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Chinese Companies, Apple Challenge Korean Firms in Hardware
Crisis of Korean IT Industry
Chinese Companies, Apple Challenge Korean Firms in Hardware
  • By matthew
  • September 15, 2014, 07:20
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Some booths at Yongsan Electronics Market, the beating heart of hardware in the center of Seoul, South Korea.
Some booths at Yongsan Electronics Market, the beating heart of hardware in the center of Seoul, South Korea.


So far, Korean tech companies like Samsung and LG Electronics have been recognized for their world-class technical skills and hardware. They have maintained the top spot in smartphone, TV, and semiconductor rankings based on the latest and first-class technology in hardware and excellent manufacturing skills. On the other hand, the biggest advantage of Apple has been in the construction of its own IT ecosystem that encompasses design, software, and content. Chinese firms have occupied the portion of the market with ultra-low-cost products that imitate goods made by Samsung and Apple.

However, this competitive market landscape is changing rapidly. Apple and Chinese companies have started to threaten Korea's strengths of hardware technology while maintaining their own strengths.

The representative example is the release of phablets by Apple. In the past, Apple manufactured only 4 inch smartphones, but it debuted the 4.7 inch iPhone 6 and the 5.5 inch iPhone 6 Plus at its headquarters on Sept. 9 (local time). In addition, it unveiled its smartwatch called the Apple iWatch.

These two smartphones are aimed at the phablet market led by Korean companies like Samsung and LG Electronics. The compound word “phablet” is formed from the words “phone” and “tablet,” which is hugely popular due to its convenience in surfing the Internet or watching videos.

The iPhone 6 and the iPhone 6 Plus are products that challenge the belief of the late Apple co-founder Steve Jobs, who stressed, “The size of a smartphone should be smaller than the palm of one's hand. No one would buy phablets.”

Apple Changes its Strategy

Previously, Apple made 4 inch or smaller smartphones in accordance with Steve Jobs' direction. Thus, the phablet market was dominated by Korean companies like Samsung and LG to the extent that Samsung accounted for 34 percent of the global phablet market in the second quarter of this year. However, Apple directly challenged Korean firms this time by releasing the 5.5 inch iPhone 6 Plus.

The U.S. tech company has been widely acknowledged to have expertise in software and design, whereas Korean firms have a competitive advantage in hardware. Nevertheless, Apple decided to go head to head with Korean Android phone makers in hardware. Apple's 5.5-inch model is equipped with hardware similar to that of the 5.7 inch Galaxy Note 4 or the 5.5 inch G3.

The iPhone 6 Plus is slimmer and lighter than the Galaxy Note 4. The 4.7-inch iPhone 6 is larger than its predecessor. Apple has superb technologies in software, and it can use its own smartphone operating system. The U.S. firm is threatening Korean IT companies by adding technical skills in hardware.

Samsung and LG use Google's Android for mobile devices. Like Apple, Samsung is moving forward with a plan to develop its own operating system, software, and content, but it has yet to build an IT ecosystem.

Meanwhile, the smartphone market is in stalled growth mode, but the size of the phablet market is increasing rapidly. Market research firm IDC predicts that each year the phablet market will grow 60 percent on average by 2018.

Apple is also going to compete in the smart watch market dominated by Samsung. The Korean tech giant continues to dominate the worldwide smart watch market with a share of 73.6 percent as of Q2 2014. LG already revealed its new smart watch to target the market. With Apple entering the market, a change in market dynamics is expected.

Chases of Chinese IT Companies in Hardware

Chinese IT firms, which have touted their low prices, are also threatening Korean firms with excellent technical skills in hardware.

Chinese electronics company TCL surprised the world by showcasing the 110 inch curved UHD TV and the first quantum dot TV, which is called a next-gen TV, at IFA 2014, ahead of Samsung and LG. Lenovo also displayed 64-bit smartphones, which are similar to the Galaxy Note 4.

Chinese smartphone makers have started to introduce products with hardware, which can be matched to that of Korean firms. Now, Chinese competitiveness in hardware is considered to go beyond the imitation level. Related to this issue, Jung Tae-myung, professor of the Department of Computer Engineering at Sungkyungkwan University, remarked, “The era where Korean companies took advantage of hardware is gone.”