, etc. In the e-commerce sector efforts are on to develop a higher degree of sophisticated and secure solutions. To sustain this tempo of growth, cyber laws, telecom regulations, investment policies and tax provisions are all being adapted to facilitate growth of the IT sector. The telecom infrastructure is being upgraded to bring Indian communications at par with global standards on the dimensions of cost, reliability, bandwidth and the range of services. The thrust is on continuous improvement to introduce competition and to ensure that the communication infrastructure remains globally competitive. Various modalities for co-operation could include establishment of software centers in India and Korea, for joint development and marketing institutional co-operation between the relevant institutions and establishment of training institutions in Korea either as franchises or in joint venture to meet the expanding requirement of the Korean market. Presently, LG and Hyundai, among the Korean chaebols have set up software development centers in India. Soft technologies, a venture company of Korea Telecom, is also setting up an umbrella Korean software development centre in India with the support of other Korean companies.. A strategic alliance between India and Korean companies will bring Korea into the picture. South Korea and India adopted a final framework Friday [6 January] to begin talks on a free trade agreement, Seoul officials said. The final framework, mapped out by a joint study group, will be submitted to each government and calls for concluding the FTA talks within two years after the submission, South Korea's trade ministry said in a statement. The statement didn't give information on when the framework will be submitted to each government. Last December, South Korean President Roh Moo-hyun and Indian Prime Minister Manmohan Singh agreed to start the FTA talks this year on the sidelines of a regional summit in Kuala Lumpur, Malaysia. Choi Soo-jin, a ministry spokeswoman, said she has no idea about a timetable regarding the FTA talks with India. Repeated calls to Shin Seung-jin, head of the trade ministry's trade and investment promotion bureau, weren''t answered. The Dong-a Ilbo reported that South Korea and India will start the FTA talks soon, citing unnamed ministry officials. According to the ministry statement, South Korea and India agreed to seal a Comprehensive Economic Partnership Agreement aimed at promoting bilateral trade including services, investment and economic cooperation, as well as goods. South Korea and India have signed agreements calling for greater cooperation in information technology between smalland medium-sized enterprises as well as in industrial technology. The pacts were signed recently in New Delhi by visiting Vice Commerce and Industry Minister Cho Hwan-eik and his Indian counterpart A.K. Dua. The Ministry of Commerce, Industry and Energy said the three memorandums of understanding (MOUs) will expand South Korea's growing ties with India, which has managed to achieve growth of 6-8 percent annually for the past few years. The MOUs are designed to capitalize on the strengths of the two economies," said a government official. He pointed out that India's prowess in IT software complimented South Korea's advantages in hardware. On the issue of furthering cooperation between small and medium companies of the two sides, the ministry said it could facilitate greater diversification such as more business tie-ups, which have generally been centered on the countries' conglomerates until now. It added that close ties in industrial technology areas could offer greater opportunities for better exchanges of information and training of experts. South Korea's vice minister also called on his Indian host to work together with him so the two countries can reach the $10 billion trade mark as soon as possible and hold constructive talks that can lead to a win-win relationship. Over the last two decades, both countries have undergone major transformations. In the wake of the Asian financial crisis in the 1990s, Korea has successfully diversified its DRAM-centric semiconductor manufacturing expertise and infrastructure to include a broader base of foundry, assembly, and testing services. Meanwhile, India has experienced unprecedented economic growth due to liberalization policies implemented in the early 1980s. Today, India's population is the world's second largest with 1.2 billion people, of which 300 million represent the world's largest middle-class population. This middle class, which is well educated, professional, and has disposable income to adopt new products for lifestyle improvement, is the major reason for India's ~7-8% yearly GDP growth. More than half of India's population is under the age of 25 and eager to adopt new technologies and the latest electronics products. These demographics make India a technology marketer's dream. South Korea: Major investor in India The winner in this dream market is none other than South Korea, whose cumulative investment in India rose from a mere $2.5 million in 1991 to $2.3 billion in 2002, making it India's fifth-largest foreign investor. The lion's share of these investments has been made by three manufacturing giants - Samsung, LG, and Hyundai - all of which have become household names in India. These Korean companies recognized early that the large Indian market was virtually untapped, and proceeded to make heavy investments both in sales and local manufacturing. As a result, they have become undisputed market leaders in India, selling an array of consumer products ranging from cell phones, TVs, and other audio/video products to home appliances such as microwave ovens, refrigerators, and air conditioners. Interestingly, Samsung and LG are the most highly sought consumer products among the brand-savvy Indians, who prefer the Korean products over other imported brands. In the Indian color TV market, LG enjoys 22% market share, while Samsung, with 15% share, is vying to become a market leader. Both have invested large sums in manufacturing and sales infrastructure. Because localization is being encouraged by the Indian government, Korean companies are finding that manufacturing is very costeffective in India. Currently, Samsung and LG each manufacture 2 million TV sets/month in their respective Indian factories, and each has plans to expand its capacity significantly. According to the recently published market research reports from Gartner, India (along with China, Russia, and Brazil) is one of the fastest-growing markets for cell phones. The same reports show that Indians purchased 18 million cell phones in 2003 and the number of purchases will grow in excess of 20% every year. Samsung enjoys 60% of the market share today, thanks to its roll-out of GSM phones. In the PC and peripherals market, Samsung has managed to close the gap with IBM for laptops, and claims to have grabbed 30% of the laser-printer market in India. LG has made its intention clear to become the no. 1 supplier of desktop and laptop computers in India by investing heavily in the local manufacture of these products. Even in the conventional automotive market, Korean companies like Hyundai and Daewoo have made large inroads, beating out Japanese and US companies. Hyundai is the second-largest car maker in India (behind Maruti Motors, an Indian car maker) and is seeing a 50% sales increase year-to-year in the family car segment. Manufacturing some of its cars in India, Hyundai is not only able to satisfy the local Indian market but export vehicles as well. In fact, Indian car exports grew 30% in 1Q04. Design center for the world India has made big strides in providing design services to semiconductor companies around the world. Today, virtually every SoC that comes to market has some content that was created in Bangalore, the "Silicon Garden" of India. All major semiconductor and EDA companies have design centers located either in Bangalore, Hyderabad, Pune, or Noida. There are more than 100 independent semiconductor-design houses as well as IP design providers, most of them with ambitions of moving up in the food chain to become semiconductor product companies. Just as in Silicon Valley, many engineers and managers in Bangalore are starting their own semiconductor ventures. The seamless connection The relationship between Korea and India has never been stronger, and it now encompasses the world of high technology. The two countries are generating a new synergy in the seamless chip industry, with India leveraging its expertise in developing software and IP for leading-edge system-on-a-chip (SoC) designs, while South Korea delivers world-class manufacturing services from semiconductor foundries and assembly/test operations. The success factors supporting the Korea-India fabless connection are firstly that there exists a well established semiconductor- manufacturing infrastructure in South Korea that India will be hard-pressed to develop. Secondly, there exists a large and well trained design-engineering talent pool with a wide array of IP available in India that South Korea currently lacks; and thirdly, the two countries are well positioned to leverage their longstanding economic and cultural ties to build upon their complementary strengths. Thus, contrary to the long-held belief that the Indian market is not big enough to target, and customers are not savvy in their product adoption, Korean companies have proven this untrue and have gained most in the process. While companies in the United States and Japan are focused on "China-hype" and swiftly moving their manufacturing there, India remains the most sought-after place for tapping the "soft skills" such as software development, IP cores, and circuit designs. So leveraging the existing synergy between Korea and India has all the makings of a formidable semiconductor zone for the fabless foundry model.