Samsung or Apple... The Battle for the Missing 10% Without LG Phones Begins in Earnest

[Asia Economy Reporter Seulgina Cho] "Samsung or Apple."

With LG Electronics completely withdrawing from the mobile business last month, competition to absorb the ‘10% market share’ that LG phones held in the domestic market has intensified. Both Samsung Electronics and Apple are preparing to launch new smartphones, leading to expectations that the competition in the second half of the year will become even fiercer. In particular, Apple, the only foreign player recording double-digit market share in Korea?often called the ‘graveyard of foreign phones’?is rapidly expanding its domestic distribution network, which had been considered a weakness, sharply targeting the gap left by LG Electronics.

◇ Apple Aiming for LG Phone’s 10% in ‘Samsung’s Home Turf’

According to market research firm Counterpoint Research on the 2nd, LG Electronics, which ended its mobile business on July 31, held a 10% share of the domestic smartphone market in the first quarter. It ranked third after Samsung Electronics (67%) and Apple (22%).

LG Electronics’ 10% domestic market share is not a figure that overturns the market landscape. Even if Apple were to take all of it, it would only reach the 30% range, about half of Samsung Electronics’ share. However, it is significant as an opportunity to strengthen dominance in a smartphone market that has recently stagnated in growth. An industry insider evaluated, "Since the Korean market is called the graveyard of foreign phones, the symbolism of a 30% market share is even greater."

Contrary to initial expectations that Samsung Electronics, sharing the same Android platform, would absorb most of LG Electronics’ market share, it is understood that some LG phone customers are also moving to Apple iPhones. LG Electronics, which held a 13% share last year, lost 3 percentage points after announcing its plan to withdraw from the mobile business earlier this year. This loss was divided between Samsung Electronics and Apple.

Apple has recently accelerated its efforts to penetrate the Korean market. Starting as early as mid-this month, iPhones will be sold at LG Best Shops. Since LG Electronics announced its mobile business withdrawal plan, Apple has been consistently courting LG Best Shops, which have over 400 stores nationwide, as a sales channel. An LG Electronics official explained, "Initially, sales will start at less than half of the stores, with plans to increase the number of sales locations."

This move is aimed at expanding Apple’s offline distribution network in Korea, which has been considered a weakness. Currently, Apple is also preparing to open its third Apple Store following Garosugil and Yeouido. The Myeongdong Centerpoint Building, where the third Apple Store will be located, is scheduled for completion on the 31st of next month. Considering the interior work period, it is expected to open as early as this year or by early next year at the latest. Recently, Apple Korea has also begun recruiting staff to work at the third Apple Store.

◇ "Smartphones Are Just the Beginning" Ultimately a Battle of Ecosystems

In the market, there is analysis that Samsung Electronics’ decision not to release a new ‘Galaxy Note’ in the second half of this year and to focus on foldable phones could be another variable. This is because Apple’s strategic smartphone, the ‘iPhone 13,’ could fill the gap left by the Galaxy Note, which has a strong fandom and guaranteed base sales. The industry expects the iPhone 13 to achieve record-breaking success following Apple’s first 5G smartphone, the iPhone 12.

In response, Samsung Electronics plans to launch new foldable smartphones such as the ‘Galaxy Z Flip3’ and ‘Galaxy Z Fold3’ in the second half of the year, declaring a ‘paradigm shift’ to a new form factor. The ‘Galaxy S21 Fan Edition (FE),’ emphasizing cost-effectiveness (performance relative to price), is also expected to be released in the second half.

The competition between the two companies aiming to fill the void left by LG phones is expected to extend beyond smartphones. The iPhone is considered the core and starting point of Apple’s ecosystem, which includes AirPods, Apple Watch, iPad, and Mac. Ultimately, it will inevitably become a battle of ecosystems. Samsung Electronics’ recent emphasis on IoT-based MDE (multi-device experience) and ecosystem expansion is closely related to this.

Although LG Electronics has exited the smartphone business, it continues in the laptop and wireless earphone sectors, making it uncertain how Apple’s domestic market share acquisition will affect LG. Another industry insider evaluated, "Apple’s aggressive moves will impact not only smartphones but also the overall home appliance market structure."