`Smart TV Shock` to Revolutionize Industry

Intense competition since the 1980s resulted in thin profit margins for PC makers, but Microsoft earned a bundle through its epoch-making Windows operating system.

The mobile phone industry has undergone a major shakeup after Apple launched the iPhone with its cutting-edge software and applications.

A similar big bang is set to happen in the TV market.

Apple and Google, the main drivers of the smartphone boom, will soon launch smart TVs to challenge the world’s top two TV manufacturers, Samsung Electronics and LG Electronics.

Smart TV goes beyond showing TV programs or movies from the Internet. The new concept TV allows users to download Web applications and share a broad array of Internet content in electronics devices such as laptops and mobile phones.

Korean companies have suffered from “iPhone shock” and are keen to maintain their lead in the TV market. Critics say, however, that lack of software capability can pose a major hurdle for Korean companies as it did in the smartphone sector.

○ Prompt action by Samsung and LG

Google in May teamed up with Sony and Intel and will roll out smart TVs in this year’s second half. The plan is to combine Sony’s TV manufacturing technology and movie content with Intel’s CPU expertise. Apple is pushing its own smart TV venture, planning to release soon smart TVs containing television receivers in addition to set-top boxes already on sale.

Against this backdrop, Samsung and LG are rushing to develop their own operating systems and applications for smart TVs.

Following its release of IPTV in 2007, Samsung launched the application store Samsung Apps this year to allow the downloading of Internet applications on TVs. The company is rushing to secure content through partnerships with foreign video content providers Blockbuster, Vudu, Netflix and Pandora.

To provide content to overseas customers, Samsung also holds Samsung Apps contests for application developers in Korea, the U.S. and Europe.

Industry sources say Samsung and SK Telecom have invested 25 billion won (21.3 million U.S. dollars) to build an open innovation center, which will be expanded to support apps and content for TVs in addition to mobile phone content.

LG set up a team exclusively for smart TVs to release the sets early next year. It is also developing an operating system and chipset for smart TVs and will introduce an apps store.

LG Electronics Vice President Jung Do-hyun said, “Smart TVs are likely to become more common going forward, so we’ll promote the convergence of TV, PC and mobile phone businesses and build an integrated platform.”

○ Major hurdles

Critics, however, speculate that Korean companies will need time to catch up with the smart TV apps made by Apple and Google.

A Samsung Electronics source said, “It’s not easy to find apps that can compete in TVs.” While the company earlier rejected a proposal from Google for a smart TV alliance, it is now open to collaborate with Google and Apple.

Lack of content creation capability has reportedly pushed Samsung Electronics to change its stance.

The emphasis of Korean companies on hardware is another problem. A smart TV is different from a smartphone, which is a simple electronic device, and should be considered a software platform that enables the downloading of content from the Internet.

Samsung is increasing the number of software developers but the way they are perceived and treated is problematic. Choi Seon-kyu, a digital media professor at Myongji University in Seoul, said, “Samsung and LG still tend to treat developers like simple contract workers. An environment in which developers can take the lead in product development should be formed.”

Forming a value chain among telecom operators, broadcasters and cable companies is also important. Fears are rising among terrestrial and cable TV operators over a monopoly of TV ad revenues by platform developers such as Google and Apple.

Lee Kyoung-sook, a research fellow at the Korea Institute for Industrial Economics and Trade, said, “There is the possibility that resistance from related parties can delay the smart TV business, as was the case with IPTV.”

sukim@donga.com sublime@donga.com