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Mobile Market In South Korea

The population of South Korea stands at 50 million where 45 million people have subscribed to mobile network this also suggests that the penetration of mobile network subscription is around 91%.

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Definition / Scope

A mobile phone is a cellular telephone which is integrated with a computer and other features such as operating system, web browsing and has ability to run software applications. In other words it is also known as smartphones. It includes smartphones, tablet PC's, notebook PC's etc.

South Korea is 11th largest economy in the world and most advance country in terms of technology and is known for fast internet speed and latest infrastructures. It is home to global tech related electronic devices manufacturers Samsung and LG. However, at recent times the country has been embracing entry of foreign players from economies like China and USA.

As of January 2018, the Apple Company opened its first outlet in South Korea and has been able to grab almost about 30% of the total market share of the smartphones. This trend is continuing as other foreign players are getting good momentum in the country's market due to their quality offering. This has further created fragmentation in the smartphone market of South Korea. As the smartphone sales are continuously going up in the world and one of the major reason for this is South Korea.

The country has been taking up on latest technologies, design and features in smartphone quite well. The smartphone consumers in South Korea are most tech-savvy than any other in the world and this is the major reason which presents a scope for future offerings despite of the country transitioning into a mature phase in smartphone market.[1]

Market Overview

The population of South Korea stands at 50 million where 45 million people have subscribed to mobile network this also suggests that the penetration of mobile network subscription is around 91%. In the entire Asian region the country is ranked at the 9th position in terms of the penetration rate. Although countries like India and China which are ranked in 1st and 2nd position have substantial population but the market is under penetrated at less than 50% but South Korea after Japan is the major country to adopt smartphone and LTE services faster than any other country in Asia Pacific region.

The smartphone adoption in South Korea is identified at 84% by 2020 which is highest in the Asia Pacific region average of 65% and even higher than saturated markets such as North America where the penetration stands at 75%. The leader of 4G technology in Asia is South Korea where the network coverage is widespread which makes the country technologically advance as 4G penetration in entire Asian region is less than 20% as of 2018. 4G adoption is highest in South Korea at 58.9% followed by Japan at 17.5% respectively.

The data usage adoption in South Korea is expected to reach 91.6% by 2019 which is highest in the Asian region. The actual usage of mobile commerce in South Korea is also highest at 37% of purchases being made through mobile medium. Thus, South Korea has been leader in mobile phone and related technology adoption and usage in the entire Asia Pacific region.[2]

Key Metrics

Metrics Value Explanation
Base Year 2017 Researched through internet


Market Risks

Smartphone Obsession

South Korea is world leading in terms of the country's 93% population having access to internet, mobile phone and latest technologies. 88% of the adults in the county own smartphones and even more surprising is the fact that 72% South Korean children own their first smartphone at the age of 12.

The adoption is so rapid that within 5 year period the entire country has transformed into a technology hub where people own smartphones and use them for various purposes such as learning and messaging but there are concerns regarding the effects of smartphone usage which is increasing isolation among kids and developing narcissistic personalities in them.

There have been reports of teens routinely involved in overuse of smartphones that has hampered their studies and also led to distress. Besides school, the children are mostly occupied with smartphones during their leisure time. Not only children but most of the adults are also obsessed with smartphones and are not following the basic protocols and discipline in workplace. They are unaware about the negative effects of overuse of mobile phones in their health. South Korea also has rehabs which are designed for the youths over addicted to computer games and digital devices.

25% of the kids are addicted to mobile phones in comparison to 8.9% of adults as of 2016. Along with physical health problems such as neck and back pain, dry eyes the cyber-bullying is one of the rising problem associated with addiction for smartphones. A statistic report revealed that teenagers in South Korea are unhappiest in the world because of increasing exposure to abuse in internet and social networking sites.

With such instances the government of the South Korea would definitely take strict actions to prohibit use of smartphones among both children and adults followed by the parents who are likely to discourage their children on overuse smartphones.

As South Korea is already mature market in smartphones, these cultural factors could further slow the growth of the industry in its domestic market [3]

Top Market Opportunities

The new trend in the smartphone market of South Korea is the unlocked smartphones. These phones are low cost and have hassle-free appeal. By unlocked phone it means that it is not associated with telecom operator and it can be used with any carrier in any country.

The sales of such smartphones has doubled in 2018. At present the consumers are opting the models offered by Chinese companies Huawei and Xiaomi and US based iPhone. A survey also revealed that 85% of the respondents who were smartphone buyers preferred to buy a Chinese product because they has a good trade-off of price and quality.

As Koreans are fast to adopt anything that is trending, the remaining players in the market and the new entrants have a huge opportunity to benefit from by catering to changing needs of consumers and keeping an eye on the latest trends.[4]

Market Drivers

South Korea stands at first place in terms of smartphone ownership and internet use as a survey revealed that 9 out of 10 adults in Korea use internet and own a smartphone. As of 2017, South Korea has highest smartphone penetration rate of 94%, internet penetration of 96% and is also well-connected in terms of mobile network at 96% respectively.

Despite it is a connected a bit lower in the social networking as it stands at third position at 69% penetration when it comes to usage of social networking sites. Such high penetration of smartphone use, internet, data technology and internet communication technology is continuing to drive the mobile phone market of South Korea. [5]

As South Koreans are technology obsessed it is a common thing for them to use smartphones. The aggressive strategy to penetrate the market by application developers, wireless networks and network service providers together is fueling the need of consumers to have smartphones. The free wireless networks across the country and cutting-edge gadgets are widely available which is why many people are opting for smartphones.

The promotional activities, selling & distribution is fluent in South Korea than any other country in the world due to the booming demand for the smartphones. The country has a widespread broadband network and data internet with no charges which is further driving the growth of smartphones. The network service providers are growing their strengths every year as the data traffic is accumulating due to the rising number of individuals using smartphones.

Thus, Korean's have an excessive passion for the gadgets so they don’t waste any time for trying out new technologies and they are less sensitive to higher prices of smartphones or high phone bills.[6]

Market Restraints

Despite of the overseas market penetration by the South Korean mobile phone manufacturers, the export income from the industry is fading because of the external players from China and USA which are more competent and are emerging all across globe. In 2013 alone South Korean smartphone manufacturers controlled 19.7% of the total smartphone market in China went down to 1.7% in 2017 whereas the four Chinese smartphone brands such as Oppo, Vivo, Xiaomi and Huawei are controlling 48.7% of the total market in China in the same period.

The scenario is same for the global market where the share of South Korean mobile manufacturers is declining every year. The factors that are hindering the growth of South Korean companies is the oversupply and low-profit strategy of the US and Chinese smartphone manufacturers. Similarly other ancillary industries supporting smartphones production such as semiconductors and OLED production is led by South Korea in the world but the venture of China into these industries is likely to restrain its growth due to China's overproduction capability and cheaper price offer which will reduce the market share of South Korea in global context.[7]


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Industry Challenges

At one point of time when South Korea highly embraced smartphone technology at present times the scenario is different as people have become slow to upgrade their mobile phones. Despite of the intense competition in the Country's mobile phone industry, where the manufacturers are introducing new features, design and technology every year fewer people are buying the smartphones.

The overall global smartphone market has been identified with decline in sales as of 2016 and this is mostly due to the sluggish replacement cycle of smartphones. In response to such a situation, both Samsung and Apple has opted for trade-up service where they allow customers to trade eligible phone and receive instant trade-in credit for purchase of new model.

As replacement cycle is expected to rise up to 33 months by 2018 from 31 months in 2017, the challenge is for the existing players to shift their focus towards what will encourage the customers to shift to new phones. As South Korean mobile market is mature and customer needs are not limited to small changes but big transformations which can only drive the sales of these products within the country.

At present, consumers in South Korea are looking for new design such as fold able phones which has been long gone in other parts of the world but the players have to consider to introduce it in the country's market to drive smartphone sales in near future. [8]

Technology Trends

Some of the notable innovations by South Korea in the field of mobile technology are follows:[9]

  1. Bridge call- It is also known as VOIP technology whereby a person can keep in touch with their favorite people who could be family or friends at free of cost. The technology is integrated the mobile handsets sold in South Korea and the call can be made by a rare carrier-supported WIFI feature. It is an application which aims at being invisible, only a registration is required and then the app directly enables the free call in the carrier.
  2. Korea Creadic Life: It is a software developer company which has developed a mobile pad where the actual mobile phone can be placed and this pad allows the user to perform multi-tasks such as POS, CAT, electronic signature, credit card payment etc. As it is equipped with NFC, RF payment, QR code recognition, mobile coupon etc this will also allow efficient mobile-based payment in near future.
  3. Bench Soft- It is a mobile accessory manufacturer which has recently introduced a state of art technology whereby a charging cable which charges at a lightning speed with 2 times faster charge ability than normal chargers
  4. Optical lens case- It is a special type of lens that has been developed in South Korea especially for the smartphones where the lens case doesn’t contain any clips, magnets or detachable covers but instead is attached to a mobile case in which phone can be placed to enable the use.

Pricing Trends

South Korea is the second country in the world which has highest average smartphone selling price after Japan. The average wholesale price of smartphones in the country is $466 as of 2017. Even though, USA is known as the largest market in the world when it comes to premium phones, South Korea is home to flagships such as LG and Samsung which are well-known brands worldwide.

Other countries in Asia such as China and India have average price of $209 and $128 respectively which makes their brands competitive in context of price offer. However, the domestic market of South Korea is still dominated by Samsung, apple and LG as people here prefer high end models in smartphones.[10]

Regulatory Trends

The government in South Korea has developed their own application known as Smart Sheriff through which the government plant to keep surveillance upon the young people who use mobile phones to visit website. Anyone who is under 19 years of age has to download the application into their mobile phone compulsorily as this will enable the government to keep track of the activities of children in internet. It is an initiation by the government is to protect kids and teenagers in South Korea against the increasing cyber bullying.[11]

Market Size and Forecast

As of 2017, Samsung has sold 2.4 million units of smartphones in South Korea and recorded a market share of 46% in terms of revenue whereas apple sold 1.5 million units in the same period of time accounting 28.3% respectively. At the third position, LG was able to sell around 80000 units of smartphones nearly doubling its market share from 8.3%.[12]

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Market Outlook

As of 2018, the average of 2 hours 3 minutes is spent by the South Korean adults in their smartphones which accounts in the 28.6% of their daily media time. This is highest share than in any other country. By 2019, the figure is expected to rise by 6%. The increasing popularity of the smartphones is driven by mobile applications, mobile video and gaming which are increasing trends in South Korea.

By 2019 the country expects to roll out 5G data which is expected to be first in the world to upgrade to the data network and this is likely to increase the smartphone time upon the tech-savvy consumers of South Korea.[13]

Competitive Landscape

In South Korea, 'Chaebol' is a common industrial term used to denote the conglomerate companies. These Chaebols together control 77% of the industry of South Korea whereas rest 23% are controlled by individual companies, SME's also known as non-chaebols. Among the chaebols, Samsung electronics alone leads the market by 41% share followed by Hyundai with 13% and LG with 9% share at the third position.

In terms of the retail volume of mobile phone penetration in South Korea, Samsung was the leader with more than 60% market share in its home country. Although foreign company apple is in the second position in retail volume at 28% market share, LG is in third position and has introduced its flagship smartphone G7.

Besides these three major players there are other companies which have slight increase in the market share of smartphones within South Korea. Two most prominent companies Xiaomi and Huawei are aggressively penetrating their distribution network in mobile phone industry in South Korea.

Despite of the entry of foreign brands the population of South Korea still remains unaware about these brands and they don't have well-established distribution networks and government support as that of Samsung and LG.[13]

Competitive Factors

As of the fourth quarter of 2017, Apple which is the biggest rival of the Korean Giant Samsung achieved highest market share in South Korea with a rise in market share at a rate of 3.3% whereas Samsung's share fell by 9% in the same period. The third, largest player in smartphone segment in South Korea which is LG was also able to double its market share from 8.3% to 15.7% in the same time respectively.

As LG is growing rapidly in its home market, it poses significant challenge to Apple which has grabbed the number 2 slot. The presence of Apple became dominant in the year 2017 with its first retail store that opened in the country. Further, Apple gained the momentum because of the discounts it provided in its 6 and 6S models. The combined sales of iPhone 8 and iPhone X reached 120% of the sales of iPhone 7 which suggests that apple is heading towards an aggressive strategy to penetrate more market.[14]

Another mobile brand which is China based, called Xiaomi has launched its recent model called Hongmi Note 5 in South Korea priced at a range of $190-$285, the brand is able to gain edge by using competitive pricing as other mobile phone brands are selling over $500. Due to the pricing factor, this brand has got huge attention from the Koreans. The company aims for a low-margin and grow market at initial phase of penetration due to which it is challenging the South Korean giant Samsung in its own home market.

The feedback of the Korean customers regarding its new model is tremendously positive. Looking at the response, the brand is opting to open its own retail store in the country.[15]

As LG has been continuously struggling to thrive in its smartphone segment and has been incurring loss of $650 million for last 11 quarters up till second quarter of 2018. The South Korean electronics giant is now heading towards a new strategy whereby it will launch smartphone only when needed and not fall into the compulsion created by head to head competition between Apple and Samsung.

LG is reducing its losses in smartphone segment every year and focusing on other advance technologies such as robotics and AI to offset the losses incurred in mobile phone division whereas for mobile phone it has long term plan where it would acquire small ICT firms and invest in research and product development to strengthen its smartphone segment.[16]

Key Market Players

The top mobile phone brands in South Korea according to the highest market share are follows:[17]

  1. Samsung
  2. Apple
  3. LG
  4. Huawei
  5. Xiaomi
  6. Pantech
  7. Google
  8. TG & Co.
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Strategic Conclusion

South Korea is home to largest giant companies in electronics not only within the country but all over the world. These companies are world leaders and continue to be because they are backed by diverse product lines and are improving their brand image day by day. These giants are LG and Samsung which have built reputations for innovation in technologies like 3D displays and light emitting diodes.

As the global mobile phone market is largely fragmented these brands account less than 5% of the total market. However, they have strong presence in their own home market. As the South Korean mobile phone market is at a highly saturated point, these companies have to build new strategy to penetrate more market and protect themselves from external emerging players.

The main advantage of South Korean smartphone manufacturers is that these companies here invest highly in research & development activities which will allow them to have an edge over competitors when it comes to innovation and developing latest technologies.

References

  1. https://www.thenational.ae/business/technology/apple-and-samsung-duke-it-out-in-south-korea-1.748165
  2. https://www.gsmaintelligence.com/research/?file=fba9efc032061d5066b0eda769ad277f&download
  3. https://thediplomat.com/2017/12/south-koreas-smartphone-obsession/
  4. http://www.koreaherald.com/view.php?ud=20161024000996
  5. https://technology.inquirer.net/76870/south-korea-no-1-worldwide-smartphone-ownership-internet-penetration
  6. https://phys.org/news/2011-11-tech-obsessed-koreans-smartphone-boom.html
  7. http://english.hani.co.kr/arti/english_edition/e_business/839793.html
  8. https://www.scmp.com/news/asia/east-asia/article/2145651/phone-makers-are-concerned-about-increasing-lifespan-smartphones
  9. https://yourstory.com/2014/10/south-korea-mobile-innovations/
  10. http://koreabizwire.com/s-korea-has-second-highest-average-smartphone-selling-price-data/113851
  11. https://www.bbc.com/news/av/technology-33130278/smartphone-sheriff-app-in-south-korea
  12. http://www.businesskorea.co.kr/news/articleView.html?idxno=20562
  13. 13.0 13.1 https://www.emarketer.com/content/smartphones-will-capture-more-than-one-quarter-of-time-spent-with-media-in-south-korea
  14. https://9to5mac.com/2018/02/20/apple-market-share-korea/
  15. https://www.digitimes.com/news/a20180723VL203.html
  16. http://www.koreaherald.com/view.php?ud=20180111000355
  17. http://gs.statcounter.com/vendor-market-share/mobile/south-korea


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