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Riding the Korean Wave: How K-Pop Stars Have Helped Lift Samsung to the Top in Asia

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Thanks to the popularity of Korean pop music, TV dramas, and movies, Samsung has become a cool brand on its home continent.

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Samsung (PINK:SSNLF) is on a roll. The South Korean electronics multinational has notched a run of five straight record fiscal quarters, including a record net profit of $6.6 billion for the fourth quarter, thanks to robust sales of devices such as the Galaxy S3 and Note 2.

Indeed, in the past year, Samsung has extended its lead as the world's No. 1 smartphone maker over chief rival Apple (NASDAQ:AAPL) and others like Nokia (NYSE:NOK) and BlackBerry (NASDAQ:RIMM). According to HIS iSuppli, the company held a 28% share of the global smartphone pie in 2012, a strong improvement from 20% a year earlier.

Apple-esque long lines were seen at the launch of the Samsung Galaxy S3 in Singapore last year.
In Asia, Samsung's presence is all but inescapable. I certainly felt it when I visited my home country, Singapore, a few weeks ago. Compared to 12 months ago, when I last made the trip home, I noticed a significant increase in the number of people carrying Samsung smartphones on the streets. At the stores of wireless carriers, Samsung phones were prominently displayed in special stand-alone sections. In the past, only Apple products warranted such a distinction.

Reuters corroborated my observations in a report highlighting the fact that iPhone fatigue had set in "trend setting" Asian cities such as Singapore and Hong Kong. Citing data from Statcounter, a Web analytics provider, the news agency noted that Apple's mobile OS share in Singapore plunged from a high of 72% in January 2012 to 50% this month. At the same time, Android's (NASDAQ:GOOG) share climbed to 43% from 20% a year ago, thanks in large part to the rising popularity of Samsung mobile devices.

Why have Samsung devices become so sought after? Raghu Bala, chief technology officer at special interest media company Source Interlink Media, contends that credit must go to Samsung's research and development, which, "along with rapid product innovation, the right pricing, and integration with Google," has help the Galaxy and Note devices become such top sellers.

"Samsung's richer product line-up and vertically integrated supply structure are among its strongest advantages over Apple's simpler product range and strength in software," added Kim Young-chan, an analyst at Shinhan Investment Corp in Seoul, according to Reuters.

However, I think it's fair to say that the Samsung is also riding on the Korean wave that has swept across Asia in the past few years. In countries like Singapore, Hong Kong, China, and even Thailand and Cambodia, South Korean pop music, movies, and TV dramas have become so popular that all things Korean become hip by default.

"Thais are not very brand-loyal," Akkaradert Bumrungmuang, 24, a student at Mahidol University in Bangkok, told Reuters. "That's why whatever is hot or the in-thing to have is adopted quickly here. We follow Korea so whatever is fashionable in Korea will be a big hit."

The West might have caught a whiff of the Korean wave (or "hallyu" in Korean), thanks to Psy and Gangnam Style, but in Asia, the Korean pop culture dominance extends far beyond Psy, and cuts across multiple demographics. Middle-aged women obsessively follow Korean soap operas while Millennials and those younger enjoy the music of K-pop stars like Girls Generation, Big Bang, 2NE1, and Super Junior, who all became household names in the region long before the first Gangnam Style flash mob was posted on YouTube.

"Korea is now unequivocally the wellspring of Asia's most popular and influential pop cultural phenomena – supplanting Japan as the primary source of Asian cool," wrote Jeff Yang at the Wall Street Journal.
Actress Kim Ha Neul seen using a white Samsung Note in the Korean drama, "A Gentleman's Dignity."


Kris Kam, a 28-year-old advertising executive in Singapore, tells me, for example, that when his mother asked him to buy her a new smartphone, she requested a Samsung Galaxy S3 "just like the white one she saw in her favorite Korean drama, My Love, Madame Butterfly."

Similarly, Yuko Ishii, a 53-year-old factory worker from Japan, has also been influenced by Korean pop culture in making her purchasing decisions. "I used to rule out Korean products, but now I have no problem with them," she told Bloomberg. "If my favorite star was advertising a South Korean TV, I would definitely buy it. I want to feel closer to them by buying the same products they use."

Samsung isn't the only Korean brand that is benefiting from the popularity of the country's pop culture exports. Hyundai (KRX:005380) has become one of the world's top five auto companies, while LG Electronics (PINK:LGEAF) is now the second-biggest flat-screen TV producer by shipments, behind only local rival Samsung.

Amore Pacific, a major South Korean cosmetics company, is also rapidly expanding in China, with Kim Bong-hwan, executive director of the company, telling Financial Times that his company's success "is largely to do with the huge Chinese following for Korean music and television stars."

"As foreigners pay more attention to the singers, slowly they develop a liking for Korea ... and if they like Korea, they will buy more Korean things. This is what we're trying to promote," said Ma Young-sam, ambassador for public diplomacy at South Korea's foreign ministry, according to Financial Times.

K-pop stars 2PM shilling for the Galaxy S3
With the Galaxy S4 due to be released by April, Samsung is poised to strike another blow against Apple in the battle for global smartphone supremacy. However, the exuberant Korean firm has warned that mobile sales growth will slow drastically this year.

"We are expecting a slow recovery in the component business due to reduced capital expenditures, while competition in the set business will intensify further as demand slows and the mid- to low-end market expands," said Samsung's Senior Vice President and Head of Investor Relations Robert Yi, according to Slash Gear.

Still, Melissa Chau, Singapore-based research manager at IDC, believed that Samsung would continue to do well for the foreseeable future thanks to its diverse product line.

"In Asia, Samsung is still in the stronger growth position [compared to Apple] when it comes to smartphones -- bringing large-screen models to the masses, re-introducing the pen with its Galaxy Note series, and also, at the lower-end, with its entry-level Galaxy Y devices driving emerging markets like Indonesia and India," she told Reuters.

Of course, Samsung can also count on some help from Psy and the rest of the Korean pop culture pantheon. But how long can the firm ride on the Korean wave? After all, cultural phenomenons all fade away eventually. Japanese pop culture once had its time in the sun, lifting up firms such as Sony (NYSE:SNE) and Panasonic (NYSE:PC) along the way, but it gave way to K-pop in the end. Will the Korean dominance last? 60% of those asked in a Korea Times survey of 3,600 people in nine countries said that they expected the Korean wave to fade in five years.

Who will take over Korea's mantle as Asia's cultural influencer-in-chief then? China certainly will feel like its time is due. Chinese brands have already become domestic powerhouses, so if the Middle Kingdom can one day produce entertainment products that strike a chord all across Asia, then Samsung ,and not forgetting Apple, can expect a strong challenge from the likes of Huawei (SHE:002502) and ZTE (PINK:ZTCOY) for the title of Asia's premier smartphone company.

(See also: Samsung Galaxy S4 Rumored to Feature an Ultra High-Resolution Display, but Does It Matter?)

Twitter: @sterlingwong
No positions in stocks mentioned.
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