Losing to Korea, Japan eyes new tech battlefields

By Rhee So-eui and Kiyoshi Takenaka

SEOUL/TOKYO (Reuters) - Japan has the technology, but South Korea has the product ... and the profits.

In the longstanding rivalry between these two near-neighbor North Asian technology industry heavyweights, the pendulum has swung Korea's way.

South Korea's Samsung Electronics (005930.KS) and LG Electronics (066570.KS) have wrested market share from Japanese powerhouses such as Sony (6758.T) and Sharp (6753.T) to become world leaders in mobile phones, memory chips and flat-screen TVs.

Yes, much of the shift is down to the vagaries of global currency markets -- the Korean won is 22 percent cheaper per dollar than two years ago, while the yen has gained 22 percent.

But there's more to it than just export competitiveness as the weaker won helps Korean exporters by making their products cheaper overseas.

Nimbleness and market savvy have bred branding success for the Koreans, who are lauded -- even by their Japanese rivals -- for their product strategy.

"We cannot help but admit that the decisive factor behind our loss to Samsung is product strength ... and marketing," Sony CFO Nobuyuki Oneda said late last month.

On October 30, Sony posted its fourth consecutive quarterly operating loss, though it did trim its annual loss forecast, while on the same day Samsung reported its best-ever quarterly net profit and gave an upbeat outlook for 2010.

"Japan has always been ahead with technologies," said Lee Min-hee, analyst at Dongbu Securities in Seoul. "What Korean companies do really well is act fast to invest and turn a new technology into a business."

In brand awareness, Samsung ranks 19th, according to Interbrand's global list, some way ahead of Sony's 29th, Canon (7751.T) at 33rd and Panasonic (6752.T) at 75th.

Analysts say Korea's ability to focus on the global market -- it's domestic market is small -- has paid off, and owner-centred management structures at business groups such as Samsung ensures speedy investment decisions.

The South Koreans have been quick to shift production overseas, making goods locally for fast-growth emerging markets from Russia and Brazil to Africa.

"Korean companies' strength is in speed. They are quick to make changes to develop and market products that consumers want," said Lim Tae-yun, a research fellow at Samsung Economic Research Institute (SERI).

Between 1997-2006, annual sales growth at Japanese electronics firms averaged 4.3 percent, well below South Korea's 22.5 percent and Taiwan's 32.5 percent, according to

SERI.