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| Korea continues to be a world leader in broadband services. To capitalize upon this success, Korea is now exploring more innovative technologies to support ‘next generation services’. Since 2008, President Lee Myung Bak has made digital convergence across industries a key to Korea’s new “Engines of Growth Strategy”. Investments in technology convergence across various industries (automotive, healthcare, energy, shipbuilding, etc.) is planned to further the administration’s “Low Carbon, Green Growth” initiative and ensure continued economic prosperity. The Korea Communications Commission (KCC) and the Ministry of Knowledge Economy (MKE) are expected to lead other government agencies and oversee the growth of new convergence projects, spending a projected USD 11.6 billion for Information and Communications Technology (ICT) development. Korea’s pro-active government / industry cooperation policy will promote the private sector to invest another USD 146 billion, over the next four years. Investments under the new ICT initiative will continue to stimulate strong demand for relevant components, equipment, software applications and content. These and other solutions will create more opportunities for U.S.-based technology companies. The overall Korean market for Information Technology (IT), telecom equipment, services, and software solutions was worth an estimated USD 200 billion in 2009. It is estimated to grow at an average annual rate of 3-4 percent over the next three years until 2013. The best prospects for U.S. exporters include equipment and solutions for broadband convergence networks (BcN), 3D/Smart Internet Protocol TV (IPTV), digital content, smart device application services, voice over Internet protocol (VoIP), wireless broadband (WiBro) services, 4G mobile technology, radio frequency identification (RFID)/ ubiquitous sensory networks (USN), mobile/social commerce, cloud computing, smart grid, IT security and green IT technologies. Market Demand Korea maintains its lead in OECD broadband penetration with 30 subscribers per 100 inhabitants. As of May 2010, 16.7 million households (out of 16.9 million) were using broadband services, which account for more than 98.8 percent of total households in Korea. Nationwide BcN will be upgraded to allow data transmission rates of 100 Mbps (Mega bit per second) enabling new-generation Internet Protocol (IP)-based services and applications. KCC also developed its “Giga Internet Plan” to build an Ultra Broadband Convergence Network (UBcN) by 2015, which will bring average network speeds up to 100Mbps for wireless and 1Gbps for wired. UBcN is expected to allow more advanced and virtual services, including, interactive 3D smart IPTV, Ultra Definition (UD) digital TV, online games, ubiquitous healthcare services, and other new technologies that will contribute to the continued growth in the ICT industry. 1) Telecom/Broadcasting Convergence Service and Content In December 2007, “The Internet Multimedia Broadcast Business Act” was passed by the National Assembly and became effective in April 2008 to allow telecom service companies to offer real-time broadcasts of popular terrestrial channels via IPTV service. As of July 2009, the three IPTV service providers, SK Broadband, KT and LG Dacom provided as many as 75 real-time channels, in addition to Video-on-Demand (VoD) reaching a total subscription of 1.7 million. With strong promotions, more stable service quality and increased content led the market reached 3 million subscribers as of July 2010. The Korean telecom and broadcasting industry plans to invest as much as USD 3 billion on IPTV infrastructure and USD 1 billion on digital content until 2013. KCC forecasts that the Korean market demand for the broadcasting and telecom content, including IPTV content, is expected to reach USD 24 billion in 2012 from the 2007 level of USD 14 billion. 2) Voice and Data Convergence Services and Applications The Korean VoIP service market is expanding rapidly driven by major carriers, including SK Broadband, LG Dacom and KT, and is projected to be worth USD 5 billion in 2012. The number of subscribers to IP phone service increased by 79 percent from 4.4 million in July 2009 to 7.9 million in July 2010, which is expected to continue the growth and replace existing public switched telephone network (PSTN). KCC’s number portability policy, effective since Aug 2008, allows the use of VoIP services with existing home phone numbers and is one of the major factors motivating subscribers to move to Internet phone services. In June 2006, Korea’s two domestic cellular service providers KT and SK Telecom commercialized the “WiBro” (now more commonly known as mobile WiMax) and more than USD 1.3 billion has been invested. However, uptake among the Korean population has been lackluster, with no more than 400,000 subscribers being attracted to the service as of July 2010. This is due to a number of reasons including a lack of nationwide network coverage, device selection ambiguity, and killer applications like VoIP. The future of the service depends on value-added convergence services like voice over WiBro network through smartphones (smart phone capable phones in Korea have a ‘010’ prefix), tablet PCs, mobile IPTV, location-based services (LBS), and other developing 4G technology standards that would induce further investment by the carriers. KCC is also considering a number of policies to offer incentives for additional investment by industry. 3) Radio Frequency Identification (RFID) / Ubiquitous Sensory Networks (USN) The Korean Government has designated 17 industries as new growth engines (NGEs) which will drive the future economic growth. The government plans to spend USD 20 billion over the next five years on NGEs, and RFID/USN is one of primary engines acting as a foundation. RFID/USN spectrum band is being reallocated by June 2011, from 908.5-914MHz to 915-923.5MHz and some 68 new Korea Standards (KS) have been developed to guide and encourage the Korean RFID industry. The “4 Major Rivers Restoration Project” is a massive domestic infrastructure project that will heavily leverage RFID/USN technology. The project aims to apply IT technologies to selected areas along the nation’s waterways to enable real-time monitoring and management. The KCC and Korean Ministry of Public Administration and Security (MOPAS) have designated several cities as models to implement its ubiquitous technology for “U-City” project. Projects include tunnel control, subway safety, waterworks management, waste management, and tourism services, all of which are targets for ubiquitous technologies. 4) Cloud Computing ICT service and solution providers are fast-preparing for “Cloud Computing” technology, to comply with green IT initiative and smart work environment. Cloud computing allows virtual sharing of computing power, storage, applications, etc. over a network resulting in savings of energy and efficient use of IT resources. Samsung SDS has signed an MOU with Cloudera and LG CNS is partnering with Microsoft to deploy the technology for their affiliated companies to use from 2010. Ministry of Knowledge Economy (MKE) is focusing on cloud computing as part of Green IT initiative to improve resource efficiency and establish environment-friendly infrastructure. The Korean government is planning to invest USD 600 million over the next five years in cloud computing technology development and pilot services, which will offer opportunities for U.S. hardware, software and IT service companies. 5) Smart Phones Smart phone demand has been spurred by KT’s introduction of iPhone 3GS in November, 2009 which have sold 880,000 units in 10months. The total number of Google’s operating system, “Android”-based smartphone subscribers have also reached 1.2 million as of August, 2010. Samsung’s “Galaxy” series have, also based on the Android Operating System, has also contributed to the smart phone phenomena in Korea. In July, 2010, the total number of smart phone subscribers in Korea reached 3 million and some projections suggest the figure might double by the end of this year and exceed 10 million in 2011. Along with the growth rate of smart phone subscriptions, the usage of Wi-Fi has increased significantly, resulting in a 64% increase in data traffic from October 2009 to March 2010. Mobile service providers will continue to invest in the wireless broadband technologies and offer an increasing variety of smartphone based services. Korean telecom companies are investing in Long Term Evolution (LTE) mobile services based on the 4th Generation (4G) mobile technology and offering 10 times faster throughput than current 3G technology. With speeds up to 200Mbps, 4G communications is expected to begin by late 2011 and all three local operators are planning to invest more than USD 3billion until 2013 in this new medium. Market Data Korea’s market for high-speed Internet access services was valued at approximately USD 3.8 billion in 2009, a 3.2 percent increase from 2008. Market demand for telecom services was valued at close to USD 37 billion while broadcasting services account accounted for approximately USD 8.5 billion in 2009. According to Korea Telecommunications Operators Association (KTOA), the number of mobile phone service subscribers exceeded 49.8 million as of July, 2010 up from 48.9 million in 2010. The number of households subscribed to cable TV and satellite TV reached 15.4 million and 2.4 million respectively in 2009 among 16.9 households. Best Prospects Korea’s extensive fiber optic/wireless broadband Internet network covers essentially the entire country with the world’s fastest average speed of 20Mbps. This makes Korea one of the most attractive ‘test beds’ for new and emerging applications and telecommunications services. The Government’s investments towards new growth engines in the ICT market coupled with Korea’s green growth projects may spring from innovative convergence services, including, 3D/HD/smart IPTV, 4G, BcN, RFID/USN, cloud computing, smart grid and enhanced digital content over the next several years, requiring more advanced handsets, network infrastructure, content, components, and software/solutions from the U.S. high-tech industries. In 2009, MKE announced plans to invest USD 8 billion in the green IT by 2013 with as much as an additional USD 90 billion in promises from Korea’s leading companies in a list of technologies including: Renewable energy, LED, low carbon energy, green delivery system, IT convergence, telecom/broadcasting convergence, robotics, new materials and nano convergence, biotechnology, software/digital content. Prospective Buyers KT and SK will continue to benefit most from government and private sector investments in future convergence services, as they own licenses for all frequency bands and have solid subscriber bases. Operators are also investing in the cloud computing-based “N screen” services which will allow consumers to use the same content in different devices such as PC, TV and various mobile communication devices and therefore focusing on the digital content technology and services market. LG U+, a newly merged company between LG Dacom and LG Powercomm is also competing in the convergence services especially for IPTV and IP phone. KT QookTV, SK Telecom and LG U+ were selected to launch full IPTV services which include terrestrial broadcasting channels and real-time services from October 2008, and are seeking for more competitive content and technologies for 3D smart and interactive TV. Market Entry One of the most effective strategies for entering the Korean market is working with competitive local partners and/or agents to present technology and applications in trade shows. Trade shows are ideal opportunities for U.S. suppliers to demonstrate their products/services and enter domestic distribution channels. Market Issues & Obstacles There is a number of market access issues for U.S. suppliers in Korea’s Information Technology (IT) and telecom market including: foreign investment ceilings, licensing requirements for service providers, linkage of spectrum allocation and technologies, and the government’s push for the development and use of unique Korean standards. . Indeed, we expect a number of changes to standards, testing, and certification in 2011 based on the new Radio Waves Act. Standards The Korean government encourages Korean industry to develop Korean IT/telecom standards through the Korea Agency for Technology Standard (KATS), Telecommunications Technology Association (TTA) and the Electronics and Telecommunications Research Institute (ETRI). U.S. suppliers of leading-edge equipment and solutions for advanced IT/telecom services exploring the Korean market are encouraged to carefully review Korea’s technical regulations and to consider the limitations to market access that the development of new Korean standards and certification requirements may pose IPR There has been a growing awareness in Korea of the importance of protection of intellectual property rights (IPR) for both domestic and foreign providers of software and technologies, so the Korean government has taken greater steps than in the past to enforce IPR. Nonetheless, U.S. suppliers of IT/telecom products and technologies should make sure that their intellectual property is adequately protected in Korea prior to entering the market and carefully plan ways to avoid possible infringement. Certification At present, all computer software/solutions products (both customized and packaged) including some wireless equipment under HS code 8525 (switches, base stations, transmission equipment, and repeaters), enters Korea at a duty rate of zero percent. However, equipment is still subject to type approval and electro-magnetic compatibility (EMC) testing. Both type approval and EMC tests are conducted at the Radio Research Agency (RRA) under the auspices of the KCC. The procedures to be followed in obtaining RRA certification are extremely complex, making it very difficult, if not impossible, to attain without the assistance of a Korean representative. For this reason, many U.S. suppliers have found it to their advantage to have their Korean agent/distributor or importer engage the services of one of 30 companies licensed in Korea as RRA testing agents to handle the entire testing process on behalf of the U.S. suppliers. However, effective as of May 2005, Korea does accept test data from U.S. laboratories, evaluated by the U.S. National Institute of Standards and Technology (NIST) and certified by the KCC, regarding telecom products that are required to comply with the U.S. Federal Communications Commission (FCC) standards. This is the first phase of a three-phase Mutual Recognition Agreement (MRA). However, effective Jan 24, 2011, according to the revised Radio Wave Act, new certification and registration process will be introduced and is expected to include improved policies on self-testing and the registration process for some of the ICT products that will be categorized in the KCC/RRA regulations. Environment The Government of Korea established new regulatory measures to promote resource recycling and restrict the use of hazardous substances in electrical and electronic products and automobiles as part of its environmental protection policy. Effective July 1, 2008, electronics manufacturers and importers are mandated to make public disclosure of compliance status of their products on Electric and Electronic Equipment and Vehicle Eco-Assurance System (ECOAS), operated by Korea Environment & Resources Corporation (ENVICO), in accordance with the “Act on the Resource Circulation of Electrical and Electronic Equipment and Vehicles”. All manufacturers and importers of “Brown and White Appliances” including TVs, refrigerators, washing machines (for household use), air conditioners, PCs (including monitors and key boards), audio equipment, cell phones (including battery and chargers), printers, copiers and fax machines must report to ENVICO for registration within one month from the date of import declaration: Local manufacturers and importers are mandated to register on ECOAS website for recycling information submission for public disclosure. However, the website registration involves a significant level of complexity and only allows Korean-language. Thus, it is recommended that U.S. companies contact CS Korea or their local partner for further information. U.S.- Korea Free Trade Agreement (KORUS- FTA) on foreign ownership of Korean telecom firms The KORUS-FTA negotiations were concluded in April 2007, and have major ICT industry enhancements including: 1) a raised cap on foreign ownership of Korean telecom operations to 49 percent; and 2) provisions that technology standards guidelines will be maintained at current levels. However, foreign ownership in companies other than KT and SK Telecom can be extended to 100 percent via indirect investments, which raises the possibility of U.S. telecom operators tapping into the Korean market by establishing an independent entity. Furthermore, foreign companies will not be discriminated against in utilizing domestic networks, allowing them to operate telecom businesses by “piggybacking” on a domestic company’s network already in-place. The Korean digital content industry recorded more than 11 trillion Won, around USD 10 billion in 2008 which represents 14.1 percent of the average annual growth since 2003. Market demand for digital content is to grow by an annual rate of around 10 percent until 2011, with the market volume exceeding USD 12 billion by 2011. The average annual growth rate of cable TV market was 52.5 percent since cable TV service launching in 1995 until early 2000. The second stage of market growth rate became steady and it is expected that the growth rate of 2009 will be 12 percent. Currently the numbers of household subscribe cable TV service is 15.31 million households. Due to the high growth of the cable TV service, the program rating of the cable TV drastically increased. In 2000 the program rating of the terrestrial TV was 91.6 percent and that of cable TV was 1.5 percent. In 2008 the rating of the terrestrial TV is 60.6 percent and the rating of cable TV is 39.4 percent. It shows that cable TV service has the highest potential to be a competitor for terrestrial TV services. With the introduction of IPTV, the market demand for digital broadcasting content is expected 1.5 trillion Korean Won, around USD 1.2 billion by 2011. According to Cable Contents Power Rating (CCPR), 12 contents out of 20 CCPR are the U.S. contents. It shows that the biggest market share of imported content is from U.S. Cable TV heavily depends on the U.S. contents. 25 percent of the drama broadcasting and the 20.5 percent of the motion pictures airing are U.S. contents. Therefore securing the right of broadcasting the popular U.S. contents and Hollywood blockbusters is one of ways to differentiate from other platforms. As Korean government mandates the broadcasting digitalization by 2012, the market demand of HD content will also increase rapidly. Broadcasting companies do not exclusively control the scheduling of programs anymore. This new trend has led to what is being called an individualized media consumer. The majority of media viewers has yet to join this technologically advanced group and is referred to as traditional media consumers. Industry experts forecast that considerable numbers of traditional media consumers will turn their consumption to individualized media services such as Internet streaming service and IPTV until 2012 when the analog service ceases. The penetration rate of cable TV and digital satellite TV is changing the character of traditional terrestrial TV’s by focusing on more specialized programming offered on increasingly specialized channels. These developments further deepen the trend toward individualized media consumption. As the number of individualized media consumers increase, there is a corresponding decrease in the power of companies focusing exclusively on terrestrial TV. The result is that the line between the broadcasting and telecommunications industries is increasingly becoming blurred. While terrestrial TV networks provide the majority of TV content even in these emerging high-tech areas, others are now competing to provide content, such as cable TV networks, IPTV service providers, and satellite TV service provider. IPTV has advantages compared to the existing services. For one, viewers can watch IPTV through TV screens with high definition quality via an Internet connection, as opposed to watching TV through a PC monitor utilizing streaming services. Also, viewers can select whatever they choose to watch. As the real time IPTV service is possible, telecommunication service providers are collaborating with existing content providers to offer the most popular programs. After the introduction of cable TV in Korea in 1995, the production of original content increased, and production companies became more and more specialized. As a result, the market demand for sharing video content has been increasing. Currently, the production market structure of video content consists of terrestrial TV operators, cable TV operators, digital satellite TV operators, and independent production companies (including program providers). In this highly competitive market, it is important to secure quality content. Outsourcing production is one means to fulfill market needs. Terrestrial TV started outsourcing production in 1991. The table below shows outsourcing of production for terrestrial TV in 2005. Currently almost 90 percent of terrestrial TV’s drama shows and miniseries are outsourced, and cable TV is rapidly joining this trend. According to the survey by Ministry of Culture, Sport, Travel and Korea IT Industry Promotion Agency, the market demand of for digital content was 11.18 trillion Korean Won, around USD 9.32 billion in 2008 which represented 14.1 percent of the average annual market growth since 2003. The annual market growth of 2008 was 10.3 percent over 2007. As the competition to secure the good and quality content is fierce, telecommunication companies that provide IPTV services such as SK Telecom, KT and LG Telecom and media focused company like CJ is strengthening the content business. The content market growth is affected by this business decision as well as the introduction of new services. The consolidation of broadcasting related companies by mergers and acquisitions is the current market trend for competing with these big companies, for catching up the recent trend and for securing the quality content. The Korean viewers are not familiar with paying for a program. However, it is expected there will be progress of changing the concept continuously, which will greatly affect the market trend. Since 2008 the convergence of broadcasting and telecommunication has been discussed and the launching of the new various services/platforms affected overall market growth. The hottest issue of the broadcasting and telecommunication industry is increment of HD broadcasting production and launching IPTV services. IPTV regulation passed through the National Assembly in the late 2008 and opened the door for the real convergence between two industries, the increment of HD broadcasting content production, the expansion of terrestrial DMB service to nationwide, all which create more market opportunities. The major U.S. program and content already have presence in the Korean market. Movies, dramas, reality shows, and sports imported from U.S. entertain the Koreans leisure time. With the change of terrestrial TV’s programming direction, the buying power of the content shifted to the cable TV, IPTV and other platforms from terrestrial TV. The market demand for broadcasting video content is increasing as broadcasting platforms diversify. High quality content will be experiencing increasing demand as new services come on-line, such as DMB, data broadcasting, mobile service, and T-commerce. Although IPTV has competitive advantages in technology, the industry is concerned about the shortage of supply of content. The cost of content, including procuring necessary intellectual property right (IPR) approvals, are important in determining if they are competitive in the market. While the new platform service providers are keen to air the best foreign content, high costs can be prohibitive. The shortage of quality content to supply the growing new service platforms represents a real opportunity for U.S. content providers. According to the broadcasting regulation, the programming quota of Korean content should be more than 40 percent however, the channels related to movies, animation, life style and sports broadcast less than 40 percent of Korean content. It shows that the categories mentioned above are in need of foreign content. This translates that the best prospects for imported content and programming are in the areas of movies, sports, animation, drama, life style and documentaries. Foreign content and programming meet the majority of the demand for Korean TV broadcasts. According to local industry sources, imports of foreign content and programming for broadcasting account for approximately 60 percent of the total demand. With a strong position in providing movies, sports, dramas, and mini-series to the Korean market, U.S. content and programming are expected to continue to enjoy dominant import market share. European content and programming in Korea are primarily documentaries, and Japanese cartoons/animation are popular in Korea. Only limited programming comes from, Japan, U.K., Australia, and China. Market research of cultural difference and the preference between two countries is required before entering the Korean market. Even the hit programs in the U.S. cannot be successful (Crusoe: 2008-2009, Easy Money: 2009) in Korea due to these differences. Meanwhile the programs succeeded in the U.S. such as Project Runway: 2008-2009, The Moment of Truth are successfully localized and broadcast nationwide. The expectation of Korean viewers is upgrading and if the programs or contents are not up to the expectation, it is evident that the program or content cannot survive in Korean market. The new broadcasting regulation was passed the National Assembly in July 2008 and effected from late 2008. The new regulation allows the big corporation to enter the broadcasting market. Also the news paper companies can combine the management of the broadcasting business. The biggest change of this new regulation is any big corporation or any news paper company can hold 10 percent of the stakes of terrestrial TV, 30 percent of news channels and comprehensive channels. Also the foreigners can have up to 60 percent share for the news and comprehensive channels. However, channels are still limited to using no more than 20 percent of their channels for foreign channel retransmissions (although this is an improvement over the 10 percent limit in place until 2004). It also does not allow foreign channel retransmissions to insert local language advertisements. There is also a mandatory local content requirement of 25 percent for cable movie channels and 35 percent for cable animation channels. Local content quotas – especially for animation channels – restrict investment in Korea, as there is not enough quality local content to fill the quota. Reducing the quota would lead to more investment in Korean broadcasting and therefore to more investment in local animation to better suit local demand. Dubbing is restricted by the Korean Communications Commission (KCC). The KCC only allows for subtitles on foreign channel retransmissions. This restriction is especially an impediment for breaking, real time news, and for animation programs geared toward children who cannot yet read. Korean consumers would directly benefit from greater access to international news sources dubbed into their own language. (FYI: Foreign channels are all delivered by Korean service providers, either cable or satellite services, and these platform operators are responsible for ensuring that foreign broadcasters meet local censorship requirements. The Korean market for software and related services was valued at USD 12.8
billion in 2002 and is forecast to reach USD 16.5 billion in 2003 and to grow at
an average annual rate of 20% for next five years. Korea's global leadership in
wireless communications and broadband Internet access services has spawned
tremendous demand for all types of software, especially for specialized and
innovative technologies, providing opportunities for sales of advanced and
highly specialized U.S. software solutions. U.S. suppliers' willingness to
modify their software slightly to meet specific user needs is a critical factor
in end-user purchasing decisions. Although U.S. software is considered superior,
Korean end-users, more often than not, will avoid purchasing from U.S. suppliers
if localization cannot be achieved.
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This site was last updated 3 January, 2011