(FORTUNE Magazine) – THE KEY to South Korea's astounding economic success is a group of unique conglomerates called chaebol. Initially backed by huge injections of government credit, these small family companies have become awesome exporters. They have formed joint ventures with a host of American companies. International investors hope to buy into the chaebol when Korea's stock market opens to foreigners in a few years.

''The chaebol are driven by an almost religious fervor for expansion,'' says W. Todd Kilborn, research director in Seoul for James Capel, a London brokerage firm. ''They all want to build empires.'' The four biggest -- Samsung, Hyundai, Daewoo, and Lucky-Goldstar -- have revenues amounting to more than 40% of Korea's gross national product. These and other conglomerates have enabled Korea to invade the U.S. auto market, capture 10% of the world memory chip business, and launch nearly as many ships as Japan. But the charmed existence of the chaebol has come to an end. Korea's workers are no longer submissive. Chaebol leaders, once hailed as heroes of Korea's economic miracle, are increasingly seen by their countrymen as robber barons. The conglomerates flourished as the chosen instrument of the authoritarian Park Chung-Hee regime in the Sixties and Seventies, when the government gave promising exporters subsidized loans, tax breaks, andsemimonopolies in key industries. < Ever since the country shifted toward a more democratic government in mid- 1987, unions have staged long annual strikes for higher pay. Last spring a walkout at Hyundai shipyard turned so violent that the government dispatched 10,000 police in a combined air, sea, and land operation. The workers ultimately won a steep pay increase. South Korea's currency, the won, has appreciated some 20% against the dollar in the last three years. Korea's average manufacturing wage has doubled in U.S. dollar terms to over $650 a month, nearly catching up with wages in Taiwan and Singapore. Korean critics complain about an unhealthy concentration of wealth and influence. The founding families have roughly a 50% stake in the chaebol. Korean political parties depend on the conglomerates for funds, and the economy hinges largely on their global success. Says James C. Spackman, chief executive in Korea of Hongkong Bank: ''In the process of building the economy, Korea let small cubs become big tigers that no one can control.'' The Korean government is curbing bank loans to the chaebol and prodding them to take more of their companies public. The backlash is galling to Daewoo Chairman Kim Woo-Choong, 52, who has donated the bulk of his shares to nonprofit foundations. Says Kim: ''Nowadays everyone complains because most of the profit goes into the big owner's pocket.'' Don't write off the chaebol. To meet the new challenges, they are rehoning the Korean export edge with productivity drives and automation, and building new plants in the U.S., Europe, and Southeast Asia. They are also switching to the manufacture of products that rely more on skills than on low wages, such as aircraft components and sophisticated electronic chips. THE CHAEBOL are Korean versions of the Japanese conglomerates known as zaibatsu, with an important difference: The Japanese conglomerates are no longer tightly linked groups owned and operated by founding families. The personalities of the founders, still living or only recently dead, are strongly felt in the chaebol. Hyundai carries on in the rough-and-ready style of Chung Ju-Yung, 73, who once bossed construction gangs and likes to grab errant executives by their neckties. Daewoo Chairman Kim travels the world in a restless search for new business. Samsung's late founder, Lee Byung Chull, who kept a Japanese mistress and second family in Tokyo, emulated the Japanese by relying on professional managers to build a leading electronics company. The largest and best-managed Korean group, Samsung, operates under strict accounting controls installed by founder Lee. He died two years ago, but as one executive says, ''left behind a large number of clones.'' This remarkable group of over 30 companies, with sales last year of $27 billion, is the 24th- largest industrial enterprise in the world. Lee, who started as a food trader, diversified on advice from friends among Japanese business leaders. Samsung became Korea's largest producer of textiles, paper, pharmaceuticals, watches, home appliances, and semiconductors. To cope with higher operating costs, Lee Kun Hee, 47, the founder's third son and now chairman, insists that ''every employee must feel a sense of crisis.'' He instills discipline at a corporate training center, where new recruits and fast-rising managers put in 17-hour days that start with exercises at 6 A.M. Samsung, which is not unionized, has avoided strikes by quietly raising workers' pay some 30% this year. Says Chairman Lee: ''I think that eventually high wages will lead to high productivity. They provide an incentive to automate factories and offices.'' In order to get around trade barriers, Samsung Electronics turns out such mainstays as TV sets and microwave ovens at plants in the U.S., Mexico, and Britain and is gearing up in Spain, Turkey, Thailand, and China. The company also plans to build factories in Malaysia, Indonesia, and Hungary. JOINT VENTURES with American corporations are infusing Samsung with new technology. Samsung Corning hopes to produce 20% of the world's output of glass bulbs for TV tubes within five years. Samsung Medical Services makes diagnostic imaging products in league with General Electric. The Lee family's ties to Japan have helped Samsung move into watchmaking through a joint venture with Seiko and into cameras with some initial help from Minolta. Both the Japanese and Americans draw the line at sharing memory chip technology with Samsung, Korea's most formidable contender in that business. Lucky-Goldstar, Samsung's main Korean competitor in electronics, has an easier time. The conglomerate, with 1988 sales of over $15 billion, gets semiconductor designs through a joint venture with AT&T and recently formed an alliance with Hitachi. Both Samsung and Lucky-Goldstar are investing heavily in research and development that, according a U.S. government commercial intelligence report, ''over time will allow them to continue narrowing the gap with the world's electronic leaders.'' Daewoo, youngest of the top four chaebol, is the most aggressive in finding markets where rivals fear to tread. Daewoo now produces refrigerators in southern China. In Hungary the company has acquired the Budapest Hilton and plans to build a second hotel. Once Chairman Kim gets a foothold in a country, he goes after other opportunities there. Kim has made a preliminary agreement to export 75,000 Daewoo subcompact cars annually to Hungary and eventually make them there. A bulging portfolio of alliances with U.S. companies enables Daewoo, which had sales of $17.2 billion last year, to keep launching new export products with American brand names. Chairman Kim has lined up such joint venture partners as General Motors, for whom it makes the Pontiac LeMans. His pitch to the Americans: ''We can help you compete with Japan.'' Daewoo Heavy Industry, which turns out forklifts for Caterpillar, is rapidly diversifying into aerospace components for Boeing, General Dynamics, and the Sikorsky division of United Technologies. Chairman Kim, who built Daewoo largely by acquiring ailing manufacturers, is betting his reputation and $1.2 billion on turning around troubled Daewoo Shipbuilding on the southern island of Koje. With characteristic daring, he is expanding into helicopters, minicars, heavy trucks, and excavators. To soothe labor tensions -- two workers died by self-immolation during a strike last spring -- Kim spends much of his time at the shipyard. Wearing a worker's blue uniform, he regularly eats lunch in the yard's cafeteria. Even Hyundai, long known for an authoritarian management style, is wooing workers in the wake of much labor strife. ''The most critical problem is not wages but the morale of workers,'' says Chairman Chung Se-Yung, 61, brother of the founder. Chung, who now holds regular sessions with union leaders, adds, ''I tell them to be reasonable, and we'll change anything that's unreasonable.'' Hyundai is still very much a family affair. Founder Chung is honorary chairman, while his brother and four sons closely manage 40 Hyundai companies, including 15 that are public. In the presence of the Chung family, managers literally snap to attention. The group's sales last year: $19 billion. FOLLOWING a dazzling debut in the U.S. auto market, Hyundai saw sales slump because of strikes and quality problems in its low-priced models. To get back its earlier momentum, Hyundai has started producing a midsize car, the Sonata, in Canada and plans to sell it in the U.S. through Chrysler Eagle dealers. Having plunged into semiconductors with no previous experience in electronics, Hyundai intends to invest more than $1 billion in that business over the next five years. Ssangyong Group is smaller than the four titans, with $6 billion in sales last year. But it may offer the most breathtaking example of the chaebol genius for diversification. Chairman Kim Suk-Won, 44, a graduate of Brandeis University, inherited the top job from his late father in 1975, when the company was solely a cement maker. Ssangyong soon jumped into oil refining and parlayed its cement business into the construction of giant hotels in Asia and the U.S. The 1986 purchase of a Korean jeep manufacturer got the group into automaking. Since then Ssangyong has bought Panther, a British sports car manufacturer, and is working out a deal with Volvo to produce autos in Korea. Kim already talks of exporting Volvo components around the world. It seems as though few businesses, anywhere, are beyond the chaebol reach.