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.

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.  

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.

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!