All eyes are on whether drastic changes in the domestic mobile communication market, such the rise of selective contract discount rates and the complete self-sufficiency system, will change the landscape of smartphone market. Until now, the domestic mobile communication market has been called the “grave of foreign-made phones.” However, there are growing concerns that foreign-made phones can benefit from new policy.
According to related industry sources on November 7, it is common to subscribe services and purchase smartphones at the same time in the current mobile communication market. This is why models that are recommended by retail stores or relatively low priced have been sold well. In particular, foreign-made smartphones have suffered with poor sales as domestic consumers, who prefer high-end products, have had low interest in foreign-made smartphones that are mostly low-end models.
However, there are now signs of changes in the mobile communication market structure. Some market watchers pointed out that foreign-made phones can benefit from changes in the policy, including the increase in selective contract discount rates and complete self-sufficiency systems.
Global smartphone manufacturers, such as Sony, Google, Huawei and Apple, are growing more and more interested in the domestic mobile communication market. When consumers buy a used phone using the current selective contract discount systems, they cannot receive subsidies. So, the government provides them with a discount on mobile charges in order to prevent discrimination of users. Recently, the rate of selective contract discounts has been increased from 20 percent to 25 percent. When consumers use a 50,000 won (US$45) flat-rate monthly payment plan, they can get a discount of 12,500 won (US$11) a month for 24 months.
An official from the mobile communication industry said, “There are only two smartphone makers – Samsung Electronics and LG Electronics – in South Korea but there are various foreign-made smartphone models. So, consumers are highly likely to purchase cheaper foreign phones and get a selective contract discount. In short, the rise in selective contract discount rates can be a gain in foreign smartphone producers.”
In addition, others say that the complete device self-sufficiency system can also be favorable to foreign-made smartphone manufacturers. The system allows consumers to get services from mobile carriers and purchase smartphones from smartphone makers, separating the provision of services and the purchase of devices. Generally, consumers get subsidies through mobile carriers when buying a smartphone. If the complete self-sufficiency system is implemented, subsidies will disappear. Foreign smartphone makers will be free from the competition for subsidies.
An expert from the industry said, “Domestic mobile communication users prefer domestic products to foreign phones. Therefore, we cannot conclusively say that changes in mobile communication market policy will lead to higher sales of foreign smartphones. But, it is still true that there are concerns over foreign phone makers gaining ground in the domestic market.”