Reserving High-End Niche Early On

When one writes about Korea, India or both, there is really only one topic to speak about right now, and that is the ratification of the Comprehensive Economic Partnership Agreement (CEPA). There has been quite a lot of ink spilled and pixels tickled about the partnership between the two countries. After all, it is indeed hard to ignore the elephant in the room. This writer can only see half of the room from this perspective, sitting in the capital of South Korea and having never been to India. But India's technology market is similar to that of China, and the strategy of Korean companies when entering both markets will be similar. That is not to imply that the Indian market isn't already saturated with Korean companies - Korean goods are quite common there. But it is notable to consider the similarities between the Korean approaches to both the Chinese and Indian markets, and extrapolate what will go on in the future.

At the Asia Electronics Expo Shanghai (AEES), the Korean angle was spelled out for all to see. The expo included representatives from five other, smaller electronics expos from Taiwan, Hong Kong, Japan, mainland China and Korea. The Korea Electronics Association, having just finished the Korea Electronics Grand Fair the month before, aggressively carved out a unique niche for itself. Even though there were only 45 Korean companies present among the thousands in total, the Korean delegation made the best use of their available resources. They positioned their designated Korean Pavilion right at the entrance to the first hall of the Expo. They had the most expensive-looking and visually appealing booths. And, if that wasn't enough, they had a stage set up where Korean pop dancers shook their hips, traditional Korean dance performers shook their ribbons, and flashy Taekwondo stunt men and women destroyed an impressive amount of wooden boards. The Korean Pavilion was the highlight of the Expo.

The Korean company representatives also seemed to be very coordinated; almost all of them singing the same tune. They almost unanimously positioned their companies as higher-cost, higher-quality luxury alternatives to what was being offered by other companies from China and elsewhere. They were selling themselves as the high end in a variety of different fields. They did not apologize for being more expensive than their competitors, but tried to sell it as a strength. And it seemed to be working. The Korean Pavilion area of the show was always packed with visitors, and when it was compared with other areas of the show, they looked rather shabby and unappealing. The Korean Pavilion was the trendy, happening, place with the expensive products and the assurance of quality.

Two specific examples that come to mind were Carima and Fils. Carima was showing off 3D printers at the AEES and Fils was showing off its piezoelectric thin film speakers. Both of them were showing off things that simply did not exist in the Chinese market, and most likely do not yet exist in the Indian market either. And both of them were completely swamped with visitors and buyers. Carima demonstrated its 3D printer by printing out toys, gears, and logic puzzles right there at the booth. They were created with a variety of different colors and materials. Fils was showing off its membrane speakers, which were thin enough to see through but complex enough to pass sound through. They were amazing all of the visitors to their booth and made more deals than any one company could possibly fulfill. It was like the visitors were kids in a candy store and all the employees were handing them samples.

It's not hard to imagine that Korean companies will be doing the same thing as they enter into the Indian market. And, of course, Samsung and LG are already employing this strategy. The companies emphasize luxury and extravagance in their cell phone models - the Samsung Omnia was launched for 33,900 rupees in India - approximately US$700. This is not the action of a company worried about the ability of the market to bear the cost. Korean companies are going to be occupying the high end of the Indian technology markets. This is not in doubt.

Consequences

In the greater context, India is setting itself up for major economic changes, and Korea is only one of the players here. While it is important that the high end of India's economy is going to be even more saturated with Korean goods, it's not the only economic sector that will soon be affected. India is signing other agreements as well, opening up itself to other Asian nations. While the particulars are moving along slowly, it can reasonably be assumed that the agreement will be completed within a reasonable amount of time. The India-EU FTA is almost finished, after a last push for cultural trade by Europe. There are also rumors that the country is open to a free trade deal with the United States, and discussion about how difficult it is to open up ties with China, which means that is also being considered. Taken all together, this means that this generation of Indians will see their country opened up, rapidly or slowly, to free trade agreements with most of the outside world. This means that there will be a sudden inflow of goods into the Indian subcontinent.

For the past 40-odd years, India has been focused on itself. The Indian economy has mostly been a story of domestic companies struggling to meet domestic demand. There is nothing wrong with that, and in fact it was a good way for India to grow its own domestic manufacturing and industrial sectors. However, domestic demand has always outstripped domestic supply, which led to anecdotes such as farmers in rural areas having the money to buy bicycles without bicycles available to buy, raising the prices to ridiculous levels. India as a market is ripe for saturation with all types of goods. And an economy of one billion people hungry for the raw goods that the world can supply is enough to make any CEO salivate.

So, as Korean companies take their accustomed stance of offering high-end, expensive luxury items, the rest of the world is also going to take various other stances within the Indian market, jostling and jockeying for position. Of course, domestic companies are also going to be a large factor. This means that, in short order, most or all of the sectors in the Indian market are going to be crowded. Can Korean companies survive in the rarefied air of luxury items in a market transformed? Judging from their success so far in China, one would be inclined to say yes.

Ripples Heading Out

But this is not the only consideration to have for India's big move towards a more open economy. It cannot be overstated that this is more than 1 billion people we're talking about. Any type of large economic shift of 1/7 of the world's population is going to have far-reaching consequences. You can think of India as a whirlpool just forming in a popular trade route for ships. While the ships were formerly traveling to various different destinations, many of them are diverted towards the whirlpool. To stretch the metaphor a little too far, this would be good for the whirlpool's economy, but bad for the economies of the original destinations of those ships. Goods that had before been given to other countries will, by preference of FTA agreements, be given to India from its trading partners, or to its trading partners from India. This will change the entire balance of power and money in South Asia.

There are some experts who say this will create a net loss for all countries that are not India in the region. Countries that produce the raw materials that developed nations need to create advanced products would experience harder times due to so many economies holding a preference on particular Indian goods, according to some analysts. In this case, Korea would have dodged a bullet preemptively with its focus on high-end electronics, because the effect of an India-globe FTA would not hinder it. However, as a small drop of water in India's ocean, Korea's economic outlook could still be affected indirectly if India sucks up all the goods, money and business. Korea's customers around Asia might not be able to afford its goods any longer, and India's market might not grow enough to compensate for that. The world is a complex and frequently confusing place, and economic forecasting is unreliable. It may very well be that there are no winners in an open-India future.

The China Factor

And, of course, there is India's de-facto rival in this region, and the other 1 billion-plus country - China. China is also looking for economic growth, and is also a budding market for every service in the entire world. It is unlikely that the country will sit passively and watch as India sets up free trade agreements north, south, east and west. China will most likely either try to create a separate bloc of power composed of countries that are not cooperating with India, or try to compete with India as a market for goods and services. China has a long history of practice in manipulating its neighbors and influencing them for the greater good of China, while India has always been an introspective power. Also, China's cultural links to the rest of Asia are much stronger than those of India. Most of Asia doesn't use a Sanskrit-based alphabets or have Hindi-based vocabularies. That is all Chinese influence.

China and India have not had a very close relationship historically, either. There is little precedence for them cooperating. And their upcoming economic roles as fast-growing economies seeking goods and raw materials put them in ever-increasing antagonism. There has been a lot of ink spilled over that issue as well.

From Perspective to Focus

In the context of all these global trends, Korea's CEPA with India seems positively minuscule in comparison. Every single Korean citizen could produce 10 cell phones each and ship them all over to India, and that would only supply half of the population, and leave China completely in the cold. Korea's goods and services are like pouring cup after cup after cup of water into two deserts. However, the deserts are paying for the water and are always asking for more. Despite the dour possibilities for India's rise, with its possible harmful implications, and despite China's possible opposition and its long-standing antagonism, Korea only stands to benefit. Unless the two waking giants smash all of Asia to ruins around them in a misguided struggle for dominance, from a Seoul-based perspective life couldn't be rosier.