The Korea Herald


[Editorial] Shift to software


Published : Aug. 19, 2011 - 18:26

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Both Sony and Nokia looked invincible in their heydays. But Sony is now being pushed out of the TV market and Nokia is at risk of being taken over. Behind the fall of Sony and Nokia is the rapid rise of Samsung, Apple and others in their global market share.

As the Financial Times recently reported, Sony and other Japanese companies ― once consumer electronics behemoths ― are pondering pulling the plug on TV manufacturing, with Samsung and LG having emerged as the top sellers of flat screen TVs. As for Nokia, rumors are galore that Microsoft is considering acquiring the Finnish company for its entry into the smartphone market.

Of great concern to many market watchers now is whether Samsung, a leading global manufacturer of both TV sets and smartphones, is following the footsteps of Nokia because of what is being put into relief as a painful blunder in management ― negligence in software creation. Samsung, which survived the recent Apple iPhone shock by quickly adopting Google’s Android operating system for its smartphones, is reeling again, this time from Google’s acquisition of Motorola Mobility.

Samsung, putting on a brave face, says it had already anticipated Google’s Motorola Mobility takeover. It says it does not pose a serious threat to its smartphone business because it has its own operating system and may use that of Microsoft under a license agreement as an alternative to Android.

Nevertheless, there is no denying that Samsung is considering all options available in case its access to the Android operating system is hindered, if not terminated, when Google’s Motorola Mobility takeover leads to what some industry watchers regard as a similar entry into the smartphone market to the one Apple made. Samsung, with its fledgling Bada operating system not yet fully market-tested, is vulnerable as Google is combining its formidable software prowess with Motorola Mobility’s hardware capacity in the pattern of Apple, which uses its own hardware and operating system for its iPhone-iPad business.

The plight of Samsung is of its own making. It has focused on hardware at the expense of software. A painful reminder in this regard is that Samsung declined an offer from Andy Rubin, a technology pioneer and co-founder of Android, to collaborate on making smartphones in 2004. Android was taken over by Google the next year.

Samsung is taking remedial measures. When news broke about Google’s takeover of Motorola Mobility, Lee Kun-hee, Samsung chairman, took no time in summoning top Samsung executives to a conference. He reportedly told them to strengthen Samsung’s software capacity by recruiting top-class computer programmers from around the world and, if necessary, taking over software companies. Samsung will have to strive to prove that the shift in its business strategy is not too late, though.

A weak software base is not limited to Samsung alone in Korea. It is common to all of the nation’s business conglomerates. Ahn Cheol-soo, founder of AhnLab, a virus vaccine program developer, and a professor of Seoul National University, warns that Samsung is faced with the danger of “falling from the position of (equal) partner for Google to supplier status.” A similar fate, he says, may befall other large Korean business groups, which he criticized for “keeping bakeries and restaurants as their affiliates, but no software company writing general computer programs.”

The Korean government has to share the blame. The main culpability lies in its inadequate proprietary rights protection for AhnLab and other software companies. According to an estimate by the Korea Software-Property Right Council, losses resulting from illegal copying amounted to 640 billion won last year. The council says four in 10 computer programs in personal use in Korea are illegal copies, adding that the rate is much lower in the United States (20 percent), Japan (21 percent) and Britain (27 percent).

Both manufacturing and programming are indispensable for businesses involving electronic devices that are in use, under development or yet to be developed. One cannot be sacrificed for the other. As Ahn proposes, it is necessary to create a “healthy software ecosystem” of cooperation among the government, conglomerates and small- and medium-sized enterprises.