ReignCom Silences Sony in MP3 Market
By Kim Sung-jin
Staff Reporter
``Sorry, Sony!¡¯¡¯
``Who would dare say that?¡¯¡¯ would be the first reaction upon hearing such a defiant expression about the world¡¯s top electronics giant.
Surprisingly, it was the theme of an Internet advertisement by ReignCom, a local MP3-device startup company that was founded back in 1999. It wasn¡¯t a bluff. In the global portable audio device market, the old domination of handy CD and cassette players, like Sony¡¯s Walkman, was being succeeded by MP3 players.
ReignCom is now the top MP3-player manufacturer in South Korea with a 50 percent market share, which is even larger than the country¡¯s largest electronics giant, Samsung Electronics. The company also controls more than 25 percent of the global MP3 market _ an astounding feat accomplished in just four years.
The company is not well known as global players like Sony, Sharp or Panasonic. It is because even until just a few months ago, ReignCom couldn¡¯t have afforded to put up advertisements on TV or newspapers. For ReignCom, Internet was the only channel for promoting its product.
On Dec. 19, ReignCom emerged as a Cinderella on the tech-heavy Kosdaq market. The company went public with its opening stock price soaring to 94,000 won, more than double the 47,000 won initial public offering price.
Its stock price skyrocketed to its highest level at 117,800 won per share early last week. As of yesterday morning, the stock price hovered at 92,200 won, about 184 times the 500 won face value per share. The company issued 6.5 million shares, 24 percent of which is owned by ReignCom president and chief executive Yang Deok-joon.
Ironically, before founding ReignCom, Yang worked at Samsung Electronics for 20 years. His company started off distributing semiconductors and as an engineering solution developer, but then began making MP3 players with Yang¡¯s confidence that devices that can replay visual, sound and other digital media on the go would be the next big hot-ticket item in the electronics industry.
Setbacks Behind the Legend
Securing talent was the greatest difficulty in ReignCom¡¯s short history, Yang relates. He said the company¡¯s focus is on creating a work environment where employees could full express their creativity.
Yang, 52, founded ReignCom with initial capital of 300 million won in January 1999, and after several months, with the beginning of the global IT trend, outstanding researchers and engineers joined the company.
After a series of obstacles, the company succeeded in attracting $5.6 million from AV Concept, a Hong Kong-based electronics firm, and permission for using a factory site in China. The collateral for the foreign investment was the superior technology and high growth potential of ReignCom.
The company was also chosen as an official partner by Microsoft early this year for the U.S. software giant¡¯s Media2Go project to develop a next-generation portable digital device, along with global electronic giants like Samsung Electronics and Sanyo.
``By setting the focus of our business on globalization since the very beginning, we rapidly expanded our distribution channels throughout the world. It contributed greatly to maximizing our profits and in fostering the brand power of iRiver,¡¯¡¯ said Yang. ReignCom develops its innovative MP3 technologies in South Korea, outsources the exterior product design in the United States and manufactures the products in China.
ReignCom began producing MP3 units under its own brand name ``iRiver¡¯¡¯ in January 2002. Before then, it supplied its MP3 products to U.S.-based SonicBlue, in the form of original design manufacturing (ODM) under the brand name Rio, since it had difficulty securing distributors for its own products.
Slick design was another key factor behind ReignCom¡¯s success. Yang entrusted the design of its iRiver product line to INNO Design, a design firm in California¡¯s Silicon Valley. Its iRiver products carry a description reading ``Design by INNO¡¯¡¯ and ReignCom pays royalty for the firm¡¯s innovative designs.
The prism-style iRiver MP3 player ReignCom rolled out in September last year was a shocker for the global MP3 industry then. The prism-style model, which was the first MP3 model to sell more than 1 million units, is still gaining in popularity around the world.
``There are professionals in any field. We fitted our technology into the professional designer¡¯s design. That is the competitive edge of our technology,¡¯¡¯ said Yang.
``I believe iRiver is the first digital product that incorporated a design firm¡¯s logo into the products. It is an innovative marketing scheme by ReignCom to promote iRiver as a upscale digital gadget,¡¯¡¯ he added.
On the back of innovative design and superior technological competitiveness, Reigncom is expecting record profits in 2003. The MP3 player maker anticipates its net profit to reach 42.5 billion won on annual sales of 230 billion won. Its net profit is about 430 percent greater than the 8 billion won it posted in 2002 and sales are up 187 percent from 80 billion won.
On the back of the world¡¯s first 1-gigabyte flash memory unit, an iRiver MP3 player, which sells more than 30,000 units a month on the domestic market alone, the company is targeting 65 billion won in net profit on 380 billion won in sales next year.
``An era of consumer electronics that merges visual, telecommunication and computer digital technologies will emerge in the future. Recognizing such market needs, we will develop innovative digital convergence products and lead the creation of a brand new digital lifestyle,¡¯¡¯ said Yang.
He said the company plans to introduce around 10 portable multimedia players with color TFT-LCDs and large memory capacities of between 40 to 80 gigabytes that can reproduce audiovisual media at the Consumer Electronics Show in Las Vegas early next year.
Korea¡¯s MP3 Player Exports
Meanwhile, the Electronic Industries Association of Korea (EIAK) said that South Korea¡¯s MP3 player exports increased by 44.2 percent in the first 10 months of the year, thanks to enhanced product quality.
Outbound shipments of MP3 players in the January-October period stood at $128 million, compared with $88.9 million in the same period last year.
Asia-bound shipments accounted for $62 million, with Europe and North America accounting for $33.9 million and $28 million, respectively.
Hong Kong topped the list with $36.6 million, followed by the United States and Japan with $24.6 million and $17 million, respectively.
Samsung Electronics and Digitalway also predict their cumulative MP3 player sales to top the 1-million mark by the year¡¯s end this year.
