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 THE STAT 26Percentage of wireless customers who use their cell phones to take picturesMore Vitals
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MARCH 4, 2003 SPECIAL REPORT: EMERGING TECH MARKETS South Korea: Tech's Test Market Asia's most wired nation is a hotbed for anything new that's digital or online. And local companies are keeping the multinationals hopping
This rapid uptake of the best in high-speed data communications has turned Korea into the world's test market for state-of-the-art wireless and Internet services and applications. "Korea has a mass of people who are using this technology in a format that's a couple of years ahead of anything we'll see in the U.S.," says Mark Headley, portfolio manager of the Matthews Korea Fund (MAKOX ). That's especially true now that U.S. tech markets are moribund. "We've stalled out, while Korea is powering ahead," Headley admits. "I don't think that U.S. tech companies have been as cognizant of this as they should be." MADE IN KOREA. Whatever else they know, Westerners are beginning to understand that South Korea is a tough market to compete in. As the quality of consumer electronics manufactured in Korea has improved, foreign products have become less coveted. In fact, exports are making up an increasing percentage of Korean gross domestic product as national powerhouse Samsung and other Korean manufacturers churn out world-class mobile phones, personal digital assistants, and liquid-crystal displays. Finnish handset king Nokia (NOK ) has even pulled its marketing team out of Korea because of the fierce competition there. Add to those difficulties slowing consumer spending, thanks to the threat of war in the Middle East and rising concern over North Korea's nuclear program, and it's no surprise that Nokia's spending is cooling somewhat in 2003, according to tech research firm IDC Korea. It now forecasts 8.2% growth in overall tech spending in South Korea, to $12.37 billion, down from an earlier prediction of 14% growth. Nonetheless, given the slack state of global info-tech demand, South Korea is still a robust market for outside companies to sell into. And tech outfits that are still in business probably aren't the kind to shrink from a little competition. One of the best opportunities may be licensing software needed for the country's national pastime of online gaming, says Headley. Indeed, Microsoft (MSFT ) will launch Xbox Live in South Korea sometime this year to tap into the sophisticated gaming market there. INTEL INSIDE. Consumer products aren't the only ones that have a future in South Korea. The country's tech and telecom infrastructure boom, which kicked off in earnest after the government received billions from an International Monetary Fund bailout in late 1997 following a currency crisis, is still in full swing. U.S. software and components make it into many Korean-made products. Qualcomm (QCOM ) has licensed its CDMA technology for wireless communications to Korean phone companies including SK Telecom, KT Freetel, and LG TeleCom. Qualcomm boasts in its 2002 annual report of having 32 million CDMA subscribers in South Korea, up from 24 million in 1999. "All the major U.S. companies sell a lot into Korea," says Tae Hea Nahm, a founding partner of Palo Alto (Calif.) venture-capital firm Storm Ventures. "If you want to buy a PC in Korea, most likely it's going to have an Intel (INTC ) chip and a Microsoft operating system." More recently, the drive for greater productivity and efficiency across the Korean economy has created demand for U.S.-provided technology services and business-class hardware and software. Steffi Han, research manager at IDC Korea, expects double-digit growth this year in software and services revenues in Korea. "Leading the market will be integrationand expansion of existing and new systems, especially those catering to Web-based services," she says. Other growth areas for applications: "Mobile enablers handling multimedia services and financial transactions, and business-continuity programs that ensure recovery after disasters such as the September 11 attacks."
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