SK Telecom To Battle Handset Makers
By John Park
SEOUL, South Korea--SK Telecom, South Korea's largest wireless carrier, is ready to enter the phone manufacturing
business. Existing handset makers are concerned that another entry will merely increase competition in the already crowded
market.
SK Telecom, an affiliate of South Korea's fifth-largest conglomerate, SK Group, established a joint venture in September
with Kyocera Corp. of Japan to produce cellular phones.
The new joint venture firm, called SK Teletech, is expected to manufacture and market code division multiple access-based
handsets. SK owns 72.5 percent of the new firm and the remaining 27.5 percent is owned by Kyocera.
SK seems to have finished all preparations for manufacturing the handsets. "We are ready to roll out," said Kil Jong Ku, a
general manager of SK Teletech.
Recently, the company signed an agreement with DSP Communications Inc. to introduce processor chip sets for dual-mode
handsets. This is the first time a South Korean firm will use DSP chips to make handsets. Most South Korean handset
makers, including Samsung, use Qualcomm Inc. chips, paying higher royalties of 5.75 percent of total sales plus $2.50 per
handset.
"We are confident that DSP chips will enable us to have competitiveness in the market," Kil said. DSP is one of the leading
producers of chip sets; the company holds a 25 percent market share in Japan. DSP has developed strong relationships with
major handset makers, including Fujitsu, Philips and Kyocera.
SK said it will start selling its newly developed handsets in December. The company expects to produce 50,000 to 100,000
handsets a month at its plant in Wonju City, about 90 miles east of Seoul. SK is likely to launch an extensive newspaper and
television advertising campaign. The company said it will introduce three new phone models by June 1999.
The South Korean wireless industry has grown rapidly. The number of subscribers in South Korea reached 12 million as of
Sept. 27, representing a four-fold increase from the 3 million at the end of 1996.
The rapid growth was fueled by heated competition among the five carriers. During the first six months of this year, 4.3
million units were sold; almost 5.2 million were sold last year. Currently, more than 10 handset makers compete in the
market, which is dominated by two firms, Samsung Electronics Co. Ltd. and LG Information and Communications Co. Ltd.
Among South Korean handset manufacturers, Samsung is the most sensitive about SK's entry. Samsung controls 54 percent
of the handset market. "Now we have to fight against SK," said Yoon Jong Jin, a manager at Samsung. The company
predicts that SK will take advantage of its position as the largest carrier and will supply its products to subscribers.
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