Google sells Motorola Mobility, Agrees with Samsung on Patent Accord

Two developments in recent days offer a powerful commentary on the future of the global ICT sector, with direct implications for South Korea's leading smartphone manufacturers.
First, as reported in the Korea Joongang Daily, Samsung Electronics has signed a 10-year patent cross license agreement with Google that will prevent the two companies from waging a patent war against one another, a move the Korean tech firm believes will help further isolate archrival Apple. As reported in the Joongang Daily, the agreement that covers “a broad range of technologies and business areas” with Google. The “mutually beneficial agreement” covers not only existing patents but also new patents to be filed by 2023, Samsung said. The deal, analysts say, will help the two companies improve on each other’s weak points: software in the case of Samsung and hardware for Google. But Samsung is also expected to benefit from some of the hardware technologies that Google has worked on in recent years, such as robotics and wearable devices.
The second development was the announcement by Google that it is selling its Motorola Mobility division to China's Lenovo for $2.91 billion.  As reported by Forbes, "Motorola Mobility was Google’s largest ever acquisition at $12.5 billion in 2012. Page says the decision was made because of the “super competitive” nature of the smartphone market. “Motorola will be better served by Lenovo—which as a rapidly growing smartphone business and is the largest (and fastest-growing) PC manufacturer in the world,” Page said today. “This move will enable Google to devote our energy to driving innovation across the Android ecosystem, for the benefit of smartphone users everywhere.” The sale doesn’t mean that Google isn’t interested in making hardware to run Android. Earlier this month, Google spent $3.2 billion to acquire smart thermostat maker Nest and bought several robotics companies last year. Page made a point of noting that Google’s vision for smart devices like the Nest and Google Glass, its Internet-connected eyewear, remains a focus for the company."
The most immediately apparent implication of this move for Korea is its impact on the nation's smartphone manufacturers, led by Samsung and LG.

Samsung and Google agree to share patents

There is a lot of news coverage, as rightly there should be, about the signing of a patent sharing deal by Samsung and Google.  The significance of this agreement lies in the fact that Samsung Electronics is an electronics manufacturing and exporting powerhouse while Google is arguably the world's most important company these days when it comes to software, content and services.
As reported by the Chosun Ilbo English edition,"The latest patent-sharing deal signifies closer ties between the two companies, whose relationship has been amicable and unique. While cooperating in hardware and software where they have an edge over each other, they have also sought to stand on their own feet in the mobile business. Samsung has tried to develop its own OS called Tizen to lower its dependence on Android. Google, meanwhile, has stepped up efforts to roll out its own smartphone by acquiring Motorola. The latest deal allows both companies to emerge from the competitive structure and step up cooperation." This new arrangement, of course, relates to the hurdle Samsung and other Korean companies face to lessen their heavy reliance on hardware manufacturing and export, in favor of strength in software. Working more closely with Google is likely to help, rather than, hinder the efforts of the Korean chaebol.

President Park Geun-hye in Davos on the creative economy

President Park Geun-hye addressed corporate and political leaders last week at the World Economic Forum in Davos.  The theme of her speech, delivered in English, was the creative economy and its relationship to entrepreneurship.  The 3-4 minute segment that I've selected for this post represents her latest public articulation of the nature of the creative economy and its relationship to entrepreneurship and sustainable economic growth.   The full speech is available on the WEF site, YouTube and in other places.  For those of you who don't have time to view the entire speech, I would highly recommend this segment.

"5G Movie in a second": Korea intends to maintain its lead in speed

A few days ago, as reported in a Korean language news bulletin largely translated by AFP,  the Ministry of Science, ICT and Future Planning announced the Korean government's intention to introduce a 5G wireless service fast enough to download a full length movie in one second. "We helped fuel national growth with 2G services in the 1990s, 3G in the 2000s and 4G around 2010. Now it is time to take preemptive action to develop 5G," the ministry said in a statement. "Countries in Europe, China and the US are making aggressive efforts to develop 5G technology ... and we believe there will be fierce competition in this market in a few years," it said. Under the roadmap, a trial 5G service will be rolled out in 2017 and a fully commercial service in December 2020. Priority will be given to developing key features for the new network, including Ultra-HD and hologram transmission as well as cutting-edge social networking services. The Korean language news release specifically mentions implementation of R&D projects in connection with the Pyeongchang 2018 Winter Olympics. A major goal of this project is to make Korea more competitive in the network infrastructure equipment market globally. According to the Future Ministry, Korea currently has only a 4.4 percent share of this market. AFP reported that "Chinese equipment makers including Huawei have expanded their presence in the global market from 12 percent in 2007 to 26 percent in 2012. Huawei announced in November that it was looking at a 5G commercial rollout by 2020, with a minimum investment of $600 million to develop the technology. Seoul intends to take up to a 20 percent stake in the world's telecom infrastructure equipment market by 2020, according to the ministry." This announcement by South Korea's leading ICT-sector ministry is hardly surprising given the nation's track record in recent decades. Many expect Korea to be a major player in development of the world's next generation network infrastructure. However, as noted in earlier posts, the real value to be created by next generation networks will be in the content, services and software that run on them.

Government restructuring and ICT-led innovation in Korea: Telecommunications Policy Article now in press

Those of you with access to the journal, Telecommunications Policy, can now access the full version of my article with Professor Park, Jaemin of Konkuk University entitled "From developmental to network state:  Government restructuring and ICT-led innovation in Korea."  It has gone online as an article "in press."  Elsevier has also published a short slide show which contains some highlights from the article and can be accessed here.   Readers who would like a PDF copy of the "in press" article should feel free to contact me via my online form here.
The article originated as a paper that we wrote for last year's Pacific Telecommunications Council annual conference, PTC '13 in January of 2013.  Subsequently we substantially revised the paper for submission and review by the journal.

Pacific Telecommunications Council annual conference--Day 2

We're into day two of PTC14, the annual conference of the Pacific Telecommunications Council in Honolulu.  The overall conference theme this year is "New World, New Strategies."  Yesterday I made a presentation based on my paper with Dr. Hwang, Jong-Sung of the National Information Society Agency entitled "Citizens, Corporations and Government in Korea's Smart Cities."  It was part of a panel session on government policy.  There were a number of questions following the presentation, indicative of rather broad interest in Korea's experience relative to that of other countries in the region and around the world.   Today more interesting sessions and meetings with researchers, academics and industry representatives.

Super brands and Korea's national image

The U.K. based market research firm YouGov has published its list of most-admired global brands, based on a multicountry survey, and the results are shown in the graphic at the left.  These results prompt me to make several observations.
First, it is noteworthy that Samsung's ranking is based in part on massive advertising and marketing expenditures that far outpace other companies on the list.  As reported by Reuters Samsung Electronics in 2013 was expected to spend more than $14 billion on advertising and marketing, an amount that exceeded Iceland's GDP.
Second, as observed by YouGov BrandIndex CEO Ted Marzilli, “Technology and internet brands transcend national boundaries and provide products and services that impact people’s daily lives. Whether it is technologies made by Samsung, Apple and Sony, or the wealth of information and videos made instantly available by Google and YouTube, these companies shape modern life and connect people from around the world, making them some of the most powerful global super brands.”  In this regard it is worth noting that if YouTube, owned by Google, were combined with its parent company, Google would be the number one brand in the world.
Third, as I've noted before, many people in the U.S. and other major markets around the world do not identify Samsung as a "Korean" company.  Equally as important, Samsung's marketing communications do not emphasize its identity as a Korean company.
Those who consult this blog regularly will know that I am very interested in the relationship between corporate and brand image. (see numerous posts relating to this topic here)  Earlier this week the Chosun Ilbo reported that "North Korea is the first thing that comes to the mind of foreigners when they think about Korea." This was based on a 50-country survey by the Presidential Council on Nation Branding in cooperation with the Samsung Economic Research Institute. As I've discussed in earlier posts, this corresponds with patterns of global web search attention revealed by Google Trends.

The demise of Cyworld and the rise of Google in Korea

Two articles that appeared just days apart in the Joongang Daily this month illustrate the contradictory tendencies in South Korea's rapidly evolving information society and powerfully emphasize the manner in which culture and language shape information technology, not the other way around!  Ironically, the world's most digitally networked nation is also in some ways one of its most inwardly-focused countries, in Korean terms the proverbial "frog in a well."  In fact, this influence of culture and language is arguably the highest hurdle Korea faces in making the transition to a creative economy.
In 1995 Korea began building its information superhighways under the highly successful Korea Information Infrastructure (KII) project and the Korean social networking service Cyworld launched in 1999, a half decade before the invention of Facebook in the U.S.  It quickly became wildly popular with near universal use by younger Koreans.  However, efforts to export the business model to the U.S. and Europe failed.  This month, as reported by the Joongang Daily, Cyworld announced that it would end its global service on February 10.  The article attributed the failure mostly to Cyworld's slowness in moving onto mobile platforms. It might have also noted that Cyworld was originally designed in the Korean language with the intent to appeal to Korean cultural preferences, and it seemed somehow unable to break those bounds in the global market.
The fortunes of Google Korea are a different story entirely.  The title of a long article in the Joongang Daily, "Google Korea Searches for Answers," reveals its bias. (Note that this article contains some factual errors, such as suggesting that "Google operates in 50 countries..." The first half of the article documents Google's struggle to achieve market share in competition with local competitors Naver and Daum.  However, the concluding portion of the article actually documents Google's steadily increasing market share.   Unfortunately, it fails to even mention that Naver, Korea's leading web portal is almost exclusively a Korean language site, developed with local cultural preferences in mind, and does not even pretend to be a comprehensive internet "search" engine.
Readers of this blog will know that I've posted frequently on this topic over the years.  I do think that this interaction of language and culture with technology and the interplay of local with global networks deserves a great deal more scrutiny.

Korea tops the e-intensity index again in 2013

For the past five years, the Boston Consulting Group has compiled and published an e-intensity index. The data for 2013 were published in December and South Korea again leads the world, ahead of a group of Scandinavian countries and the U.K.  The 2013 BCG e-intensity index can be accessed here.   Note that registration and a login is required to use the interactive graphic.
The bar graph published with this post (click to see a full size version of the graphic) accompanied the 2012 E-intensity index. The 2012 BCG report contained the following interesting observation.
"Back in 1997, the White House also put forth five principles that described how governments should approach Internet policy. The first and most important was that “the private sector should lead.” This has been borne out by time. The Internet has enjoyed widespread adoption in countries with vibrant private sectors that allow the inventions of Apple, Google, Orkut, Rakuten, Spotify, and their kin to thrive. But if we examine the e-Intensity Index leaders, a more complex—and interesting—story emerges. (See Exhibit 1.) Many of the most advanced digital economies—South Korea, Sweden, and Japan, for example, three of the top ten 2012 e-Intensity Index nations—have developed coherent, long-term strategies for going digital."
The e-intensity index measures the relative maturity of Internet economies on the basis of three factors: enablement, engagement, and expenditure.

• Enablement accounts for 50 percent of the total weighting and measures various aspects of fixed and mobile infrastructure deployment. 
• Engagement, 25 percent, measures how actively businesses, governments, and consumers are embracing the Internet. 
• Expenditure, 25 percent, measures the proportion of money spent on online retail and advertising.

The Pyeongchang 2018 Winter Olympics: Some financial and cyber realities

As the world gets ready to focus its attention on next month's Winter Olympics in Sochi, local media have given some attention to the next Winter Games, to be held in Pyeongchang in 2018.  Specifically, the local press are discussing the pros and cons of the government's announcement that it will invest about $2.8 billion over the next five years in Gangwon Province to prepare for the 2018 games.  The accompanying graphic (click to see a large version), published in The Korea Times, shows the zones where much of that investment is concentrated.
Although the expenditure of $3 billion and questions about use of Winter Olympic facilities in the years following the Games are certainly important, they should be kept in perspective.  In this day and age, the Olympic Games, both Winter and Summer are primarily a global media event.  The reach of the Olympics, the experience of the Games and the manner in which they are financed, all depend heavily upon television and the media. That means, of course, that the broadband and mobile communication revolutions are a major part of the current transformation in the Olympic experience.  We saw glimpses of this in the London Olympics, and Sochi is being billed as the first "bring your own device" Olympics.  In this regard, it is important to remember that Samsung Electronics  is one of the Olympic TOP sponsors and the official mobile communication provider for the Olympic games.  According to Reuters, Samsung Electronics spent more than $14 billion, more than Iceland's GDP on marketing and advertising in 2013.  As reported in the Korea IT Times, Samsung's Wireless Olympic Works (WOW) app has just been released and "As part of the “Samsung Smart Olympic Games Initiative”, Samsung will provide around 18,000 mobile devices to the Olympic Family, including executives, staff, and officials from the IOC, National Olympic Committees and organizing committees in Sochi.They will be connected to Samsung’s WOW service which will provide essential, up-to-date Games Time data and connectivity that is crucial to the Olympic Winter Games operation."  According to Forbes, Samsung will provide each athlete at the Sochi Games with a Galaxy Note 3.  The magazine notes the global promotional impact of 2,500 athletes using those devices to record and send video during the opening and closing ceremonies of the Games.

Samsung's challenge is Korea's imperative

As reported today in the Joongang Daily, Samsung Electronics operating profit in the fourth quarter of 2013 fell by 6 percent, largely because of the declining profitability of the company's "cash cow" smartphone business. (click on the accompanying graphic to see a larger version) This marked the first profit decline in nine quarters and was attributed to  "...slowing growth in sales of smartphones and tablets in developed countries, an overly strong local currency and higher marketing costs compared to arch-rival Apple." The article also noted that "Disappointment in the earnings of Samsung Electronics, which accounts for 20 percent of Korea’s stock market capitalization, wasn’t totally unexpected. But the scale of the decline was a surprise, and the company’s shares dropped 0.23 percent from the previous day."
Globally, more than half of all mobile phones being sold these days are smartphones.  However, Samsung is facing increased competition not only from Apple, but also from other manufacturers of Android devices, notably in China.  Also, smartphones like other computing devices are modular and becoming increasingly commoditized.  As noted in an earlier post, companies like Google are looking into "build your own" or "design your own" mobile phones.  Such technological and economic trends suggest that the challenge for Samsung is part and parcel of the next big hurdle for South Korea, to lessen its heavy dependence of manufacturing and exports by large chaebol industry groups while increasing its strength in software, services and content.  This has been the subject of numerous posts, including this short one last October.
Gartner's latest projections underscore the urgency for Korea of making this transition.  As shown in the accompanying table, the three categories of enterprise software, IT services and telecom services together account for 78 percent of projected worldwide IT spending for 2014, while all the hardware devices together, including smartphones, make up only 18 percent of the total.
In light of Samsung's large influence on South Korea's export-led economy, it is probably appropriate to suggest that its challenge to shift from emphasis on hardware to a more balanced approach that includes software innovation is an imperative.   That imperative, in turn is at the heart of the Park Geun-hye administrations emphasis on digital convergence as a basis for realizing the "creative economy."

Mobile video and the future of T.V.

I did a post in late December with some findings from a recent KISA nationwide survey on mobile internet use.  That post noted the extremely rapid diffusion of LTE mobile services in South Korea and the exponential increase in data traffic generated by the popularity of these services.  
Here I would like to stress what is both a main reason for the popularity of LTE and a major cause of the increase in data traffic, the viewing of mobile video.  As reported last year by Digital Times, a Korean language publication of  the Korea Economic Daily, 94 percent of all smartphone users reported viewing mobile video as of April 2013, up from 88 percent a year earlier.  The total proportion of time spent viewing mobile video was also up almost two percent over the same time period.
As shown in the accompanying graphic (click to see a full size version), Cisco's Visual Networking Index predicts that mobile video will increase from 51 percent of global data traffic in 2012 to 66.5 percent of traffic in 2017.   Korea is already near the projected global levels of mobile video traffic and it is expected to increase to 74 percent by 2017. The Digital Times article also noted the popularity of Google's YouTube in this country and its successful advertising-based commercial model.  Overall, video on demand accounted for about 57% of all mobile video viewing.  According to Nielsen KoreanClick, Youtube was by far the most popular entertainment (video) web site in Korea as of December 2013, reaching nearly 34% of the market.
Television is changing, with implications for policymakers, consumers and those who make and distribute programs.  Those of us living in South Korea these days have a front row seat to observe the changes.

Dokdo is Korean territory: historically, geographically and in terms of international law

The small rocky island of Dokdo in the East Sea is in the news again owing to a public relations effort by the Japanese government to claim that it is actually Japanese territory.   Late last year, Japan's foreign ministry posted a video to YouTube in several languages making such a claim.
Readers of this blog will know that I've posted frequently on this topic in recent years (if you're interested, just enter the word Dokdo in the search box at the right.)   Dokdo illustrates one of the main issues of the emerging information era in which cyberspace contains a flood of information, making it more difficult to sift out the truth and trustworthy information from rumors and falsehoods.
South Korea's Ministry of Foreign Affairs has put up a new section on its website, which is so far only available in Korean. The accompanying graphic is a partial screen capture from that site. (click to see a full size version)  The Ministry has also published a short video to YouTube that explains why, historically, geographically and in terms of international law, Dokdo is Korean territory.
What makes this matter so hurtful and even insulting to many Koreans is that a large part of the "evidence" Japan has assembled to support its claim to Dokdo involves events after 1905, and the start of Japan's near half-century colonization of South Korea.