successful innovation of the korean mobile communications ... · 3 global competitiveness of the...

June, 2007June, 2007

Successful Innovation of the Korean Mobile Successful Innovation of the Korean Mobile Communications Industry and SK Telecom's RoleCommunications Industry and SK Telecom's Role

InnChan Lee, Ph.D.InnChan Lee, Ph.D.Vice PresidentVice President

ICT Research OfficeICT Research Office

1

ContentsContentsContents

Overview of the Korean Telecommunications Industry Overview of the Korean Telecommunications Industry

Cases of Successful Innovation Cases of Successful Innovation

Global Collaboration for InnovationGlobal Collaboration for Innovation

Implications & SummaryImplications & Summary

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Growth of the Korean Telecommunications Industry

•• With the advanced IT Infrastructure and telecommunications indusWith the advanced IT Infrastructure and telecommunications industry development, try development, Korea has been leading the telecommunications market serving as Korea has been leading the telecommunications market serving as the global testthe global test--bed bed for new technologies and servicesfor new technologies and services

Digital Opportunity Index(2006)Digital Opportunity Index(2006)

0.66

0.66

0.67

0.67

0.69

0.69

0.69

0.69

0.69

0.69

0.69

0.70

0.70

0.71

0.71

0.72

0.74

0.76

0.77

0.80

0.00 0.20 0.40 0.60 0.80

United States 20

Germany 19

Austria 18

Canada 17

Switzerland 16

Macao,China 15

Israel 14

Luxembourg 13

Norway 12

Finland 11

United Kingdom 10

Sweden 9

Hong Kong,China 8

Taiwan, China 7

Netherlands 6

Singapore 5

Iceland 4

Denmark 3

Japan 2

Korea(Rep.) 1

Top 10 economies by number of Top 10 economies by number of mobile broadband subscribers(2005)mobile broadband subscribers(2005)

(Unit : millions)

Source : ITU

1

1

1.1

2.3

4.1

4.7

4.9

10.1

13

18

0 5 10 15 20

Australia

Portugal

Spain

France

Germany

United States

United Kingdom

Italy

Korea(Rep.)

Japan

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Global Competitiveness of the Korean ICT Companies

•• The advancement of ICT services has facilitated growth of variouThe advancement of ICT services has facilitated growth of various sectors of the ICT s sectors of the ICT value chain, helping contents, platform, devices, and handset invalue chain, helping contents, platform, devices, and handset industry develop dustry develop

•• In particular, the Korean handset manufacturers have grown to beIn particular, the Korean handset manufacturers have grown to be global major players global major players

PanasonicPanasonicAlcatelAlcatelSamsung Samsung ElectronicsElectronics77

BenQBenQ MobileMobile(Siemens)(Siemens)

LGLGElectronics Electronics NECNEC66

LGLGElectronics Electronics Sony EricssonSony EricssonAlcatelAlcatel55

Sony EricssonSony EricssonSiemensSiemensPanasonicPanasonic44

SamsungSamsungElectronics Electronics

SamsungSamsungElectronics Electronics EricssonEricsson33

MotorolaMotorolaMotorolaMotorolaMotorolaMotorola22

NokiaNokiaNokiaNokiaNokiaNokia11

200620021998Ranking Global Handset Market Share(Global Handset Market Share(’’07Q1)07Q1)

Ranking Changes in the Global Handset MarketRanking Changes in the Global Handset Market

Nokia(34%)Nokia(34%)

MotorolaMotorola(17.5%)(17.5%)

SamsungSamsung(14%)(14%)

Sony Sony EricssonEricsson

(8.5%)(8.5%)

LG(6.3%)LG(6.3%) Others(19.7%)Others(19.7%)

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Innovation as Drivers of the Korean Telecommunications Industry

•• The success of the Korean telecommunications industry was laid The success of the Korean telecommunications industry was laid with the worldwith the world’’s s first commercialization of CDMA in 1996 and the subsequent technfirst commercialization of CDMA in 1996 and the subsequent technological ological innovation innovation

2010~2010~1996~1996~19801980 2002~2002~ 2006~2006~

• AMPS: Advanced Mobile Phone Service • GSM: Global System for Mobile telecomm • TDMA: Time Division Multiplex Access• EV-DO: Evolution-Data Only• WiBro : Wireless Broadband• HSDPA: High Speed Downlink Packet Access

AMPSCDMA/GSM(TDMA)

EV-DOWCDMA

WiBro (Mobile WiMax)HSDPA

’96 CDMA ’02 1x EV-DO ’06 HSDPA/WiBro

14.4

144

384

50

100

“The World’s First Commercialization”Data

TransmissionSpeed(kbps)

•• SK Telecom has made a number of historical breakthroughs in the SK Telecom has made a number of historical breakthroughs in the Korean Korean telecommunications industrytelecommunications industry

•• SK Telecom has been recognized as one of the WorldSK Telecom has been recognized as one of the World’’s most innovative companiess most innovative companies-- ‘‘Business WeekBusiness Week’’ (2006.4) (2006.4)

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1) CDMA Technology Innovation : Backgrounds

•• By the mid 1990s, Korea had no proprietary mobile communicationsBy the mid 1990s, Korea had no proprietary mobile communications technology and technology and transition to digital technology was needed to meet the increasitransition to digital technology was needed to meet the increasing demandsng demands

•• To avoid technology dependency, commercialization of CDMA had beTo avoid technology dependency, commercialization of CDMA had been decideden decided

In 1990s, Korea had no proprietary mobile In 1990s, Korea had no proprietary mobile technology and mobile market was dominated by technology and mobile market was dominated by

foreign vendorsforeign vendors

Transition to digital technology was needed to meet Transition to digital technology was needed to meet the increasing demands for mobile the increasing demands for mobile

communications servicecommunications serviceMobile Equipment Market Share(1991)Mobile Equipment Market Share(1991)

•• From the late 1980From the late 1980’’s, demands for mobile s, demands for mobile communications began to increase sharplycommunications began to increase sharply

•• In mid 1990s, the only commercialized In mid 1990s, the only commercialized digital mobile communications technology digital mobile communications technology was TDMA in Europe was TDMA in Europe

77 1010

4040

166166

2020

8080

’86 ’87 ’88 ’89 ’90 ’91

CAGR : 88%

CAGR : 88% ((unit : 1,000)unit : 1,000)

Handset Market Share(1991)Handset Market Share(1991)

Growth of mobile subscriberGrowth of mobile subscriberSwitching Switching

SystemSystem

Base stationBase station

TransmitterTransmitter

0% 20% 40% 60% 80% 100%

Motorola AT&T

MotorolaMotorola(43%)(43%)

SamsungSamsung(20%)(20%)

LG(9%)LG(9%)

Hyundai(9%)Hyundai(9%)

Others(19%)Others(19%)

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1) CDMA Technology Innovation : Development Overview

•• CDMA commercialization was a national R&D project, funded by theCDMA commercialization was a national R&D project, funded by the Korean Korean government and jointly carried out by Korean handset manufacturegovernment and jointly carried out by Korean handset manufacturers, telecoms rs, telecoms service providers, and governmentservice providers, and government--sponsored research institutessponsored research institutes

MIC

QualComm

• Design Overall System

ETRI**

• System Design

• Sub-System Integration

Equipment Manufacturer

• Manufacturing handset and telecoms equipment

Korea Mobile Telecom*

• Coordination of the R&D process• testing and evaluating developed products

* Korea Mobile Telecom was the predecessor of SK Telecom It was a public corporation owned by the Korean government.

** ETRI : Electronics and Telecommunications Research Institute

Designation of CDMA as the technology standard

Development of commercialized CDMA system

Launch of the world's first commercialized CDMA

service

Agreement on joint research program with

QualComm

Initiation of research on digital cellular

technology’89

’91

’93

’95

’96

Phase IPhase I

Forming of Forming of collaborative R&D collaborative R&D

organizationorganization

Phase IIPhase II

CDMA system CDMA system development and development and

service launchservice launch

Changing paradigm of innovation from a follower to Changing paradigm of innovation from a follower to an innovation leader for the Korean ICT industry an innovation leader for the Korean ICT industry

CDMA Development ProcessCDMA Development Process

81996 : Commercialization of CDMA service1997 : introduction of newly licensed PCS operators

1) CDMA Technology Innovation : Key Factors for Success

•• There are four major factors to the success of CDMA technology iThere are four major factors to the success of CDMA technology innovation nnovation

•• The Korean Government timely The Korean Government timely introduced the cuttingintroduced the cutting--edge CDMA edge CDMA technology and led a largetechnology and led a large--scale project scale project

•• Development methodology and research Development methodology and research management expertise accumulated management expertise accumulated through the previous through the previous ‘‘TDX projectTDX project’’

•• Korea Mobile Telecom had defined Korea Mobile Telecom had defined specifications of CDMA systems and specifications of CDMA systems and also coordinated conflicts between also coordinated conflicts between development sub groupsdevelopment sub groups

•• Korean government adopted demand Korean government adopted demand facilitation policyfacilitation policy

•• Market competition was introduced Market competition was introduced through the newly licensed operatorsthrough the newly licensed operators

Handset cost + subscription fee

Number of subscribers

((Unit :USD)Unit :USD) ((Unit :10,000)Unit :10,000)

Motorola

LG

Samsung

Key Factors for CDMA SuccessKey Factors for CDMA Success

Changes in Handset Market ShareChanges in Handset Market Share

0%

10%

20%

30%

40%

50%

60%

1994 1995 1996 1997 1998 1999 2000

0200400600800

100012001400160018002000

1991 1992 1993 1994 1995 1996 1997 1998 19990

500

1000

1500

2000

2500

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2) Wireless Internet : Overview of the Korean Wireless Internet Market

•• With development of cuttingWith development of cutting--edge technology including CDMA 1x and CDMA 1x EVedge technology including CDMA 1x and CDMA 1x EV--DO, DO, the Korean communications market moved away from voicethe Korean communications market moved away from voice--oriented service to lay the oriented service to lay the basis for wireless internet servicebasis for wireless internet service

• SK Telecom has led wireless internet technology advancement and nurtured wireless internet business to grow nearly 30% of total service revenue

(28.5%)(28.5%)

Wirelesslnternet

Wirelesslnternet

VASVAS(2.5%)(2.5%)

VoiceVoice(69%)(69%)

SK Telecom's Sales Breakdown(2006)

• Korean wireless market leads global telecommunications market with highest contents revenue next to Japanese service providers

3.3% 3.8% 5.5% 4.6% 3.5%6.9%

19.4%

9.0%

27.2% 29.6%26.4% 26.6%

21.5%

30.5%

72.4%

55.2%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

USA France Germany Italy Spain UK Japan Korea(rep.)

Contents Revenue in Major Telecommunications Market(2006)

% of Contents Revenue in Data Revenue% of Contents Revenue in Total Revenue

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2) Wireless Internet : Development of the Korean Wireless Internet Platform

•• ““WIPIWIPI””, the Korean wireless internet platform, has been developed as s, the Korean wireless internet platform, has been developed as standardization tandardization of wireless internet platformof wireless internet platform

SK Telecom

GVM/SK-VM

KTF

MAP/BREW

LG Telecom

KVM

• Inefficiency due to different platforms by each operator

In 2002, SK Telecom, KTF, LG Telecom, Samsung Electronics, LG Electronics, ETRI, and the Radio Research Laboratory successfully developed ‘WIPI’- the Korean wireless internet platform

• Royalty for QualComm’s ‘BREW’ platform would have caused an additional cost in the industry

1

2

Backgrounds for ‘WIPI’ development

Wireless Internet Platforms by Operator(2002)

(KRW Bn)

1,086

1,736

2,424

3,284

3,685

2002 2003 2004 2005 2006

Wireless Data Market GrowthWireless Data Market Growth

The standardized wireless internet platform has promoted mobile contents development, helping Korea to advance in global wireless internet market

5-yr CAGR : 35.7%

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2) Wireless Internet : Global Expansion

• SK Telecom is making a strong impression on the global market through the exporting of its cutting-edge wireless Internet solution, helping its business partners (contents providers and solutions/ platforms providers) advance into the overseas market

TA OrangePlatform(2004)

Mobile1Coloring(2003)

SingTelColoring(2003)

TelkomselColoring(2004)

NURSATPlatform(2004)

SkyTelMNO JV(1999~)

PelephonePlatform(2002)

China UnicomN/W Consulting(2001~)

VAS JV(2004~)

TelstraConsulting(1999)

SMARTColoring(2003)

APBWPlatform(2003)

SK-EarthlinkMVNO JV(2005~)

S-TelecomMNO(2003)

KDDIConsulting(2002)

• SK Telecom exports mobile service systems, terminal solutions and contents in the form of one package

• This new business model contributes to forming cooperative relations between large telecom companies and IT venture companies, helping them advance into the international markets

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3) Convergence Services : Overview

•• Based on network advancement, the Korean ICT industry is facing Based on network advancement, the Korean ICT industry is facing unparalleled changes unparalleled changes that are dismantling the boundaries between different industriesthat are dismantling the boundaries between different industries

•• SK Telecom has pioneered innovative convergence services, providSK Telecom has pioneered innovative convergence services, providing new values to ing new values to consumers in mature telecommunications market in Koreaconsumers in mature telecommunications market in Korea

SK TelecomSK Telecom’’s Innovative s Innovative Convergence ServicesConvergence Services

Corporate Corporate DriverDriver

•• New growth New growth engines in engines in matured market matured market

•• Market Market competitioncompetition

Regulation Regulation DriverDriver

•• Regulation Regulation mitigationmitigation

•• Strategic Strategic fostering of new fostering of new industryindustry

Technology Technology DriverDriver

•• Wireless Wireless Broadband Broadband NetworkNetwork

•• Device Device ConvergenceConvergence

Customer Customer DriverDriver

•• Convenience Convenience enhancementenhancement

•• Personalization Personalization needsneeds

Key Drivers for ICT Convergence

Core Core businessbusiness

Entertainment Finance

Broadcasting Information

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3) Convergence Services : DMB (Digital Multimedia Broadcasting)

• premium mobile broadcasting service by offering nationwide coverage and enhanced content

• SK Telecom pioneered the development of DMB service with early investment since 2001

• To promote the Korean IT industry, major system components such as broadcasting center and gap filler were all developed by Korean companies

•• SK Telecom launched Satellite DMB service via SK Telecom launched Satellite DMB service via ‘‘TU MediaTU Media’’ in May 2005, creating a new in May 2005, creating a new concept in multimedia mobile broadcasting service that convergesconcept in multimedia mobile broadcasting service that converges telecommunications telecommunications and broadcasting and broadcasting

• Several standards such as DVB-H and MediaFLO are under development

• S-DMB is the world’s first commercialization of mobile broadcasting service, creating another case for global test-bed

DVB-HBeing tested in France, UK, and

Finland

S-DMBCommercially launched in in

Korea and Japan

MediaFLO(QualComm)

Being tested in US

Program Provider

DMB Broadcasting

Center

Gap Filler

Ku-band(13.824~13.883 GHz) Ku-band

(12.214~12.239 GHz)

Handset DMB Device Car

S-band(2.630~ 2.655 GHz)

S-band

Configuration of SConfiguration of S--DMB ServiceDMB Service

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3) Convergence Services : DMB (Digital Multimedia Broadcasting)

•• SS--DMB has been developed through collaboration with various intereDMB has been developed through collaboration with various interested parties sted parties including program providers, broadcasters, terminal vendors and including program providers, broadcasters, terminal vendors and government officialsgovernment officials

•• SK Telecom has innovated new services based on its satellite DMBSK Telecom has innovated new services based on its satellite DMB technology by technology by developing mobile Tdeveloping mobile T--commerce and intelligent telematics servicecommerce and intelligent telematics service

ContentsContents

ProgramProvider

Broadcaster PlatformPlatform

Terminal/EquipmentTerminal/Equipment

Handset vendor

Gap Filler

• Expands demands for broadcasting services from households to individuals

• Contributes to the development of broadcasting contents industry

•• CrossCross--border collaboration border collaboration between SK Telecom and between SK Telecom and MBCo in Japan MBCo in Japan

• Conducts collaborative R&D for the development of DMB equipment (e.g. Gap Filler)

• Provides opportunities for overseas exports of DMB equipment, terminal, and chip set

Network / SatelliteNetwork / Satellite

+

Mobile TMobile T--CommerceCommerce

DMB Navigation (TPEG)DMB Navigation (TPEG)

New Innovative DMB ServiceNew Innovative DMB Service

1

2•• 15 15 Video ChannelsVideo Channels

•• 20 Audio Channels20 Audio Channels

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Global R&D for innovation

•• SK Telecom has actively collaborated joint R&D projects with leaSK Telecom has actively collaborated joint R&D projects with leading global players ding global players sharing advanced technology and innovative service knowsharing advanced technology and innovative service know--howhow

Advanced Technology Development

Advanced Technology Advanced Technology DevelopmentDevelopment

Convergence Service Development

Convergence Convergence Service DevelopmentService Development

• Advanced Technology• Innovative Service Know-how• Creative Marketing Ability

Outward Globalization• Acquired Biz & Technology

Know-how from GlobalMarket

Inward Globalization

Global Collaboration for Innovation

Global Collaboration for Innovation

Motorola++

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TD-SCDMA Cooperation with China

•• Specially, SK Telecom seeks a global cooperation with China for Specially, SK Telecom seeks a global cooperation with China for the development of the development of next leading telecommunications technologies including TDnext leading telecommunications technologies including TD--SCDMASCDMA

Signed MOU for cooperation on development of the "TD-SCDMA Project"

• First overseas telecom service provider to agree with Chinese government on development of TD-SCDMA technology

• TD-SCDMA Test-bed opened in Korea, followed by establishment of TD-SCDMA Service Development Center in Beijing

SK Telecom hopes to contribute to accelerating the commercialization of TD-SCDMA service through

systematic cooperation

•• TDTD--SCDMA network interoperability testsSCDMA network interoperability tests

•• TDTD--SCDMA terminal platform testsSCDMA terminal platform tests

•• Developing 3G multimedia and convergence Developing 3G multimedia and convergence servicesservices

•• Resolving problems that may arise in the process Resolving problems that may arise in the process of launching largeof launching large--scale commercial servicesscale commercial services

•• Establishing the KoreaEstablishing the Korea--TDIA(TDTDIA(TD--SCDMA Industry SCDMA Industry AllianceAlliance) to nurture TD-SCDMA ecosystem

• Strengthening the competitive edge of TD-SCDMA technology and promoting the 3G service in China

•• Strengthening the competitive edge of TDStrengthening the competitive edge of TD--SCDMA technology and SCDMA technology and promoting the 3G service in Chinapromoting the 3G service in China

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Next Innovation through global collaboration between China and Korea

•• SK Telecom seeks to establish a solid foundation for the two couSK Telecom seeks to establish a solid foundation for the two countries' cooperation on ntries' cooperation on future generation telecommunications technologies, facilitating future generation telecommunications technologies, facilitating subsequent innovationsubsequent innovation

World-first’s implementation of TD-SCDMA / WCDMA Interconnection and

TD-SCDMA global video telephony

• Building a cooperative model for joint China-Korea development in the telecommunications industry, for not only TD-SCDMA technology but also beyond 3G technology and 4G

•• Building a cooperative model for joint ChinaBuilding a cooperative model for joint China--Korea development in the Korea development in the telecommunications industry, for not only TDtelecommunications industry, for not only TD--SCDMA technology but SCDMA technology but also beyond 3G technology and 4Galso beyond 3G technology and 4G

•• SK Telecom has significant expertise in 3G SK Telecom has significant expertise in 3G technologies such as CDMA and WCDMA, and technologies such as CDMA and WCDMA, and expects to share knowexpects to share know--how and experience in how and experience in TDTD--SCDMASCDMA developmentdevelopment

•• SK Telecom is particularly keen to see SK Telecom is particularly keen to see TDTD--SCDMA technology established as SCDMA technology established as a global standarda global standard

•• SK Telecom will continue collaboration to SK Telecom will continue collaboration to research and develop beyond 3G and 4G research and develop beyond 3G and 4G technologiestechnologies

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20

KFS for Innovation and Future Challenges

•• The success of innovation for Korean telecommunications industryThe success of innovation for Korean telecommunications industry has been strongly has been strongly rooted in the following factorsrooted in the following factors

•• The ICT industry in East Asian region should promote joint collaThe ICT industry in East Asian region should promote joint collaboration to lead ICT boration to lead ICT market of next generationmarket of next generation

Effective cooperation and Effective cooperation and partnership with companies in partnership with companies in

other industries and governmentother industries and government

Innovation driven by consumer Innovation driven by consumer needs, not by fancy technologyneeds, not by fancy technology

Perseverance to overcome Perseverance to overcome difficulties in the process of difficulties in the process of technological innovation and technological innovation and

new service developmentnew service development

Top managementTop management’’s vision and s vision and organizational commitment for organizational commitment for

growth by innovationgrowth by innovationSuccessful Successful InnovationInnovation

•• Promote global cooperation in the East Asian region to lead the Promote global cooperation in the East Asian region to lead the ICT market of ICT market of next generationnext generation

•• AchieveAchieve standardization of the next ICT technology, including 4G, througstandardization of the next ICT technology, including 4G, through joint h joint R&D projects and testR&D projects and test--beds in the East Asian regionbeds in the East Asian region

Future ChallengesFuture Challenges

Thank YouThank You

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