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| Xiaomi Chief Executive Officer Lei Jun introduces the company's smartphone RedMi Note 3 during a showcase at the National Convention Center in Beijing on Nov. 24. / AP-Yonhap |
By Kim Yoo-chul
Chinese smartphone manufacturer Xiaomi is set to change the Korean telecommunications market partly with the company's aggressive pricing strategy along with advanced hardware and software.
The Korean market has long been regarded as the tomb for foreign handset manufacturers as all domestic carriers such as SK Telecom, KT and LG Uplus have been reluctant to promote non-Korean producers which led them to suffer from declines both in sales and profit.
Also, with the lack of support from local sales channels, both Motorola and HTC of Taiwan left the market. Apple is also the country's No. 3 brand after Samsung and LG.
But Xiaomi is becoming a real threat as its "me-too" strategy, which technically means the similarity of surface design, user experience and embedded tech features of those with iPhone and Galaxy devices, is appealing to Koreans.
On Tuesday, KT, the No. 2 local carrier, halted the sale of Xiaomi's Redme Note3 phablet only two days after it started sales.
By forming a partnership with the local online shopping channel of InterPark, KT had offered the Note3 with with 16 gigabytes (GB) of storage for 69,000 won, a price even cheaper than the phone sells for in China. InterPark guaranteed a 20 percent cut in monthly mobile charges to consumers who purchased the Note3.
"For legal issues, InterPark stopped selling the Note3s. We notified KT of this decision," said an official.
Officials from the local telecom industry said the overnight decision was to prevent the possible worsening ties with Samsung Electronics and LG Electronics because growing sales of Xiaomi devices will clearly sap demand for Samsung and LG phones.
Samsung Electronics and LG Electronics denied speculation that the InterPark's decision was due to pressure by the companies.
"This wasn't happening. Korean consumers are ready and even eager to buy Xiaomi phones and even Huawei phones. Chinese phones improved in quality and use chips and displays sourced by Samsung and LG. A new market order will happen in the local telecom market," said an executive at LG Electronics by telephone.
For example, LG Uplus sold more than 10,000 units of Huawei's super budget Y6 models in 15 days since the introduction of the devices.
New App market?
Market analysts expect Xiaomi and Huawei to form official partnerships with local distribution channels to make their forays into the local market.
"The introduction of Chinese phones will press Samsung and LG to change their rigid pricing strategies. Local brands will lower suggested retail prices of their devices to save their bottom lines, which will be helpful to consumers," said an official at the Ministry of Science, ICT and Future Planning.
But it seems to be premature to say that even Chinese manufacturers will expand their positions in Korea and that doesn't have an imminent impact on the current mobile ecosystem.
Consumers who want to use Xiaomi smartphones should install a lot of new applications such as Google PlayStore and programs to support the Korean language. As Xiaomi phones support English as their primary text language, a process of customization should be put in place.
"Xiaomi has its app market system. The popularity of its phones will offer more consumer choices beyond the Apple- and Google-created ecosystem. But the effects of Xiaomi's market will be limited. You can get good phones at good prices; however, that doesn't mean that your software experience is better than using Google and Apple apps," according to an official at Samsung.
Samsung Electronics Vice Chairman Kwon Oh-hyun said the world's top smartphone maker is being challenged and needs to build a new ecosystem.
Globally, Samsung is facing challenges from Apple in the high end of the smartphone market and from Huawei to Xiaomi on the low end. Already, Huawei said its revenue from smartphones and other consumer products likely jumped about 70 percent last year.
Samsung commanded 23.7 percent of the global smartphone market in the third quarter, ahead of rival Apple's 13.6 percent, said Strategy Analytics, a market research firm. Huawei came in third in the global smartphone market with 7.5 percent of market share.
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