|
|
|
|
 |
|
|
SPECIAL ADVERTISING SECTION
Korea A global player 
Digital Dream South Korea has truly reached the Digital Age and the country's economic turnaround is showing that they can do it with panache and with profit. After you read this, take a look around your house. If you've got modern electrical appliances, chances are they have a computer chip in them and chances are it was made in Korea, a country only slightly larger than the US Midwestern state of Indiana. In the digital age, a growing range of appliances need chips to operate -- ranging from PCs, mobile phones, digital televisions and set-top boxes, to the less obvious refrigerators and air conditioners. Korea has become a global player, exporting their digital know-how to a world that is always ready for the next big thing. When a $400 billion economy bounces back from crisis conditions in three years the world stops to take notes. If the dream of digital communication is not enough, imagine a country where the government rises above bureaucratic inertia to change regulations so that they benefit customers, small to medium-sized companies and the giants, the chaebols. Everybody is getting a piece of the digital pie. South Korea is giving entrepreneurs tax breaks and exempting them from military service so they have time to develop their good ideas. South Korea is one of the first economies to shake off the global downturn and contiune to grow. Government stimulus plans have encouraged growth. South Korea's economy grew 10.6% in 1999, and IT spending and investment accounted for 40% of that explosion. This year the government will offer over $60 million in loans to ultra high-speed Internet providers. Lately, South Korea has been growing at a steady rate of approximately 4%, with a balance between a newly robust consumer side and traditional export industries contributing to this growth. Haywire for Wireless South Korea's digital boom shows no signs of slowing down. At the end of March 2002, according to the Information and Telecommunication Ministry, the number of mobile phone users had reached 30.3 million or 64% of Korea's population of almost 45 million. The number is expected to grow to 33 million by the end of the year, and to 42 million by 2005. In 18 years, since mobile phones were first introduced in South Korea, six out of 10 South Koreans have become hooked. Based on these recent figures, South Korea has the eighth largest mobile phone subscriber base in the world. Translated into millions of won this means that wireless service companies generated 70% of the country's total telecommunications revenue last year, while fixed-line service companies contributed a mere 30%. Currently, 7.94 million homes are able to get high speed Internet access. From their homes or from their phones, Koreans are hitting the Internet at high speed. Translated into dollars and expanding its reach to all of Asia, mobile commerce consumer spending in Asia could total $113 billion, and wireless data access charges may bring in another $54 billion by 2004, according to projections by UBS Warburg. To keep hungry wireless users well-fed with new bells and whistles, Korea's large conglomerates have had to come up with new and exciting services and games to which customers can subscribe over their phones. Korean mobile phone users can choose from a vast array of features that include games, traffic, weather, stock market information, global positioning, music and photo downloads, movie, concert and airplane tickets, animated golf and dance lessons on handsets and of course, Web surfing. The big companies have turned to a rich talent pool of wireless software and hardware engineers. Mobile carriers throughout Asia see the necessity to fatten their future cash cow -- the mobile Internet will fuel future revenue and profit growth. This has created an important opportunity for innovative start-ups in an economy long dominated by conglomerates. Out With the Old South Korea's government has lent a helping hand by encouraging start-ups. They have gone so far as to revise regulations so that a billing system was created by the mobile service providers to charge consumers for content based on the packets of data transmitted. The revenve this created could in turn used to pay the developers and content providers. South Korea has adopted a fiscal stimulus strategy and has implemented painful corporate restructuring that is needed to unleash domestic demand. Unlike other economies in Asia, South Korea has been able to overcome some sluggish bureaucratic habits, allowing them to embrace change and welcome innovation. The South Koreans swallowed the bitter medicine of reform before they saw results. They paid off a $20 billion loan from the International Fund before it was due, cut their short-term debt nearly in half and raised foreign reserves from $9 billion to $105 billion. They closed many of the country's dysfunctional commercial banks and opened others to foreign management and ownership. Many companies were privatized and some were simply pushed out of the stock exchanges for their inactivity. Importantly, government regulations were cut in half between 1997 and 2001. Improved corporate governance has forced companies to adopt better auditing standards and more transparency. Recipe for Success The International Monetary Fund has raised its 2002 GDP growth forecast to 5% for South Korea, while South Korea's Ministry of Finance and Economy forecasts GDP to rise to between 5% and 5.9%, and the Bank of Korea forecast 5.7%. At the same time industrial production and consumer confidence have gone up and unemployment is falling. Two key words to explain this phenomenon are strategy and convergence. Digital convergence technology is when the chips you manufacture can be used in the other appliances and handsets that you also manufacture. Feeding your semiconductor, telecommunication and digital technology from the same rice bowl is a sure recipe for success if you've got the right mix of memory chips, smart card, display driver ICs, TFT-LCDs, CDMA mobile phones, monitors and VCRs. Samsung Electronics and LG Electronics are two world-class high-tech players who have closed the gap and taken the lead. Foreign investors have rediscovered the potential of South Korea. Many believe Asia's emerging markets are stable and extremely undervalued compared with developed markets. They are looking not only at South Korea's companies like Samsung and LG, but at the small companies that have between $2 and $5 million in sales. As many as 500 small companies are developing wireless Internet software, games, optical technology, security and systems integration solutions; products that will cause their own little revolutions and make fortunes for the creative entrepreneurs behind them. Savvy Marketing South Korea's leading brand names have expanded their global reach. Samsung's success in China is an example of reach and recovery with the numbers to show it. Their risk taking and savvy marketing strategies are ringing true in 10 major cities. Choosing 10 cities and limiting their offerings to carefully selected products lines, Samsung has sold $1.81 billion worth of consumer electronics in China. That's five times what they sold in 1998, when they closed down sales offices and factories and changed their approach. Profits soared 70%. Now a Samsung phone, which sells for as much as 60% more than other major brands, is a status symbol for Chinese women. The A-288, a super light hand phone, comes in pretty colors, identifies callers with a small display on the outside and comes with 16 ring tones from bird songs to pop music. China is now a priority market in Samsung's global strategy. Convergence is the Key According to some analysts, Samsung Electronics and LG Electronics (LGE) are two of the best-positioned players in South Korea's recovery game. Samsung's semiconductor exposure as well as market share in displays and cellular phones makes them a global player. As a low cost producer of DRAMS, they are in an area that is cyclically recovering the fastest. LGE is well positioned in the digital TV market with its two subsidiary joint ventures with Philips of the Netherlands, LG Philips LCD. For CRTs, subsidiary LG Philips Displays claims to come in first place with global market share, and the other subsidiary, LG Philips LCD claims to be number two in world market share for TFT-LCDs. LG Electronics recently announced that their first quarter net profit rose 79% to 219.8 billion won ($167.3 million) from one year ago, driven by robust local demand for home appliances and multimedia products, as well as strong overseas sales of mobile phones. Samsung Electronics announced first-quarter net profits rose 54% from year earlier, spurred by semiconductor prices and strong handset sales. Sweet rewards for hard fought reforms. Samsung Electronics' strong results can be attributed to several factors. Memory chip prices have rebounded since they bottomed out last year. A supply shortage of LCDs puts them in a good position. The demand for mobile phones increases steadily and they are the world's second largest supplier of DVD players. Also, perhaps due to global warming, the demand for air conditioners has increased. Advanced mobile devices, such as PDAs, are one of the fastest growing market sectors. Market watcher Dataquest forecast the global PDA market to grow from 15 million units this year to 30 million units by 2005, an annual growth of 25%. Samsung's introduction of 512Mb lightweight, low power consumption mobile SDRAM makes it a heavyweight contender for global market share. Time for Success From the startup entrepreneurs who supply mobile phone content to the larger convergence specialists, Koreans attribute their success to an adventurous and pioneering spirit. They have shaken off the yokes of their past and have embraced a technological future, a digital age in which they keep their strong individuality, while attaining success on the global playing field. This Special Advertising Section was produced by Step Design Consultants Ltd. www.step.com.hk |
|
|
© 2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.