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.
In 2002, the total import market share, valued at USD 756 million, represented
5.9% of the total software market demand, which, in general, consists of
packaged software, computing-related services/software and digital contents.
Although the statistics show that the import market share to be relatively low,
in reality, the substantial amount of localized software and Systems Integration
(SI) services provided by major U.S. subsidiaries that participate in large
projects as strategic partners is counted in local production. U.S.-sourced
packaged softwareaccounts for more than 90% of Korea's software import market,
and U.S. suppliers are expected to remain the principal suppliers of packaged
software to Korea for the next several years. Technological advancement in
Korea's software sector is still behind that of the U.S. and Japan, a result of
Korea's relatively recent computerization and an acute shortage of highly
qualified software specialists. Korea's SI companies and software developers are
actively trying to develop partnerships with global leaders in every segment of
IT services and solutions to deliver total solutions to clients in a
time-to-market manner and to target the domestic and global market at the same
time. U.S. suppliers will continue to enjoy the competitive advantages of strong
project management and marketing skills, compared to Korean firms and
third-country suppliers.
In 2002, the market demand for packaged software, including system
infrastructure software (e.g. operating systems, security software), application
software (e.g. Word, Excel, enterprise solution package) and application
development/deployment software, was valued at USD 2.95 billion, representing
23% of the total software market demand. The market demand for application
software accounts for 50% of total market demand for packaged software and is
valued at USD 1.5 billion. Demand for system infrastructure software accounts
for 30% of total market demand for packaged software and is valued at USD 900
million. Market demand for Electronic Resources Planning (ERP) and Customer
Relationship Management (CRM) in the application software market reached USD 230
million and USD 65 million in 2002, respectively, growth rates of 50% over that
of 2001. The overall market demand for packaged software has been growing in
relation to the development of Korea's advanced IT infrastructure and related
services in the e-commerce and telecom segments and will continue to grow at an
average annual rate of 20% for the next three years. The fact that the Korean
government has increased efforts to strengthen its IPR protection and
enforcement through the Computer Program Protection Law (CPPL) has also
contributed to the strong growth in demand for both Korean and imported packaged
software.
Computing-related services and software, consisting of SI, software development,
system management and maintenance, accounts for 71% of total market demand and
was valued at USD 9.1 billion in 2002. Growth in demand is forecast to be 21%
over the next five years. The demand for SI software/services and system
management software represented 69% and 23%, respectively, of the total
computing-related services/software market, valued at USD 6.2 billion and USD
2.4 billion.
The digital contents market, valued at USD 700 million in 2002, includes on-line
games, education software and multimedia contents. The market demand for digital
contents software, growing at an average annual rate of 36% since 2001, is
forecast to continue to experience strong growth, driven by Korea's
unprecedented high rate of subscriptions for broadband internet service as well
as by growing demand for mobile internet services. In 2002, the number of
Korea's broadband subscriptions reached 10 million of 14 million households and
mobile internet service users reached 10 million of 30 million mobile phone
users.
Statistics (USD millions)
2001 2002 2003 (E)
A. Import Market 631 756 908
B. Local Production 9,793 12,452 16,563
C. Exports 290 446 942
D. Total Market 10,134 12,762 16,529
E. Exchange Rate 1,291 1,300 1,200
(U.S. $1:Won)
The above statistics are unofficial estimates. E=Estimated. The exchange rate is
1 U.S. dollar to the Korean won as indicated.
