My Thoughts on the Apple Cloud

Just for the record, my reaction to the announcement of the "Apple Cloud" by Steve Jobs, was to think that his company had conceded defeat in the marketplace to Google, which has led the world in the development of content and services for cloud computing.   Obviously, reporter Kim Yoo-chul of The Korea Times shares this opinion, as reflected in his Reporter's Notebook Piece today.

Are Smart Phones Tracking Users in Korea?

The Joongang Daily this morning carried an article with the accompanying data (click on the graphic to view a full sized version) on the growth of location-based data and location-based service businesses in Korea.  Not surprisingly, the chart shows a rather dramatic increase in the business between 2009 and 2010.  This is exactly what we would expect, given that Apple's iPhone was delayed in coming to the South Korean market and did not arrive here until November of 2009.  While location-data businesses, which include Apple and Google, collect location data, location-based services businesses use that data for various services such as logistics, transportation, or emergency services.
LBS is considered a rising business, and not just in Korea. Research firm Gartner said the market for location-based services - currently worth $2.9 billion - will to rise to $8.3 billion in 2014.

iPhone "Invasion" of South Korea? Some Background

The Los Angeles Times story entitled "Apple's iPhone is Invading South Korea, home of Samsung's Galaxy S," is getting quite a bit of attention these days, at least in the blogosphere.  It will not surprise readers of this blog that I cannot resist commenting on the article.  For one thing, the "invasion" is already over, having taken place more than a year ago.  Just use the search feature to the right and enter "iPhone" and you'll see that I began posting on this topic back in 2008, over a year before the iPhone finally arrived here.  By that time, it had become very apparent that something was amiss in South Korea's mobile market.  It was missing out on a major global trend toward mobile broadband, epitomized by the Apple iPhone.  Even when the iPhone finally arrived in South Korea near the end of 2009, there was another months-long delay before Android-based phones began to appear.

So, it is difficult to conceive of the Apple iPhone's entry into the Korean market as described in the L.A. Times article as a "bold offensive by a foreign competitor invading its lucrative home turf with a breakthrough product."   In fact, the iPhone arrived in Korea about two and a half years after its introduction in the United States!

Some of the reasons why it took so long for the iPhone to reach this market have been explored in earlier posts on this blog.  However, it is now safe to suggest that this delay did not necessarily work toward the best overall interests of either consumers here or the large mobile handset manufacturers like Samsung and LG.  In fact, as noted in an earlier post, Korean exports of mobile handsets took a huge hit because of the delayed transition to smart phones.  Of course, the drop in exports was partly compensated for by the fact that most of the high value-added parts in the iPhone are manufactured by Korean companies.

In late 2009 when the iPhone arrived in the Korean market, many industry estimates suggested that there might be 700,000 or even a million customers for the new phone.  In fact two million iPhone handsets have been sold in just over a year since its introduction.

The larger impact of the iPhone in Korea can only be understood by looking at the broad transition that is now underway here toward mobile broadband.  In important respects, this development was artificially delayed by the obstacles that prevented a more timely arrival of the iPhone and Android phones.  Clear evidence of the rapid transition to mobile broadband can be found in various places, including the rapid uptake of Facebook and Twitter here, as touched on recently.

Many in Korea, perhaps led by top executives of KT, would suggest that the arrival of the iPhone and the accompanying "smartphone shock" were less of an invasion than a blessing or "wakeup call" for South Korea's market and its exporters.

Samsung to Supply LCDs for iPad 2

Amid all of the industry speculation about the size, features and launch date for the second generation Apple iPad, one thing seems certain.  As reported in The Korea Times, Samsung will provide some 8 million LCD panels for the new device.  The display panel is the single most expensive item in a tablet computer and the whole deal is reportedly worth $500 million, with the possibility that there could be additional orders.

According to an industry executive, speaking anonymously, Apple turned to Samsung to expand its procurement channels for displays when LG display failed to keep up with an initial order.  Apple produced 16 million iPads last year and industry officials say the next model will see even bigger annual sales of around 40 million.

I would not be surprised to see that sales projection reached or even surpassed, especially if the new iPad is thinner and lighter in weight so that it feels much like a clip-board when in use.

The Rapid Diffusion of Smartphones in Korea

The Joongang Daily carried two articles today that underscore important aspects of the transformation taking place in mobile communication, here in Korea as well as globally.  The first article noted that the recent Chuseok holiday led to a surge in the downloading of smartphone applications. Applications for road navigation, expressway traffic congestion and charye, the Korean ancestor veneration ritual, topped the popular application list during the holiday period. The same article noted that smartphone users in Korea currently number three million, a figure that is expected to double by year's end. I expect that may be a conservative estimate. Just think of how many family members and relatives had a chance to see the iPhone or Android phones in operation over the Chuseok holiday! That sort of exposure probably represents the most powerful form of sales promotion for these devices here in Korea.

A second article described the parts bottleneck that is being faced by the manufacturers of smart phones. As shown in the accompanying graphic (click to see a larger version), industry forecasts in the spring of 2009 significantly underestimated the worldwide growth of demand for smart phones.  Consequently, such parts as the organic light emitting diode (OLED) screens are in short supply.  The manufacturing process for such parts bears many similarities to that for semiconductors and requires long lead times to build fabs and ensure adequate capacity.

iPhone 4 Arrives in Korea

As reported in the Joongang Daily and other papers, the arrival of the iPhone 4 in South Korea was greeted by long lines of customers.  (click on the photograph to see a larger version).  Although Samsung's Galaxy S and other smartphones are present in the Korean market, they still do not have the sheer number of applications that Apple's platform supports.  It seems likely that the iPhone will continue to drive the mobile revolution here, and worldwide, until Android phones catch up on the application side of things.

In an encouraging note, KT is taking the iPhone 4 introduction as an opportunity to promote its expanded services for expatriates in Korea. With the growing number of foreigners in the country, KT said it will provide special services for expats in Korea. The mobile carrier opened a twitter account (http://twitter.com/ollehkt_expats) that offers advice in English on the use of the iPhone 4 and KT’s other services.
In addition to the permanent expat community in Korea, KT and the other mobile service providers should be explicitly targeting more of the marketing toward tourists and business visitors, who may want to use state-of-the-art mobile services during short stays here!

Korea's Response to Google and Apple

To readers of this blog, please know that I'm still alive and well.  It is just that I've been a bit busy with other things at work and at home and have not been able to post much in the last several weeks.  However, I have been following the press and the trade publications that cover South Korea's IT sector and cannot help but comment on the overall response to the popularity, worldwide and in Korea, of products being sold by Google and Apple.

Today, for example, The Korea Times carried a report that LG was about to unveil the "1st Smart TV."  This would be a television set equipped with "Netcast 2.0" for web-connected televisions.  This move by LG was clearly a response to moves by Apple and Google, along with its Korean arch-rival Samsung.

The situation is somewhat similar with smart-phones and notepad sized devices.  Samsung and LG are scrambling to come out with their own devices that might compete with Apple's iPhone and Android-based digital devices.

What is the common denominator in all of the reports I'm reading? It is simply that South Korea is still heavily reliant on the manufacture of communications hardware, rather than content or software.  It is the latter that not only makes up the bulk of the global ICT market, but also represents the major hurdle for Korea to continue its remarkable advance as an "IT Powerhouse" or a knowledge economy.  The transition to greater emphasis on software and content in Korea has begun, but it will be a long-term challenge for the country to succeed.  This challenge will be the subject of future posts.

Apple gets more than 600,000 Orders for iPhone 4 and closes Pre-ordering

As reported in The New York Times, Apple was overwhelmed with pre-orders for the iPhone 4 and had to close pre-ordering and apologize to customers, asking them to try again when the phone was in stock.  What does this say about the emerging market for smart phones in Korea?

Although KT has already sold 700,000 or so of the iPhone 3Gs, they are impossible to find and there is a waiting list for them in the South Korean market.  It seems apparent that there would be an equally strong demand here for the iPhone 4, as soon as it becomes available.

The demand for these phones is not because most of their most valuable components (screen, camera, batter, main processing chip, memory chip, etc.) are made in Korea.   Instead, it is because Korean consumers have perhaps the world's highest expectations of their telecommunications services of any consumer group in the world.   Three decades ago, an average Korean had to wait over a year to have regular telephone service installed and there were no digital networks.  Today all of that has changed.  Korean consumers expect the very latest and very best technology and are quick to adopt it.   I say bring on the iPhone 4 and the Androids!

Apple Faces Developer's Collective Action in Korea

Apple's closed approach to the approval and marketing of apps for its iPhone, in contrast to the open approach adopted by the Google-backed Android platform, is raising some hackles in South Korea.  As reported in The Korea Times, Korean internet companies are voicing increasing anger at what they say has been Apple's slowness and inconsistency in approving applications for iPhones. Controversy erupted last month when Apple discarded a number of applications from Korean music streaming sites including ``Bugs Music,'' ``Soribada'' and ``Mnet'' from its App Store content platform.  The Korea Internet Corporations Association, an industry lobby that represents 150 internet firms including NHN, Daum and Google Korea said its member companies are considering collective action against the U.S. technology giant's "unfair" business policies.  Apple has offered no explanation of why the previously-approved applications were pulled, although industry watchers suggest it may be part of the company's changing business strategy for music in the Korea market.

Until recently, Korean iPhone users had been able to access only a fraction of the vast iTunes content pool, but Apple now appears to be opening up the pipeline.  This would mean iTunes would have to compete directly with services like Bugs music.   The outcome of these developments will be worth watching closely, especially with a raft of Android-based phones hitting the market in the last half of this year!

iPhone 4 "Made in Korea?"

The Chosun Ilbo today carried an interesting short story entitled, "iPhone 4 Made in Korea."   In fact, amid all of the news reports of a titanic clash between Samsung's new Android phone and the iPhone, many of the most important components of the iPhone 4 are supplied by Korean companies.  The screen, which received a great deal of attention during the iPhone 4's unveiling recently in San Francisco, is manufactured by LG, which also makes the displays for Apple's iPad.  Samsung supplies the flash memory chip and the A4 CPU chip that powers the iPhone.  As if that weren't enough, the batteries in the new phone are manufactured by Samsung SDI, and it is equipped with multi-layer ceramic capacitors made by Samsung.  Smaller Korean companies are also involved.  Amotech supplies the varistors used in the phone, and Interflex produces the flexible printed circuit boards.

Status Report on Korea's "Smart Phone Revolution"

An article in the Joongang Daily today reports that the "Smart Phone Revolution" in Korea is finally starting.  It was accompanied by the graphic shown to the left (click on graphic to see a full-size version).   Last year only about two percent of consumers used smart phones, defined as those capable of accessing e-mail or the internet and performing functions much like a small hand-held computer.  This year the percentage of smart phone users has risen to 22 percent.

Expert predictions when the Apple iPhone was introduced have been shown to be way off target.  For example, experts predicted that 1.8 million smart phones would be sold in 2010.  Now the predicted figure is up to 5 million.

Not surprisingly, the introduction of smart phones has been accompanied by a boom in wireless data transmissions.  This is not surprising because most, although not all of the applications on the iPhone and other smart phones, rely on internet access.

Worldwide Trends in Sales of Mobile Devices

CNET has an interesting report on the trends in sales of smart phones over the past year.  Overall sales of mobile phones increased 17 percent year on year.  However, smart phones showed a 48.7 percent increase as 54.3 million units flew off the shelves.

The most interesting data in the report were in Table 2 (click on the graphic here to see a full size version).  Note that ONLY the iPhone and Android phones increased their market share year on year.  The report notes that the first quarter of this year was Apple's strongest yet, helped in part by overseas sales from mature regions, such as the U.K. but also in new markets such as China and South Korea.

Gartner's forecast for the near term suggests that the most successful companies will be the ones that control an integrated product in terms of operating system, hardware and services.  To stay competitive, manufacturers must integrate hardware, the user interface, the cloud and social networks to continue to attract customers.  Enough said. The challenge for Korean handset makers and mobile service providers should be apparent.

The "Smart-Phone Wars" in Korea

A recent article in The Korea Times notes that "smartphones may get more pricey."  Wireless carriers are worried that the governments attempt to limit their marketing expenses (see my previous post) could cool the smartphone boom by making the devices more expensive.  SK Telecom, the country's largest mobile-phone carrier with a 50-percent-plus share in subscribers, spent an amount equivalent to 27 percent of its revenue last year on marketing expenses, while the number was 33.5 percent for KT and 30.6 percent for LG Telecom, the smallest carrier.

HTC's recently released Desire, which is generating significant buzz among the handsets powered by the Google-backed Android operating system, is priced at around 900,000 won out of the factory. But SK Telecom's handset subsides have the phones sold to customers at around 300,000 won, although the exact price depends on the monthly data plans they choose.

The Korea Communications Commission (KCC) is reportedly considering adopting a ceiling for the handset subsidies, limiting the amount to around 250,000 to 270,000 won per device. 

South Korea to Cap Telecom' Marketing Costs

The Korea Communications Commission (KCC), South Korea's telecommunications regulator said on Thursday that it will limit the amount telecoms companies spend on marketing in a move aimed at cooling intense competition and boosting profits in one of the world's most saturated telecom markets.  As reported by The Wall Street Journal, the KCC said that the country's major mobile operators --including KT, SK Telecom, LG Telecom --should not spend more than 22% of their respective revenues from fixed-line and wireless businesses on marketing.   The regulator said it expects the move, which takes effect from May, to lower total marketing costs to 7.03 trillion won ($6.14 billion) this year, sharply down from 8.02 trillion won spent last year.

In order to ensure companies follow the guidelines, KCC said it will conduct an industry inspection in June and take strict action against companies that have spurred marketing competition by giving heavy subsidies on handsets or offering free gifts.

The introduction of Apple's iPhone last Fall, followed by the release of Android and other competing smartphones have contributed to the increased marketing costs.  In other words, the current intense competition is part and parcel of the so-called "iPhone effect" or "smart-phone shock" here.

Yet More on the "iPhone Effect" in Korea's Telecoms Market

One part of the "iPhone Effect" or the "iPhone Shock" to the Korean market is becoming clearer.  An article in today's Chosun Ilbo is headlined "The iPhone Casts Clouds for Korean Handset Makers."  The article notes that Korea's mobile phone exports for the first quarter of 2010 were down 11.4 percent compared to a year ago, mainly because Samsung and LG are unable to compete strongly in the surging "smartphone" segment, led by Apple's iPhone and the Google-based Android phones.

This is just another strong piece of evidence that Korea's leading handset manufacturers and exporters bear a big part of the responsibility for the two and a half year delay in bringing the iPhone to Korea.  

The "iPhoning" of Korea

Jasper Kim had an excellent short article in the Wall Street Journal a few days ago, entitled "The iPhoning of Korea."   It reiterates a number of points made in earlier posts here, and adds a new one.  According to the article, mobile service providers balked at providing free WiFi service for the iPhone, something that had become commonplace elsewhere in the world.  Eventually, as we all know, KT provided free WiFi service to iPhone owners through its nationwide Nespot network.  I'd be pleased if any readers can elaborate on this point.  Did the issue of free WiFi further delay the iPhone's entry into the Korean market, after WIPI issue was taken care of?

Samsung and Apple's iPhone

In an earlier post, I posed the following question for readers of this blog.  How could South Korea, while possessing arguably the most advanced and dense digital networks of any nation in the world, be a laggard (80 or so other nations preceded it) in the adoption of the Apple iPhone and even Android-based "smart phones"?   Based on a recent article in the Korea Times, I am now tempted to propose a one word answer that explains the single biggest reason for the delay:  Samsung.   According to the article, KT's introduction of the iPhone in Korea created a rift between Samsung and KT, which continues to this day. Among other key points are the following:

• The immense buzz generated by the iPhone contrasted starkly with the paucity of excitement about Samsung's Omnia II, which had previously been proclaimed as an "iPhone killer."


• The iPhone has been selling about 4,000 units per day and its sales exceed those of Samsung's Omnia II by a considerable margin.


• According to the report, Samsung has been channeling most of its new mobile phones toward SK Telecom, while providing lax technology support on the phones it offers to KT.  In particular, Samsung is directing its smartphone pipeline to SK Telecom, including its new Galaxy series which run on the Android platform.


• The iPhone's rise is an alarming development for Samsung because it poses the question of whether the company can adapt to a new mobile marketplace in which the focus is moving from hardware to software and services.

A Space-Themed Android Onslaught in Korea?

The forthcoming entry of large numbers of Android phones into South Korea's market is taking on a number of themes related to space.  An article in the Chosun Ilbo today speculates on why this is the case.  Samsung has chosen the name Galaxy for a smartphone to be released later this month.  Earlier this week, Pantech unveiled a smartphone called Sirius.  LG Electronics new smartphone slated for release next month is being developed under the name Eclipse.

The space theme is in line with the open nature of Google's Android project.  The name Android itself refers to robots that appear in science fiction stories and movies such as Star Wars.  Although the Chosun Ilbo story did not mention it, we might add the obvious fact that these new smart "phones" with their ability for mobile broadband access, locational services and more, are a key point of convergence and contact for entering cyberspace!

More on the iPhone Shock in Korea's Mobile Sector

Evidence of the shock that the arrival of Apple's iPhone provided to the mobile communications market in Korea continues to accumulate.  As an article in The Korea Times today puts the question, it is "Can Samsung, LG Claw Way Out of iPhone Hole?"   (click on the graphic at left to see a full-size version) Of course, it is not only the iPhone hole, but in a real sense the Android one as well.  The major players in the mobile communications sector here, including service providers, handset manufacturers and the government, somehow managed to delay the arrival of the iPhone and Android phones in this market by approximately two and a half years.   As suggested in many prior posts on this blog, that delay arguably increased the system-wide shock to Korea's domestic mobile market.   Consumers had become accustomed to feature phones and to a heavy reliance on Korean-language only services.  Handsets like the iPhone and Android-based phones, because they bring the internet and location-based services to the palm of your hand, open up a whole new world of possibilities compared with the older feature-phones.  In the long run, this will be good for the Korean market and especially for consumers here.  In the short run it provides a shock!

Question for Readers of This Blog

I would like to pose a question for readers of this blog, and would encourage you to post your answers as "comments."  If you do not want those comments to be publicized, please make note and I will respect your wishes.



The question is as follows.  How could South Korea, while possessing arguably the most advanced and dense digital networks of any nation in the world, be a laggard (80 or so other nations preceded it) in the adoption of the Apple iPhone and even Android-based "smart phones"?   In your answer to this question, I would appreciate it if you could specify the major reasons why this happened.  For example, was it a failure of government policy?  Was it that the private sector (LG, Samsung, SKT, KT) feared loss of profits?  Were there cultural or linguistic factors?



I would welcome comments from scholars, government officials, industry executives and any interested members of the public.