Reviving Korea`s hidden champions

Daemyung Optical, Korea`s second largest lens maker that accounts for 22 percent of the domestic lens market, was acquired by U.S. leading lens manufacturer Vision Ease at 133.5 billion won (112 million U.S. dollars) in October last year. No. 1 ranking Chemiglas was also sold in 2002 to Essilor Korea, a joint venture with Esillor in France. As Korea`s top four lens makers, including Japan`s Hoya and Hamni Swiss Optical, have become all foreign-owned, concerns are rising that Korea`s so-called hidden champions are being eclipsed by foreign companies.

Established in 1985, Daemyung Optical received "50 Million Dollar Export Tower" prize on the Trade Day in 2012, and a women-friendly award by Daejeon City thanks to its high female employment rate in 2011. Lee Kyung-seok, the founder of Daeyung Optical, showed his enthusiasm and commitment by saying, "We have reinvested directly the profits we make." As Korea`s high value-added lens market were encroached upon by advanced companies and lower-end market by Chinese and Vietnamese businesses, Daemyung continued to suffer declining revenue after peaking in 2012.

Small and mid-sized companies that have global technological competence but lack business capability to grow into a global player, have been suffering from second generation heirs` reluctance to succeed their fathers` business. Smaller companies account for 99 percent of Korea`s total businesses and more than 70 percent of employment, and their founders have managed business for more than 30 years. They now have to have their children succeed business, but many of them are forced to close business due to fear of huge inheritance tax, causing huge losses on the national level.

Major global economies, including Germany and Japan, are working hard to foster hidden champions. In June last year, the Korean government pledged to make 100 hidden champions for the next five years. However, what is more important than the sheer number is to create conditions that healthy companies can survive and grow. Entering the new year, Korea is facing many economic hardships stemming from both domestic and external factors, and news that a sound domestic company was sold to a foreign company is discouraging. Inheritance tax law should be revised for promising smaller players to continue to create added value.