Chasing the iPhone

SEOUL, South Korea, June 29 — While Americans have been blitzed with news about the iPhone’s debut, many in South Korea’s and Japan’s technology industries initially greeted Apple’s flashy new handset with yawns.
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Seokyong Lee for The New York Times
Pantech's design center in Seoul, South Korea. An executive at the company says that riding on Apple’s coattails may turn out to be the best business strategy.
Cellphones in these technology-saturated countries can already play digital songs and video games and receive satellite television. But now that analysts and industry executives are getting their first good look at the iPhone, many here are concerned that Asian manufacturers may have underestimated the Apple threat.
Analysts and executives in South Korea say that the iPhone, with its full-scale Internet browser and distinctive touch screen with colorful icons, is more than just another souped-up cellphone. They fear this Silicon Valley challenger could leap past Asian makers into the age of digital convergence by combining personal computing and mobile technologies as no device has before.
“Apple’s impact will be bigger than Asian handset makers think,” said Kim Yoon-ho, an analyst in Seoul at Prudential Securities. “The iPhone is different from previous mobile phones. It is the prototype of the future of mobile phones.”
The fear now is that Apple may repeat in wireless communications what it accomplished in portable music with the iPod: changing the industry. And just as when the iPod came out six years ago, big Asian manufacturers like Samsung Electronics and Sony could find themselves wondering what hit them, say analysts and industry executives.
Here in South Korea, manufacturers are taking the threat seriously, and are rushing out their own iPhone-like handsets. By the end of the year, Samsung, South Korea’s biggest cellphone maker, will unveil its Ultra Smart F700, with a large touch-controlled screen displaying rows of icons, much as the iPhone does.
LG Electronics, another large Korean handset maker, has begun selling a smartphone in Italy that can view full-size Web pages. Pantech, which sells most of its phones in the United States under the carriers’ brand names, will also unveil its first touch-screen smartphone this fall.
Sony Ericsson plans this fall to introduce its latest Walkman phone, the W960i, which will feature a touch screen and memory space for 8,000 songs. Nokia of Finland, whose N95 is probably the closest competitor to the iPhone in the United States, said it also plans a touch-screen cellphone called the Aeon, though the company has not said when it will go on sale.
Motorola, based in Schaumburg, Ill., plans to sell this summer the Razr 2, the successor to its once-popular Razr upgraded with a Linux operating system and full-scale Web browser.
“If the iPhone changes the rules in the cellphone market, then we have to adapt as soon as possible,” said Yi Seung-soo, a cellphone designer at Pantech. “We can take advantage of being a follower,” he said.
It’s the same method Korean manufacturers have used before — quickly developing similar products that are cheaper but which contain a few more features than Apple, he said. That strategy has not diminished iPod’s dominance in the music-player market in the United States, but makers in Asia have fared a bit better in their home markets.
For the time being, their concern is over the handset market in the United States, where the iPhone went on sale Friday. Apple will not sell its new phone in Asia until next year, and there are also doubts whether iPhone will catch on in markets like South Korea, where consumers often pay for small, sleek phones packed with functions. Bulkier smartphones and BlackBerrys have so far failed to sell well here.
But even if iPhone’s success is limited to America, it could be a setback for South Korean electronics companies, which export heavily to the United States. In particular, say analysts, Apple could end up seizing much of the top end of the American cellphone market, where a handset that cost $100 or more offers the highest profit margins.
That segment of the American market represents about a quarter of America’s 250 million cellphone subscribers, according to Strategy Analytics, a market research firm based in Newton, Mass. In contrast with cellphone users in Asia, more than half of American subscribers paid $50 or less for their cellphones.
Apple, whose biggest challenge may be persuading Americans to spend $500 or $600 for an iPhone, has said it wants to have the devices in the hands of 1 percent of the world’s cellphone users, or about 10 million people, by the end of next year.
For its part, Samsung says it is ready for Apple’s challenge, offering a far broader range of high-end products. Some of Samsung’s recent products in this segment in the United States include the BlackJack, a $200 smartphone that uses Windows Mobile, and the UpStage, a phone on one side and an MP3 player on the other.