The Size of Samsung Electronics and its Challenges

The Korea International Trade Association recently re-published an article from the Wall Street Journal on the size of Samsung Electronics and the challenges it faces. In terms of size, it is already about the size of Hewlett-Packard with roughly $110 billion in annual sales. About one third of its revenues come from companies that compete with it in selling television sets, computers, mobile handsets, semiconductors and other electronic devices. The best example of this is Apple, which is one of its biggest customers for flash memory chips and screens.

As shown in the accompanying graphic , Samsung is now a leading player in several key markets within the ICT sector. It achieved this status without major acquisitions and by running its own factories. As the article notes, this is similar to what IBM did back in the 1980s, making both the components for electronics products and the actual devices sold to consumers.

The iPhone is now here....where are the Android Phones?

The absence of the Apple iPhone in Korea's market was only a symptom of what was happening here.  Somehow, Korea's three mobile service providers (KT, SKT and LGT), its leading handset manufacturers (Samsung and LG Electronics) and the government managed to allow the domestic market to ignore a clear worldwide trend toward mobile broadband internet.  Now it appears they are going to pay the price.

All of the news these days is about the arrival (yesterday) of Apple's iPhone in the Korean market.   However, a much more significant development is around the corner.  It is the arrival of Android phones, manufactured by Korea's own companies, Samsung and LG, as well as Motorola, and a number of other companies around the world.  Yet there is very little specific news appearing about the release of Android phones here, despite the fact that Samsung released its first Android model in the European market months ago.

In short, despite the euphoria for some of the iPhone's arrival here in South Korea, it appears that it may take another year or two for this market to catch up with global trends. There are many ironies at play here, but this seems to be the consequence of  an exclusive focus on Korean language applications, services and software in this market.

Google's Search Market Share and "Walled Gardens"

A comment on my previous post asked why I included the Czech Republic, along with China, Russia and South Korea, as "walled gardens." A good question.

I based the reference largely upon a September 16, 2008 article in The Financial Times, entitled "Google still struggling to conquer outposts," which included a non-Google map of the world as an interactive graphic. The article used Szenam, Baidu, Yandex, Naver and Yahoo in Japan as "local success stories." What they all have in common, according to the article, is that they (1) invested earlier and developed technologies that work with (2) the local languages.

The term "walled garden" may not be the best to describe what is happening in all of these countries. For example, China is undoubtedly the most aggressive of these countries in governmental efforts to filter, censor and control the internet. However, in the case of Korea, I believe that the overwhelming preference for Korean language, together with the fact that Naver does not really search the internet, as Google's bots do, effectively walls off most consumers here from using most of the content and applications that are out there on the web. With the arrival of the iPhone tomorrow and Android phones soon to follow, that situation may be about to change.

The Apple iPhone in Korea's Walled Garden

I couldn't resist the title for this post, conjuring images as it does of the Garden of Eden and what went on there, but there is some logic to that symbolism.  The Apple iPhone is about to be released in the Korean market starting tomorrow.  The Korean market, like those of China, Russia and the Czech Republic is an internet walled garden, built almost entirely on use of only Korean-language web sources and databases.  The Apple entering this garden, on the other hand, is built on a different principle:   wide access to the internet worldwide and to applications devised by internet users all around the world.   It appears possible that the Apple iPhone, like the apple in the Garden of Eden, is going to mean the end of the garden as we know it!

Most people I talk to know that Korea has the most advanced wireless networks in the world and plenty of digital capacity, so they are surprised to learn that only 10 or 11 percent of the populace purchase data plans and actually surf the internet on their 3G phones.  It seems that the Apple iPhone, along with Android and other phones to follow, are going to break that pattern once and for all.

A good editorial in the Chosun Ilbo yesterday called the iPhone a "wake-up call" for Korean telecoms.  I think it may be even more than that, since consumers here may decide they like the iPhone, its apps, and its broad use of the internet.  Once Android phones arrive, it is difficult to imagine Korean consumers staying away from some of Google's powerful cloud-computing tools.

iPhone Equals Explosion of Korea's Mobile Internet Market?

Now that the iPhone is officially coming to Korea, there seems to be a flurry of media attention to what it all means. Many observers are beginning to pick up on the larger significance, as indicated by today's article in The Korea Times, headlined "iPhone's Debut May Spark Mobile Internet Usage." Of course it will! Consider the following:

• The major reason for the iPhone's popularity around the world is that it makes the internet mobile. Most of its applications depend on the internet.
• Mobile broadband is the killer application for mobile devices and the main transformation taking place in mobile communication worldwide involves the transition from phones to handsets that are internet-capable and more like hand-held PCs.
• There is a very good chance that Android phones will rather quickly surpass the iPhone worldwide and in the Korean market because of (1) Google's powerful range of cloud computing information services and (2) the more open nature of the Android platform.

The next year or so will be a period of great transformation in Korea's mobile market, with positive implications for consumers here.

Google Korea to "Koreanize" its Home Page

The Korea Times yesterday notes that Google Korea plans to "Koreanize" its home page!   The article notes that Naver has a 66 percent share of the search market and Daum is in second place with 20 percent.  Meanwhile, Google has only 2.2 percent of the Korean search market.  The article also points out that Google's strength has been simplicity, but that now it is ready to compromise that to make its web page more attractive to Korean users who "have grown accustomed to fancy websites crowded with features."  The article then proceeds to discuss the load time factor, or how long it takes Google's home page to load.  Everyone knows that Google favors speed.   Number three of its "Ten Things" states that "Fast is better than slow."

All of this is interesting, but I don't think it gets to the central point of explaining why Google has such a minuscule market share in Korea.  For insight into that, do a search of this blog for "Google" and read one of my earlier posts on the topic, including this one.    I'd like to repeat some of the main points.

• Naver is not really an internet search engine, since it searches only Korean language materials and ignores most of the information on the worldwide web.


• Korea is one of four countries in the world, including China, Russia and the Czech Republic, that pursue this walled garden approach to so-called "internet search"  Coincidentally, while the rest of the world was enthusiastically adopting an innovation called the Apple iPhone, Korea was content to use its own, Korean-language only mobile services for two and a half years before bring in the iPhone to this market.


• The popularity of Naver versus Google obviously has a great deal to do with language and culture.


• Conclusion:   "Koreanizing" its home page will not do much for Google Korea's market share.  Language, culture and mindset issues are never solved that easily.   Perhaps a more focused approach, simply telling Korean consumers that there is a whole world wide web of English and other language information out there would be more helpful.

Apple iPhone Release Set for November 28th: Some Predictions for Korea's Mobile Broadband Market

Finally, after two and a half years of waiting for many people, Korea Telecom has announced release of the Apple iPhone in Korea.  On November 28, KT is planning to invite 1,000 customers who made online reservations to the Jamsil Basketball stadium for a launch event.  I've been posting on the topic of Korea's mobile communication market for some time now (just use the search feature in the right-hand column to search for "mobile")  Just for fun, I'll go out on a limb and make the following predictions about the forthcoming launch of the iPhone in Korea.

• It will be immediately and immensely popular here, selling millions, rather than tens or hundreds of thousands of sets with service contracts in the first year.  This is based on the established popularity of the iPod touch, which many bought as the best possible substitute for the non-existent iPhone.


• It will spark a mad rush by other mobile service providers and handset manufacturers to produce Android phones for the local Korean market.  The delay in getting Android handsets here is almost as embarrassing as the long delay in the arrival of the iPhone!


• The market for the iPhone, Android phones and competitors from Symbian will be heavily skewed toward younger people because they are (1)more broadband internet literate and (2) more fluent in English and other foreign langauges.  The market will, of course, most definitely include those of us in older demographics who use and appreciate the value of mobile broadband.


• The entry of iPhone, Android and others may help to shed light on the inherent weakness of South Korea's Microsoft monoculture, the subject of earlier posts.


• Finally, assuming that mobile broadband finally takes off here in Korea, as it has throughout North America, Europe and other parts of the world, this may wake people up to the extreme Korean-language dependence of the domestic Korean market.  Of course, Korean is the native language of residents here and will always be dominant.  However, if South Korea truly aspires to become a hub of any sort, it will need to adopt multiple languages, much in the way that Singapore or Hong Kong have, for different historical reasons.  The introduction of more foreign language broadband content and options here, starting with English, is not a threat but an opportunity for building a strong 21st Century information society in Korea.

www.jamesflarson.com is accessible again

Just a quick note to readers of this blog.   My personal website, www.jamesflarson.com is now accessible again.  I'm still not sure why it was being blocked, but am glad to see that it can now being accessed from within Korea.

Update on my personal website

My personal website, www.jamesflarson.com is apparently still not accessible from within South Korea. I am informed that it is being blocked by KT, on the advice of the Korea Internet Security Agency (KISA) because the site is generating malware. My ISP is in the United States and I opted years ago for the least expensive plan. Therefore, I suspect that the malware is coming from other websites hosted by my ISP on the same IP adress.

In any event, I apologize to those people in Korea who temporarily cannot access my personal website. I'll work this out and get it back up and running.

www.jamesflarson.com not accessible from Korea

This post relates to my personal website, www.jamesflarson.com, which I have hosted with an ISP in the United States for nearly a decade now.  About three or four days ago, I suddenly noticed that I could not access my own site from my office here in Seoul.  This is the first time I've had any difficulty accessing my personal site, which basically serves as an electronic resume and source of information about my background, including books and other publications.

Our network administrator advised pinging the site and doing a traceroute, which we did a couple of days ago. I then contacted my ISP in the U.S. and verified that there is no server-side problem there.  Another individual independently verified that www.jamesflarson.com can be reached from within the U.S.

Meanwhile, as the owner and the author of the site, my attempts to reach it from here in Seoul seem to drop off the internet at a Kornet router somewhere here in Korea, to the best of our knowledge.  Tomorrow I'll ask another staff member to follow up with Kornet.   This type of network problem is a nuisance, to say the least.  I'll look forward to learning what happened and reporting on it here.

Digital Textbook Plan hits Snag

Korea's Ministry of Education, Science and Technology is planning to spend about 18 billion won ($US 15.5 million) to establish e-book infrastructures in 110 schools in rural communities around the country. However, as The Korea Times reports today, there are concerns that the project could be derailed. The consortium that the government selected to provide the e-book readers, led by LG-Dacom and Hewlett Packard, are finding it difficult to keep the price of each device below 1.3 million won, while the government insists it will pay no more than 1.1 million won per reader.

This seems like a laudable project, given the rapid convergence that will soon lead to widespread availability of mobile broadband and the ability to download books from such vast digital libraries as the one made available through Google Book search. The Korea Times article notes that the Ministry of Education Science and Technology had approached both LG Electronics and Samsung Electronics to support the project but the companies both declined, citing lack of market size! Perhaps this is the same lack of market size that explains why Apple's iPhone and also Android phones are so slow in arriving in the Korean market. An alternative view would be that Korea's large electronics firms, along with their telecoms service providers, should view the Korean market, although small, as a valuable test bed for products that will be part of the future information society.

Korea's Dependence on Foreign Trade

One reads a great deal about South Korea's export-led economic growth and its dependence on foreign trade.  Nonetheless, I was struck by today's article in The Korea Times that graphically quantified Korea's dependence on exports.  Last year, imports and exports made up 92.3 percent of the Korean economy, breaching the 90 percent level for the first time.  Exports accounted for 45.4 percent of the national income, while imports made up 46.9 percent.

Such dependence on foreign trade is inevitable for an economy like Korea.  Other Asian economies depend even more heavily on trade.  Last year Singapore saw its ratio record 361.7 percent followed by Hong Kong with 348.4 percent.   Malaysia, Thailand and Taiwan also had ratios higher than South Korea.

I would only add that ICT exports and imports play a very important role in this overall picture.  It would be nice to break out the ICT sector to see just how things stand.

More on Microsoft Monoculture: Mobile Phones

The Chosun Ilbo English edition carried an interesting article yesterday headlined, "Microsoft Can't Get a Handle on Mobile Phone OS Market." Of course it can't. This is highly relevant to the current situation here in the Korean market, which has been described as a "Microsoft Monoculture." (see my earlier post) The article relates to a growing concern I've had with developments, or lack of development, in South Korea's mobile market over the past several years. This nation, which has the most extensive and advanced digital networks in the world and where 100 percent of the population carry 3G, internet-browsing capable phones, finds itself in the somewhat embarassing situation. Only about 10 percent of the population actually use there phones to surf the web, for two reasons. First, the exorbitantly high data rates. Second, and more importantly, two of the three mobile service providers do not even allow web-browsing on most of their phones, instead providing a Korean-language only walled-garden database which, in the case of SK Telecom is called "Nate." All of this prompts the following observations.

• Microsoft's whole business model was built around the PC and desktop computing, an era which is now ending with the advent of cloud computing and true mobile broadband.


• To be more specific, Microsoft's Windows Mobile platform was modeled after Windows itself, which may only now be emerging from the disaster of Windows Vista. Industry and expert reviews of the latest versions of Windows Mobile are hardly encouraging. Those who know a little bit about software will surely go for Android, Apple's iPhone or Symbian before venturing into a Windows Mobile user environment.


• Korea's major handset makers, LG and Samsung, both have big business deals with Microsoft. In the case of LG, it made a long term commitment to manufacture handsets using the Windows Mobile platform. Samsung is currently trying to sell its Omnia and other nice new AMOLED touch screen phones in Korea, with the Windows Mobile OS. This at a time when consumers here in Korea want the iPhone or something much like it--the Android.


• Both mobile service providers and handset manufacturers in Korea appear to have "missed the boat" in the Korean mobile market by about two and a half years. That is how long ago the Apple iPhone was first introduced in the U.S. and some other markets. Korea will catch up. I never bet against this country in the long term, but valuable time has been lost.


• I expect to see Android emerge as the leading OS for mobile communication over the next 5-10 years, perhaps even sooner. There are solid reasons for this expectation. Read David Pogue's review of Motorola's Droid in the New York Times.