The Mobile Revolution: More on the iPhone Effect in Korea

As time passes, it becomes more and more apparent that the introduction of Apple's iPhone has sent shock waves through the mobile communications sector in South Korea, revealing some of its salient characteristics.  This phenomenon, the so-called "iPhone Effect" deserves a more thorough treatment than in my earlier post.  The following are some of my thoughts about the iPhone effect.

• The iPhone effect is occurring now only because leading industry and government players chose to ignore the implications of the transformation in mobile communications taking place around the world starting more than two and a half years ago with the introduction of the iPhone.  Neither the handset manufacturers, nor the mobile service providers, nor the government seemed very concerned about this until mid 2009.  The effect was that Korea continued to pursue an old model of mobile communication, based on feature-phones, while mobile broadband and "apps" were taking hold elsewhere in the world.


• It underscores Korea's relative weakness in the development of software and internet content, versus the manufacturing of hardware.  LG and Samsung Electronics together command a large share of the world market for mobile handsets, but are relatively weak in the so-called "smartphone" segment (I don't like this term, because the new phones, iPhone and Android, are really hand-computers or hand-broadband devices) show signs of being caught flat footed by the success of Apple's iPhone in the Korean marketplace.


• The iPhone effect also highlights the continuing high dependence on (or preference for) Korean language web content, as illustrated by high levels of usage of Naver, a Korean-language service, and relatively low levels of usage of Google.  The vast majority of the iPhone and Android apps being downloaded and used around the world are written in English or other languages.  The iPhone in Korea is exposing consumers to many of these applications, disclosing a clear "App-gap" with many of the most useful applications not yet available in Korean.


• The iPhone effect occurs partly because the Apple iPhone has introduced a multi-touch, capacitive touchscreen that is more than just screen technology.  It is a user-interface (UI) that everyone else is copying as we enter this new era of the handheld, internet-connected PC.  The iPhone is faster, easier to use and just a bit more intuitive than any of the competing phones on the market today, including Google's Nexus One and, most pointedly, Samsung's local T-Omnia II.  In this revolutionary era, the iPhone is setting the standard, much the way that the IBM PC did way back in 1980.

The revolutionary transition in mobile handsets from phones to internet-connected computers is well underway, both in Korea and globally.  Given the nature of semiconductors and other components that go into the handsets, it is clear that handsets will soon become a commodity, much like PCs are today, with more or less  modular, interchangeable parts.  The big money and the major impact of this transformation will be found in software and content.  Therein lies the future challenge for Korea.

Apple and Android in Korea in 2010

A headline from Telecoms Korea caught my eye this morning.   It proclaimed that "Six Out of Ten in Korea Willing to Buy Nexus One, If Released."  Nexus One, of course, is the new touch screen phone just unveiled by Google, which many have dubbed the "Google Phone."  The Telecoms Korea article cited a quick online poll by SmartphoneNow, a Korean-language web site.  Although the online survey is a decidedly non-scientific poll, 66 percent of a few hundred early respondents put the Nexus One first on their wish list, ahead of other Android phones soon to be released in Korea.  Now that the iPhone is selling better than almost anyone had projected, local research firms are projecting that Apple's iPhone and various Android models will provide healthy, if not overwhelming competition for Samsung Electronics Omnia Series.  This is illustrated by a market projection recently published in Telecoms Korea.  (Graphic at upper left--click to see full-size version.)

 The SmartphoneNow site also carried an interesting breakdown of major parts and their costs in the Nexus One (click on the graphic of the parts classification table in the lower left to see a full size version of the graphic). Like all "smartphones" these days, major components come from all around the world.  However, since Samsung Electronics contributes both the memory (at $20.40) and the mobile display (at $23.50), it ranks number one on this list in terms of the value of parts.  Qualcomm comes in second with parts worth $35.50.  So, if Nexus One does extremely well in Korea, taking market share away from Samsung Electronics own models, does that really hurt Samsung?

The information presented here simply confirms that Korea's mobile market is in the early stages of a complete transformation (I was going to say "upheaval,") with consequences for everyone, handset manufacturers, companies that make handset components, mobile service providers, and of course customers.  In a development that could really shake up Korea's market, Google is selling the phone directly over the internet via its own site, using a picture of the phone plus the headline and tagline "Nexus One -- Web Meets Phone."  That pretty much says it all, it is all about mobile broadband, with the content and applications it makes possible. If you clicked on the previous link, you'll see the notice "Sorry the Nexus One Phone is Not Available in your Country."  I wonder when it will be and which of Korea's mobile service providers will offer it.

The rapidity with which customers in Korea express a preference for Android-based phones, before they even arrive in the Korean market, is indeed interesting.   However, in one sense this is not at all surprising.  Korean customers are "tech-savvy" and easily capable of discerning that all phones will very soon be hand-held computers.  For Korea's mobile sector and its IT industry generally, the best strategy will be to open the marketplace up, not only for the Nexus One, but for all the new handsets, tablets and other devices that will emerge in the second decade of this century.  Doing so may mean hardships in the short term for some companies, but they will strengthen Korea's case to be one of the world's most important testbeds for cutting edge new technology.  Apple's iPhone and various Android models should do very well here this year!

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.

The Imminent Mobile Internet Revolution in Korea

There is more information to add to my earlier posts on the rapidly approaching shakeup in Korea's mobile market.  A recent article in the Korea Herald highlighted some of these points.   It began by noting that only 10 percent of Korea's mobile phone users currently subscribe to a fixed rate data plan for mobile internet, compared with larger percentages in other advanced countries, as shown in the graphic (click the graphic for a full-size version).  Not surprisingly, revenues from data services in all those other countries are significantly higher than in Korea. The main reason for Korea's low percentage of data-service use, in a country where everyone carries an internet-capable 3G phone is, of course, the outrageously high rates charged for data services.  Also, smartphones make up only 1 percent of total handset sales (I must confess that I didn't realize it was this low!)   All of this while the iPhone, along with the Blackberry and other smartphones have enjoyed booming popularity around the world for the past two years or more.

In the Korea Herald Article, analysts claim that the iPhone will create a breakthrough in Korea's wireless internet services.  One is even quoted as saying that the iPhone will bring about a paradigm shift that will lead to a better telecommunications environment for consumers.  I would simply note that the paradigm shift is well underway all over the world, and it involves not only Apple's iPhone but most notably the Google-supported, open source Android platform, and of course Symbian which continues to lead the world in smart-phone market share.   As noted in my previous post, Android is predicted to move ahead of the iPhone by 2012.

A final thought:  although this post focuses on mobile internet, the continued rapid convergence of digital media means that it has ramifications for converged services in the "ubiquitous network" era that is rapidly approaching.  Mobile handsets, after all, promise to be the key device in that era, providing users with services based on increased ambient intelligence in Korea's cities, towns and even rural fishing and farming villages.

Korea Times: "Closed Mobile Market Frustrates Consumers"

The headline of this article in the Korea Times says it all.  There has been a lot of local press coverage about the Apple iPhone (not yet available in Korea) and Android Phones (being launched by Samsung and LG in Europe and not yet available in Korea).  This latest article summarizes many of the points I've made in earlier posts.  I'd add the following considerations just to sharpen the point.

• it is becoming more than a little embarrassing for South Korea, a nation that touts its high levels of broadband internet access to actually deprive consumers here of mobile broadband access.  (I subscribe to SK Telecom's service but will NEVER use NATE.  Not only is Nate expensive, it doesn't even provide unfettered access to the internet! I'd like access to the internet via my handset.)


• Instead of protecting old-fashioned, Korean language only services, Korea should open up the mobile internet market.  Force Samsung, LG, KT and SK Telecom to compete here with the best the world has to offer.  This competition, over the long run, can only strengthen Korea's position in the global market.


• Now that handsets basically function like hand-held computers, it is natural that people want to use them as such.  This means that Korean corporations need to rapidly shift their focus to the production of software and content that young people today and future generations will want to use.  The handsets, like the PCs of old, will become commodities.  

Chosun Ilbo: "Global Phone Makers Fail to Impress Koreans"

The headline of an article in the Chosun Ilbo English online edition tells you a great deal about how some people in Korea view the market for mobile telephone services here.  The gist of it is that makers of international phones are failing in the Korean market for lack of new models that come up to the standards set by Samsung and LG Electronics locally.  In fact, this is only a small part of the story.   The real news, as I've commented in earlier posts, is that mobile phones are rapidly being transformed into hand held computers with web browsers, as epitomized by Apple's iPhone.  I read the Chosun Ilbo article today shortly after reading a short New York Times article announcing that Nokia and Intel are partnering to work on mobile computing.  In observing Korea's mobile communications market today, several key realities should be kept in mind.

• It is still not possible to purchase and use an iPhone in South Korea, and may not be possible until late this year or early next.  This, despite the fact that slim new Android phones are being released in the U.S., Europe and around the world.


• Although most Koreans carry 3G cellphones capable of internet access, the two largest mobile services provide only a limited "walled garden" Korean database, rather than access to the full richness and variety of the web beyond the Korean language.


• Despite the above two points, many consumers here in Korea are eager to see the iPhone released in this market.  As evidence, take a look at sales of the iPod Touch, which almost functions as an iPhone if you're in one of the nation's many WIFI hotspots.  Millions of overseas Koreans, who already use the iPhone or Android phones to surf the web, must be lording it over on there relatives here in South Korea.  The word of mouth promotion alone is something Apple could never afford to pay for.

The pressure to catch up with the rest of the world will continue to mount.  The Korea Communications Commission seems to be nudging the mobile industry toward full openness and competition, which should be a good thing for Korea's export-oriented, ICT-based economy.  Delaying the iPhone is, as I mentioned in an earlier post, delaying the inevitable.

Apple Bores a Big Hole in Korea's "Walled Garden"

As a short follow-up to my earlier post, there is an excellent treatment of the current situation at this link. Enjoy.

The Challenge for Korea's Mobile Telecoms Sector

Today many Korea-related blogs were filled with speculation that Korea Telecom was planning to introduce the Apple iPhone in Korea next month.  This was quickly dampened when a KT official apparently announced that there was no such plan.  However, the excitement generated points to the growing challenge faced by South Korea in its mobile telecommunications sector and, by extension, in the global marketplace.  As noted in earlier posts on this topic, several things are becoming clear:

• The mobile market worldwide is on the verge of a massive shift in emphasis from handsets to software and services, as epitomized by the Apple iPhone and Google's Android software platform.


• Korea's handset makers, led by Samsung Electronics and LG Electronics are major players in the global handset market, with much to gain or lose from the massive shift over to hand held computer/communication devices.


• As noted in a recent Reuters analysis, Korean mobile communications service providers have concentrated overwhelmingly on Korean-language services, which don't easily translate into the global market which demands English and other languages.

Samsung is reportedly planning to open up an App store later this year, but will it be a global app store, in competition with iPhone and especially Android applications?  It should be and my recommendation and hope would be that both Samsung and LG invest heavily in making the Android platform successful, here in Korea and around the world.  The rationale for quickly releasing a state-of-the-art Android phone capable of toggling between English and Korean seems obvious.  With some of the world's best mobile networks and the impending transition for some customers to WiBro, Korea is easily the world's largest national test-market for new mobile services and software.  Encouraging competition and innovation in that market is what will serve Korean handset manufacturers and telecommunications providers best in the long run and in an increasingly global marketplace.

Delaying the Inevitable: The iPhone No-Show in South Korea

It is interesting to see the local press reaction to Apple's recent unveiling of its newer, faster iPhone.  As reported in the Joongang Ilbo today, "one model is still missing in Korea's abundant cell-phone market, the iPhone."   This is the case even though the Korea Communications Commission eliminated the WIPI software requirement (barrier) in April of this year.  For years, there have been reports that both KTF and SK Telecom have been talking with Apple about introduction of the iPhone, but as yet no results.  Some Korean consumers are obviously eager to get their hands on an iPhone, as illustrated by the popularity of the iPod Touch, which is basically an iPhone without telephone capability.

So what is the problem?   According to press reports, it is that Apple has its own proprietary system of content and applications which would take business away from the content services of SK Telecom and KT.  The Joongang Ilbo article quotes a telecommunications analyst as being skeptical of the iPhone's success in Korea, saying that people have waited too long and that they've already bought the iPod Touch instead.    If you believe this line of reasoning, I have a bridge to sell you.   The delay in releasing the iPhone in the South Korean market, along with Android Phones and any other global competitors, will only hurt Korean consumers, handset manufacturers and ultimately companies like KT and SK Telecom.  Consider the following:

• The iPhone is the best of a new generation of phones that clearly show how the mobile communications industry is entering a transition from phones to handheld computers and devices that also happen to handle voice telephony.  See my earlier post on "Korea's Stake in the Future of Mobile Broadband."


• Consumers in Korea want mobile broadband for everything it will do, including web search, browsing, mobile internet games and so forth.  They do not want to be limited to the content SK Telecom or KT packages for them.


• Yes, bring in the iPhone, Android phones and other smart-phone competitors will increase competition and take some content-business away from the large domestic telecoms service providers!    This is good and is what both industry leaders and the government should expedite.    One the whole, it will benefit Korea by making its companies more competitive in the global market.  


• Given that the entire mobile industry worldwide is entering a seismic shift, South Korea today is only delaying the inevitable for short-term profit.    

The Mobile Internet is Coming: Korean Web Portals Target Mobile Phones

There is a very interesting article in today's Korea Times, detailing how major web portals in Korea are now targeting mobile phones by formatting their material for handsets.   They include

• http://m.naver.com (a new arrival)


• www.daum.net (since January)


• www.cyworld.com (Mini-cyworld last December)


• mini.paran.com (Paran, the internet unit of KT Wednesday of this week)

As the article points out, traffic to mobile portals remains miniscule as most wireless users (including yours truly) won't touch their expensive data services.  However, as it concludes, all of this will change with the arrival of the iPhone and Android phones into the Korean market.  As noted in an earlier post the mobile market worldwide is shifting not just to smartphones, narrowly conceived, but to hand-held computers with flat rates for accessing the internet.  The sooner South Korea joins this trend the better for its consumers and exporters of mobile phones.