KT, Samsung Continue Rift Over iPhone

KT Chairman Lee Suk-chae is enjoying the success as the country’s sole provider of iPhones, but equally concerned about its deteriorating relationship with Samsung Electronics as a result. / Korea Times

By Kim Tong-hyung
Staff Reporter

Just five months into its release, the Apple iPhone appears to have reshaped the local mobile-phone market irrevocably. And Samsung Electronics, which once reigned supreme in the old hierarchy, clearly isn't too pleased about it.

The immense buzz generated by the iPhone starkly compared to the paucity of excitement related to Samsung's Omnia II, previously claimed as an ``iPhone killer,'' summarizes the first chapter of Korea's transition toward the smartphone era.

KT, which trails SK Telecom as the No. 2 mobile-phone carrier, managed to sell 500,000 iPhones through March, or about 4,000 units per day, and the number may approach 600,000 once April's sales figures are tallied up.

And although the laborious marketing efforts by Samsung and SK Telecom resulted in the sales of around 470,000 Omnia IIs, which were released earlier than the iPhones, the lack of hype surrounding the Windows Mobile-based handset dampens the number on the spreadsheet.

This apparently has Samsung riled and frustrated, and KT has been feeling the wrath of the world's biggest technology company gradually worsen.

Samsung has been channeling most of its new phones toward SK Telecom, while providing lax technology support on handsets it offers to KT, which is looking increasingly like a one-trick pony. Now, KT Chairman Lee Suk-chae, never a man to mince his words, is finally saying enough is enough.

In a seminar hosted by the Korea International Trade Association (KITA) last week, Lee bashed Samsung and other Korean handset vendors for their wink-wink, nudge-nudge creation of an anti-iPhone front weaved through SK Telecom.

``In business, there are no permanent friends or enemies. You can't make things personal when operating a company,'' Lee said.

Lee also criticized Samsung's lack of software support for the KT-released ``Show Omnia.'' The awkwardly named smartphone is basically the same device as SK Telecom's T-Omnia II, but Samsung prevented KT from promoting it as part of the Omnia II family.

Compared to the 470,000 T-Omnia IIs sold by SK Telecom, KT managed to sell just 40,000 units of Show Omnia, and Lee claims Samsung's lukewarm marketing support had much to do with it. Show Omnia users are frustrated by Samsung's delayed upgrade of the handset's operating system, as well as KT's inability to provide a meaningful content pool.

``The Show Omnia is an illegitimate son who can't call his father, father,'' said Lee, using the old Korean folklore of Hong Gil-dong, the Joseon Kingdom equivalent of Robin Hood, as a metaphor.

Gutted at Home

Despite iPhone's popularity, SK Telecom still has a larger number of smartphone customers thanks to its vast lineup of premium handsets, and Samsung seems hell bent on assuring that things stay that way.

Samsung is directing its smartphone pipeline to SK Telecom, including this week's release of the much-hyped ``Galaxy A,'' which will be the first handset powered by the Google-backed Android operating system that backs video calls.

Samsung's Galaxy S, which gathered positive reviews after revealed at the CTIA Wireless 2010 tradeshow last month in Las Vegas, will also be provided through SK Telecom in June.

SK Telecom Monday revealed its list of the 10 new smartphones it plans to release through June, which includes the Samsung handsets and also globally hyped products such as HTC's Desire and Sony Ericsson's Xperia X10. In comparison, KT has yet to present any convincing smartphones beyond the iPhone, and may see competition this time around when Apple later this year releases the next version of the iPhone, which may or may not be named iPhone 4G.

The iPhone's rise is an alarming development for Samsung, which previously enjoyed a virtual duopoly here along with LG Electronics, as the local market accounted for about 30 percent of Samsung's operating profit from mobile-phone sales. Although Samsung isn't commenting on sales performances, some industry sources believe the company barely avoided a loss in local handset sales during the first three months of the year.

Samsung's inability to produce smartphones that can compete with the iPhones and BlackBerries of the world is an urgent issue for the company, which is facing questions on whether it can adapt to a technology industry where the focus of competition is moving from hardware to software and services.

Samsung is the world's second-largest handset vendor behind Nokia, but is reduced to be an also-ran in smartphones, which provide larger margins than conventional phones.

Samsung's worldwide share in mobile phones reached over 20 percent last year, but its share of the smartphone market struggled to touch 5 percent.

According to market researcher Bernstein Research, the iPhone accounted for only 8 percent of the handset industry's revenue through the first six months of 2009, but 32 percent of the sector's operating profit. Apple's size of its mobile industry profit was about double of that of Samsung's, the research group said.

The key strength of smartphones is their wireless Internet capabilities and the range of ``apps'' they support, and this is the area where the iPhone has its clearest advantage over its competing products. As a result, companies like Samsung, which lack a strong developer network, are investing heavily in the Android community in hopes of maintaining a fighting chance.