A Move to Lower Smartphone Prices
A Korean lawmaker is preparing measures to lower the hurdles for foreign-made budget smartphones in order to roll back smartphone prices in the Korean market.
The lawmaker is Byun Jae-il of the ruling Democratic Party, who previously served as a vice minister of information and communication.
Rep. Byun recently urged the government to reform the current abnormal handset distribution system that combines handset sales with subscription to mobile services.
Under the present system, consumers have to purchase a handset and subscribe to a mobile service at the same time. Byun said handset purchases should not be tied to subscription to a mobile operator.
On top of that, Byun is urging the government to ease the policy on USIM portability to whittle down the dominance of Samsung Electronics, LG Electronics and Apple in the domestic smartphone market.
Byun thinks that USIM portability makes it difficult for foreign-made handsets to enter the Korean market.
The current USIM portability system was introduced in 2013 when smartphone users had to change their smartphones when they switched to other mobile carriers due to the incompatibility problem.
Korean handset makers such as Samsung Electronics and LG Electronics did not have a big problem as they made their smartphones USIMs compatible.
However, this system imposed a burden on foreign smartphone makers such as Xiaomi and Huawei as they had to change their handsets according to the Korean standard.
Currently, Samsung Electronics is holding about 60% of the Korean smartphone market, followed by LG Electronics with a 12% share and Apple with a 19% share. Other smartphone makers are accounting for only 8% of the Korean market. According to the Ministry of Science and ICT, only 27 foreign-made handset models were officially launched in Korea over the past three years. The high market shares of Samsung Electronics, LG Electronics, and Apple and barriers against foreign handsets’ entry into the Korean market are hindering launches of foreign-made handsets in the Korean market and are preventing smartphone prices from falling in Korea, according to some Korean politicians.
"In 2017, when the Redmi Note 5 of Xiaomi was launched with its price of 299,000 won in Korea, the price of its competitor, the Samsung A5 dropped to 297,000 won from 460,000 won,” Byun said. “An increase in foreign-made handset in the Korean market triggers competition, lowering smartphone prices in Korea.”
Chinese smartphone manufacturers are glad to hear the news. They believe that their smartphones are not very different from Korean smartphones in terms of performance. "Korean consumers still have a prejudice against Chinese smartphones. But if they use them, they will probably be satisfied with their cost performance ratios," said an official of the Korean smartphone industry. But some experts say that they are not sure about whether or not the introduction of the USIM Portability System only will be able to touch off a sharp rise in Chinese smartphone launches in the Korean market as Chinese smartphone manufacturers have not expanded their product launches due to various burdens such as marketing costs in addition to the USIM portability issue.
The Korean government is prudent. "The Korean government may mitigate USIM portability policies exceptionally for budget smartphones only. But in this case, consumers may face inconvenience," said an official of the Ministry of Science and ICT. “Consumers will get in trouble when they switch to other mobile carriers with foreign-made smartphones due to handset compatibility if it is found that the foreign-made smartphones cannot not enjoy eased USIM portability policies."