South Korea's IT market is projected to continue to strengthen in 2010, after signs of a continued upturn in consumer demand in the first half of 2010. South Korean IT spending is expected by BMI to increase from US$16.1bn in 2010 to around US$20.3bn in 2014. There will be a number of key growth areas including notebook PCs, IT outsourcing, hosted applications and industry-specific software applications. Going into 2010 the consumer segment was driving IT market growth due largely to increased consumer sales of notebooks. Corporate IT spending should pick up in 2010, however, as business confidence improves following a resurgence of orders in the wake of the economic slowdown. New cloud computing offerings are expected to fuel further demand from end-users to utilise this technology, and to drive investment in data centres.
In the consumer segment, growing broadband penetration and rising demand for notebooks will continue to be growth drivers. In the enterprise segment, the industry trend is towards specialised vertical-specific applications. Demand for advanced IT services such as outsourcing is expected to show a strong growth trajectory.
Industry Developments
South Korea has announced that it is to spend US$224.5mn to prepare to launch fully fledged cloud computing services in 2010. Around 73% of the funds will come from the state, with the money being used to develop technology and build infrastructure required to support the service. The government will also move to reform potential administrative and legal barriers to cloud computing, which it aims to complete by 2013.
In Q210 the Korean communications regulatory lifted a briefly imposed ban on imports of the iPad for personal use. The ban had been in place because the iPad's wireless networking features had not yet certified, but the Korean media had delighted in exposing Korean celebrities who had the gadget.
South Korea plans to invest KRW400bn (US$341.1mn)
Competitive Landscape
Local vendors Samsung and LG remained the leading players in the Korean PC market in 2009, with a combined market share in the region of more than 50%. Samsung took pole PC market position, with a market share approaching 40% in Q409, more than twice as much as that of closest rival LG. However, the combined share of the two big domestic vendors has slipped slightly from a previous level of around 60%. Meanwhile, the leading US vendor, HP, was thought to have around a 10% share.
The banking and financial services sector is a key target for vendors. In May 2010, US consulting company Accenture signed an eight-year collaboration agreement with local company Hanhwa S&C to jointly market IT solutions and services to insurers, securities firms and banks in South Korea. Hanhwa will help Accenture to tailor its financial services solutions to the Korean market.
Meanwhile, in April 2010, IBM announced that it won a contract to provide technology and services to Dongbu Insurance, Korea's second largest non-life insurer. The seven-year open infrastructure offering contract has been valued at approximately US$60mn. Another key local client for IBM is Korean Air, with which IBM has a 10-year outsourcing agreement, renewed in December 2008.
Computer Sales
According to BMI projections, sales in South Korea's PC market will be worth around US$3.3bn in 2010, with single-digit growth from 2009. Total PC revenues including notebooks and desktops are forecast to rise to US$3.4bn in 2014 at a CAGR of 1.4%. In the fourth quarter, total domestic PC shipments reached around 1.1mn units, with that total almost equally divided between desktops and notebooks.
Software
Software spending is forecast at US$5.7bn in 2010 and is expected to be the fastest-growing segment of IT spending. As the market focus moves from hardware to services and solutions, the share of the market accounted for by software should rise, with enterprises seeking greater leverage from their investments. However, software piracy in South Korea is above the global average and remains a problem.
IT Services
IT services sector is projected to account for about 40% of the domestic IT market in 2010, with spending of US$6.4bn. CAGR for the segment is estimated at 7% over the 2010-2014 period. Sectors such as government, telecoms, healthcare and banking should continue to supply demand for implementation, consulting and managed services.
E-Readiness
South Korea has one of the most sophisticated mobile telephony markets in the world. Given the dramatic increase in 3G subscriber numbers seen by KTF, SK Telecom and LG Telecom and the increased marketing for 3G services by KTF, BMI is expecting this healthy growth to continue.
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