Why Korea Won't Bite the Apple

South Korea is proud of its electronics makers and tech-savvy consumers. Samsung and LG won't roll out the welcome mat for the new iPhone 3G

by Moon Ihlwan

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Despite the buzz generated by the June 9 unveiling of the first major makeover of Apple's (AAPL) iPhone, there's one place on the planet the U.S. brand isn't likely to generate much buzz, at least in the near future: South Korea. The country is one of the most advanced mobile Internet markets in the world, and electronics companies have worked hard to make sure tech-savvy Korean consumers don't fall for foreign brands.

This is a place where Nokia (NOK) is virtually absent. Google (GOOG) has struggled in Korea too. Its six-year-old Korean-language search service lags far behind market leader NHN. And while consumers in other countries have embraced the iPod, most Koreans are just not that into Steve Jobs and the work of his Apple designers. Many analysts say the iPhone 3G, the next-generation iPhone (BusinessWeek.com, 6/9/09) with faster Internet access that will sell for as low as $199 (half the current entry-level price), probably won't do the trick either. "Apple can't expect to be acclaimed as a premium brand in Korea," says Thomas Kang at market researcher Strategic Analytics.

The big problem for Apple is simple. Koreans are more attracted to phones made by local consumer-electronics powerhouses Samsung Electronics and LG Electronics, both of which roll out scores of sleek multimedia handsets featuring leading-edge technologies every year. The Big Two together control nearly 80% of the Korean handset market.

Samsung's Answer to the iPhone

Eager to play up their innovation bona fides, the Korean companies are determined not to take a back seat to Apple. For instance, less than 24 hours before Apple CEO Steve Jobs announced details of the new iPhone, Samsung unveiled a new touchscreen smartphone, called Samsung Omnia, its answer to the new iPhone. LG, for its part, last year actually beat the original iPhone by three months in the race to introduce a touchscreen model, (BusinessWeek.com, 5/1/08) offering the Prada phone, the outcome of LG's joint efforts with the Italian fashion house.

Like the iPhone, Samsung's Omnia works like a small handheld PC. It runs on Windows Mobile 6.1 and features Word, Excel, Powerpoint, and Opera 9.5 as its Web browser. It also sports a 16 GB memory, a five-megapixel camera with antishake technology, music and video players, 3G capability, Bluetooth, WiFi, an FM radio, and GPS functionality. It will go on sale in Southeast Asia later in June and in Europe in July, though pricing has yet to be announced. "Although the iPhone boasts intuitive user interface, it doesn't really outshine Korean phones in functions and technologies," says telecom analyst Yang Jong In at brokerage Korea Investment & Securities.

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LG is working on a slew of new smartphones too. In the past two years, LG has changed into a trendsetter (BusinessWeek.com, 5/8/08) from a second-tier phonemaker by launching models with a distinct look and feel. In April it rolled out the Secret, which used carbon fiber and tempered glass for the first time in a phone—a design meant to preserve the model's sleek style from wear and tear.

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