KT to Nuture the Software Industry

As reported in The Korea Times, KT has announced new measures to support the growth and development of South Korea's software industry.  The article also summarizes some of the key changes in corporate culture within KT under the leadership of Chairman Lee Suk-chae.   It is well worth reading.

The Smartphone Race a Hardware Battle? Samsung's Future

The Financial Times carried an interesting article today entitled "Samsung needs to hit reset button." .

It referred to the company's strength in hardware, notably memory chips, in which it invested  Won11,000bn last year.  Also, its bright and power-efficient Amoled (or active matrix organic light-emitting diode) mobile screens are increasingly the industry standard.

But the long term worry for Samsung is software, which is crucial to its increased focus on high-end consumer electronics such as smartphones and tablets. Falling prices for chips – which constituted about half of second-quarter operating profit – have pushed Samsung to prioritise its Galaxy devices, which are big challengers to Apple’s iPhone and iPad.

The article goes on to quote Chang Sea-jin, professor at Singapore National University who says Samsung was fortunate to produce such devices just as Google’s Android was becoming a standard operating system. He argues this reduced the smartphone race to a “hardware battle, where Samsung is strong”.

However, especially since Google's acquisition of Motorola, Korean government sources have expressed concerns about Samsung's weakness in software. Kim Young-Chan, an analyst at Shinhan Securities is quoted as saying that “Samsung cannot easily build up software in a short time and it is hard to expect major changes from Korean engineers with fixed ways of thinking,” said Mr Kim. “But Samsung will not be marginalised, given its strength in hardware.”

Korea's Hardware Success and Software Challenge

A great deal has been written over the years about the strength of Korea's IT manufacturing and export sector in comparison to its relative weakness in software and content industries. The Joongang Daily has a lengthy article on the topic today, with supporting data and an effort to explain why Korea remains relatively week in the software area.

According to the article, as Korean companies take a hard look at their software vulnerabilities, they say they see a vicious cycle at work.

First, students shun software-related majors at universities. The quality of Korean software manpower falls behind that of other advanced countries. Companies don’t pay and treat their software engineers right. And that goes back to students shunning software majors at universities.

The accompanying graphic shows average salaries by certain occupational groups (click on the graphic to see a full size version).

According to a recent report by the Samsung Economic Research Institute, the number of places in IT-related departments at about 100 major universities in Korea have been declining for four years straight since 2006.

Admission quotas, or places, in computer engineering departments plunged at the fastest rate. The figure stood at 80 in 2006, but decreased to 73 in 2009. That compares to the figure for electric and electronic engineering, which inched down from 87 in 2006 to 85 in 2009.

“As the IT environment undergoes rapid changes, it’s crucial for Korea to secure software capability fast,” the report pointed out. “But universities appear to have succeeded in neither attracting top-tier software talent nor providing high-quality education programs.”

“The morale of Korea’s software talent is at its lowest,” said Daniel Lee, 41, CEO of Inspirit, a local company that makes software for mobile communication networks. “The importance of software is growing day by day, but if things don’t change, Korea’s software industry has no future.”

Some cite an even broader problem in the Korean technology industry: An under-appreciation of the value of start-ups and their innovative ideas, except by foreign tech firms.

CNN Executive on Mobile News and The Need for Original Content

As noted in a Joongang Daily article today, Tony Maddox, 50, executive vice president and managing director of CNN International, based at CNN’s headquarters in Atlanta, believes that not many people sit in front of the television to watch scheduled news and that is why CNN doesn’t feel threatened by the introduction of social media but “embraces them.”   As readers of this blog may know, I've been interested in television news for a long time.  It was the topic of my doctoral dissertation at Stanford, which later was expanded into my first book, Television's Window on the World, which is still available via many bookstores and can be downloaded free of charge from Google Books.  The book examines ten years of U.S. network television coverage of international affairs back in the pre-CNN, pre-internet era.  My interest in television news continued over the years, and I wrote two Headline Series monographs for the Foreign Policy Association, the latest of which was The Internet and Foreign Policy.

Now, back to the Joongang Daily article based on an interview with CNN's Tony Maddox. Today's consumers, he said, are not going to tie themselves to scheduled TV news. "They want TV news when they want it, on the go."



Maddox explained that as a result of the expanding platform of the Internet and mobile and iPad applications, to meet soaring demand, “more people access CNN content and read, listen and watch stories today than at any point in history.”

Under Maddox’s direction, CNN has been spending “enormous sums of money” since 2007 to add more correspondents to cover the world, which he said was in contrast to other media companies that have been reducing the number of foreign correspondents to cut back on expenses.



This is a move, Maddox said, that CNN has taken to “distinguish itself in the marketplace” in such an era in which everyone can say they are a reporter by having a mobile phone in hand.



The basic points made by Maddox apply not only to news, but to other forms of information as well. Despite the flood of information unleashed by the internet and the rapid spread of mobile devices, people everywhere long for high quality, accurate, trustworthy and credible information.

Nexon Positioned for Success in Global Market

For some time, analysts of South Korea's dynamic ICT sector have noted that its success was largely based on the manufacture and export of hardware, prominently including semiconductors, screens, television sets, and mobile handsets.  Korea has been viewed as relatively weak in the production and export of software, content and services.   That situation may be changing, and one reason is the potential of Korea's online games in the global market.

A recent article in TechCrunch uses the Korean company Nexon as an example of Asian innovation in the world of free-to-play games and virtual goods.  The article is well worth reading.  I would only add, as noted in earlier posts, that the world of online games has business implications and future applications that extend far beyond the game industry itself.  These include education and the process of admission to colleges and universities, both areas of interest to our new Asia Center to Advance Educational Exchange (ACAEE).

Hardware vs. Software: Korea's Growing Dependence on Manufacturing

The Joongang Daily and other media are reporting today on a new Bank of Korea report that shows Korea's increasing dependence on its manufacturing sector over the past nine years.  (Click on the accompanying graphic to see a full size version)  Last year the manufacturing industry created total value worth $257.4 billion, or 30.6 percent of the country's total.  This represented the first time that the percentage from manufacturing exceeded 30 percent and it was also a significant increase over earlier years.

In terms of the focus of this blog, it is significant that Korea's manufacturing industries are led by electronics.  In other words, these figures reflect a heavy reliance on the manufacture of semiconductors, mobile handsets, flat screen television sets and computer monitors and other electronic components.  This compares with relatively small production of software and content, which comprises by far the bulk of the global ICT industry.  The Bank of Korea also reported that last year's exports tied to the manufacturing sector were 5.6 times greater than exports by the service sector.

According to an official from the Knowledge Economy Ministry, “There is a need to develop high-value service sectors such as medical, information technology, finance and insurance in addition to low-value service sectors such as retail and lodging.”

Employment Effects of Mobile Broadband Boom in Korea

An article in The Korea Times caught my eye this morning.  Entitled "Mobile boom proving as economic catalyst?" it offered some details about the impact of the current mobile broadband boom and "smartphone shock," on employment patterns in South Korea.  In particular, government figures show that the number of creative one-person enterprises in the country increased sharply last year on the strength of the explosion in internet devices and content.  According to the Small and Medium Business Administration (SMBA), the nation's one-man enterprises reached 235,000 in 2010, up 15.7 percent from the preceding year, and the number accounts for about 1 percent of the economically active population.

The number of people who want to develop applications has been on the increase, said an instructor at a local information technology educational institution, which offers an education service on applications. Reportedly, those who are familiar with computer programming can develop an application after a one-month course.

The government report also said that more than 60 percent of those who established one-man creative enterprises had earned bachelor's degrees or higher academic qualifications.

Korea to Develop "Software Maestros"

In an effort to boost the nation’s lagging software industry, the Ministry of Knowledge Economy selected 100 young trainees to be part of its first “Software Maestro” nurturing program.The ministry’s move comes amid concerns that the country’s industrial focus has been on hardware industries such as semiconductors and liquid crystal displays at the expense of its software industry.

In 2009, Korea’s market share of the global software market was just 1.8 percent, or $17.8 billion, according to recent government figures.

The share of software exports was even lower, taking up only 0.8 percent of the total global pie.

Additional information on the new "World Best Software" Program are contained in an article in the Joongang Daily.

Hardware versus Software

The Chosun Ilbo carried an opinion piece today that focused on the relative lack of development of South Korea's software industries.  Among other things, it pointed out that

• Last year Korea exported IT products worth U.S.$121 billion, which accounted for a third of the nation's total exports of U.S. $363.5 billion.


• The leading exports were all manufactured products: memory chips, displays and mobile handsets.


• On the other hand, exports of Korean-made software totaled just U.S. $300 million, less than 1 percent of all IT exports.


• Foreign products take up 78 percent of the local software market.

The editorial concluded with reference to the rapidly growing smartphone market, which shows that manufacturing good handsets is no longer enough.

Apple Envy at Samsung Electronics?

An article in Business Week suggests that Apple-envy may have been a major factor in the recent personnel shakeup within the Samsung Group.  The company Choi, Gee Sung, the head of its TV and cellphone business as CEO, replacing Lee Yoon Woo.  It also created a new position, that of chief operating officer, for Lee Jae Yong, the only son of former chairman Lee Kun Hee.

Some Samsung-watchers have a one-word answer for why the company made these changes now:  Apple.    For all of its success in consumer electronics, the company is an also-ran in the battle to win customers away from Apple's iPhone.  Park Kyung Min, chief executive of fund manager Hangaram Investment and a longtime watcher of Samsung noted that "Samsung must have taken a whopping blow from the revolutionary popularity of the iPhone.  To emulate Apple it needs a new start."

Until now, Samsung electronics success has come largely from the development and worldwide sale of electronics hardware, led by semiconductors, flat screen displays and televisions and handsets.  According to Business Week, the new management team will try to refocus the company on total solutions, including creative software.  After all, the Apple iPhone is a beautiful and efficient piece of hardware, but everyone knows that its real worldwide popularity lies in the software applications available through its App store.  The Apple iPhone is really just the first of a whole generation of hand-held computers and internet terminals.  The new Android phones will emulate the best features of the Apple iPhone and eventually these handsets will be come commodities, just as desktop or notebook PCs did.  Perhaps Samsung should envy Apple, but not for its hardware, but rather all of the very useful internet and iPhone based applications that people love to use!