By Jeffrey Wu, CNA staff reporter One of the most tech-savvy countries in the world, South Korea is the focus of many foreign companies' attempts to sell more smart phones, but it's proving to be a difficult-to-conquer market, one with many die-hard fans of local brands. One company which is reassessing its strategy in South Korea is Taiwanese smartphone vendor HTC Corp. The Taoyuan-based manufacturer in July announced that it had decided to close its South Korea office to streamline its operations and improve efficiency. An HTC official told CNA recently that the company had faced some difficulties during its negotiations with South Korea's telecom operators. Although these carriers say publicly that they are happy to work with any handset maker, they often express concerns about whether foreign brands' products are good enough, the official said. "It's not enough to be just as good as South Korean firms' products. ... You need to have superior brands and products so that the carriers there would be willing to sell them," said the official, who spoke on condition of anonymity. That means foreign brands need to introduce their flagship phones with cutting-edge technology or better-than-industry hardware specifications. Furthermore, South Korean operators also want foreign companies to spend heavily in local advertisement for their phones and to give promotional gifts to consumers, expectations that are hard for foreign brands to meet, the official said. "You can always enter the market. But eventually, you will find that you cannot play the game for a long time," said the official. In the first quarter of 2012, non-Korean smartphones accounted for only a 3.4 percent of mobile phone sales in South Korea, with Apple Inc.'s share dropping sharply to 2 percent, according to research firm Gartner Inc. That was still higher than HTC's market share of 0.7 percent, Google Inc.'s Motorola Mobility Holdings Inc.'s share of 0.4 percent and Japan's Sony Corp.'s share at 0.3 percent, Gartner said. In the first quarter of 2010, however, Apple accounted for as much as 23 percent of South Korea's mobile phone sales after the country started selling the iPhone 3GS in November 2009, the researcher said. The sharp drop in Apple's market share came as consumer interest shifted to South Korean branded devices with larger screens, long-term evolution (LTE) super-fast wireless connectivity and shorter product cycles, according to a recent study by U.S.-based tech news website Engadget. Since the first generation of iPhone was launched in 2007, Apple's iPhones have had the same screen size of 3.5 inches for years until it started using a 4-inch display in its re-designed iPhone 5 this year. Meanwhile, South Korea-based Samsung Electronics Co. overtook Apple as the world's top smartphone vendor in the third quarter of 2011 thanks to the hot sales of its 4.7-inch flagship model Galaxy S II, which was unveiled in February last year, said research firm Strategy Analytics. In its home market, Samsung grabbed a dominant 70 percent share in South Korea's smartphone market by the end of July this year -- two months after the launch of its newest 4.8-inch Galaxy S III -- South Korea's MK News website reported. "The Korean market is especially difficult because of the dominance of not just Samsung but other local players -- LG Electronics Inc., and Pantech Co.," Ovum analyst Mark Ranson was quoted as saying by The Register, a British technology news website. "Korean players are even more dominant in the local LTE smartphone market," he said. C.G. Lee, a Seoul-based analyst at Gartner, told The Register that this local dominance in the LTE space is because there is no standard frequency band between countries. "Without economies of scale, foreign vendors also find it difficult to survive in a communications market where huge marketing dollars are needed," Lee said. Despite their low market share, foreign brands have viewed South Korea as a market they must tap. That's because of the high percentage of South Koreans using smart phones. The number of smartphone users in South Korea as of August 2012 surpassed 30 million, which equates to roughly six out of every 10 people, according to a study in late August by SK Telecom and other telecommunications companies. The results also suggested that the number of smartphone users is increasing by an average of 10,000 to 15,000 people each day. A study conducted in late June by the Korea Communications Commissions (KCC) showed similar results, pointing to the leap from 10 million smart phone users in March 2011 to approximately 20 million in November 2011. The subsequent jump to 30 million users took less than 10 months, the commission said. Following with unprecedented growth rates, reported by the KCC, the smartphone penetration rate in South Korea surpassed those of smartphone savvy countries like England and Australia, which recorded 50 percent and 52 percent, respectively, in the first half of this year. The KCC study found that among the 53 million people using mobile phones in South Korea as of June 2012, about 28.8 million, or approximately 58.5 percent, were using smartphones. With smartphones becoming an important part of the daily lives of South Korea's wired population, another topic of interest among industry-watchers is that of what improvements, and for whom, these next-generation innovations have brought. Among the vast choices for apps that enhance mobile productivity, those relating to shopping and banking proved to be most popular, reported the KCC in a survey of over 4,000 smartphone users, conducted with the Korea Internet & Security Agency in early June. Of the survey participants, 83.5 percent said that smartphone use had made for a more convenient lifestyle, while 79.2 percent responding that their smartphones allowed them quicker and easier access to news and other important information. With smartphone gaining popularity, South Korean consumers seem to prefer models that support super-fast fourth-generation (4G) wireless broadband, such as the LTE technology. The number of 4G LTE network users in South Korea hit the 8.4 million mark in July 2012, with the figure expected to nearly double by the year's end, South Korea's Yonhap News Agency reported. The popularity of LTE-capable smartphones and creation of nationwide networks are spurring rapid growth, the news agency said, citing industry insiders. To tap into the market, foreign brands should sell their best flagship models with localized features and price their phones aggressively, the HTC official said. Joey Yen, a senior analyst at research firm International Data Corp. (IDC), told CNA that she was surprised when HTC decided to exit South Korea because the company had vowed to stay in the market. However, it is a quite straightforward decision for HTC as it wants to "stop bleeding" in its head-to-head competition against South Korean brands, Yen said. She believed that HTC still has advantages of making customized smartphones for South Korea's telecom operators, which had been the company's core strategy in Europe before it transformed into a brand from a pure manufacturer in 2007. To expand its economies of scale, Yen also suggested that HTC should boost its retail sales in South Korea by partnering with large distributors there, since the South Korean operators are asking HTC to fill many requirements for selling its phones in the country. Asked if HTC could return to South Korea's smartphone market in the future, Yen said the company still has a chance but that depends on how HTC leverages its resources. "If HTC considered that it could have better returns when putting the same resources in other markets, maybe it would be difficult to see HTC go back to the country," she added.