Korea signals lifting of handset barrier
Song Jung-a | Saturday, 19 July 2008
International handset makers make no secret of their desire to enter South Korea, one of the world's most technologically advanced and expensive telecoms markets.
While alluring, the market is dominated by Samsung Electronics and LG Electronics - as a result, in large part, of government regulations requiring handset applications be based on a homegrown technology known as wireless internet platform for interoperability, or WIPI.
Foreign companies have found it too expensive to produce handsets tailored for Korean consumers in line with the WIPI rule. Nokia, global leader in the handset market, is virtually absent in Korea, and Motorola of the US is a minor competitor with less than 5.0 per cent. Apple, the US technology group, has kept its iPhone out of the market because of the WIPI rule.
But faced with criticism that the regulation restricts Korean consumers' choices, President Lee Myung-bak's newly elected government has expressed a willingness to soften the WIPI rule, potentially allowing foreign handset makers a way into the Korean market.
"The WIPI rule, designed to protect local companies, has been the biggest entry barrier against foreign handset makers," says Stan Jung, analyst at Woori Investment & Securities. "Once the rule is spiked, global companies will actively seek to enter the market. Then, Samsung and LG will find it hard to maintain their dominance."
Positive signals from Seoul could encourage Nokia to consider returning to Korea. Nokia first entered the Korean market in 2001 on an original design manufacturer basis but the Finnish group withdrew two years later owing to sluggish sales.
SK Telecomsaid in April it had held talks with Nokia about supplying South Korea's biggest operator with handsets although added that no decision had been made. Nokia has declined to comment on its plans to re-enter the market but analysts say any move by the group would have a big impact on local rivals, given the company's economies of scale and pricing power.
BlackBerry, the smartphone, is also set to reach South Korea belatedly.
Canada's Research in Motion, which manufactures the BlackBerry, was unable to offer the mobile e-mail device in Korea because of the WIPI rule. But SK Telecomhas won approval to offer BlackBerry services as an exception to the WIPI requirement.
Meanwhile, US-based Apple has held discussions with KTF, a local operator, to supply its next-generation iPhone. The negotiations broke down but, Oh Young-ho, of KTF, said: "Talks may resume someday. Once the device is sold here, it will be accepted well by Korean consumers, given its brand power and price competitiveness." Apple declined to comment .
Analysts say that, even if Korea does soften its rules, foreign companies could still find it tough to break the market as consumers are fussy about their handsets and Samsung and LG will fight to keep market share.
Samsung has overtaken Motorola to become the world's second largest handset maker. And the Korean group has launched the Omnia, a smartphone that works like a small handheld PC, to take on Apple's iPhone. LG took the number four spot from Sony Ericsson owing in part to the success of its stylish touchscreen phones such as the Prada, Viewty and the Voyager.
"Samsung and LG have been very good at reading consumers' changing needs and rolling out new models with much-needed features faster than their foreign rivals," says Kim Hee-yeon, analyst at Nomura Securities.
"It won't be easy for Nokia and Apple to steal market share from Samsung and LG in Korea unless they provide really distinct features."
................................
Under syndication
arrangement with FE
While alluring, the market is dominated by Samsung Electronics and LG Electronics - as a result, in large part, of government regulations requiring handset applications be based on a homegrown technology known as wireless internet platform for interoperability, or WIPI.
Foreign companies have found it too expensive to produce handsets tailored for Korean consumers in line with the WIPI rule. Nokia, global leader in the handset market, is virtually absent in Korea, and Motorola of the US is a minor competitor with less than 5.0 per cent. Apple, the US technology group, has kept its iPhone out of the market because of the WIPI rule.
But faced with criticism that the regulation restricts Korean consumers' choices, President Lee Myung-bak's newly elected government has expressed a willingness to soften the WIPI rule, potentially allowing foreign handset makers a way into the Korean market.
"The WIPI rule, designed to protect local companies, has been the biggest entry barrier against foreign handset makers," says Stan Jung, analyst at Woori Investment & Securities. "Once the rule is spiked, global companies will actively seek to enter the market. Then, Samsung and LG will find it hard to maintain their dominance."
Positive signals from Seoul could encourage Nokia to consider returning to Korea. Nokia first entered the Korean market in 2001 on an original design manufacturer basis but the Finnish group withdrew two years later owing to sluggish sales.
SK Telecomsaid in April it had held talks with Nokia about supplying South Korea's biggest operator with handsets although added that no decision had been made. Nokia has declined to comment on its plans to re-enter the market but analysts say any move by the group would have a big impact on local rivals, given the company's economies of scale and pricing power.
BlackBerry, the smartphone, is also set to reach South Korea belatedly.
Canada's Research in Motion, which manufactures the BlackBerry, was unable to offer the mobile e-mail device in Korea because of the WIPI rule. But SK Telecomhas won approval to offer BlackBerry services as an exception to the WIPI requirement.
Meanwhile, US-based Apple has held discussions with KTF, a local operator, to supply its next-generation iPhone. The negotiations broke down but, Oh Young-ho, of KTF, said: "Talks may resume someday. Once the device is sold here, it will be accepted well by Korean consumers, given its brand power and price competitiveness." Apple declined to comment .
Analysts say that, even if Korea does soften its rules, foreign companies could still find it tough to break the market as consumers are fussy about their handsets and Samsung and LG will fight to keep market share.
Samsung has overtaken Motorola to become the world's second largest handset maker. And the Korean group has launched the Omnia, a smartphone that works like a small handheld PC, to take on Apple's iPhone. LG took the number four spot from Sony Ericsson owing in part to the success of its stylish touchscreen phones such as the Prada, Viewty and the Voyager.
"Samsung and LG have been very good at reading consumers' changing needs and rolling out new models with much-needed features faster than their foreign rivals," says Kim Hee-yeon, analyst at Nomura Securities.
"It won't be easy for Nokia and Apple to steal market share from Samsung and LG in Korea unless they provide really distinct features."
................................
Under syndication
arrangement with FE