Data-driven macro perspectives on how digital adoption evolved in South Korea For any inquiries regarding this research, please contact kh.lee@murexpartners.com.

1. ©2020 Murex Partners.All rightsreserved.
June 2020
The Digital Land of
Morning Calm :
How Digital Adoption Evolved in South Korea Since 1997
A Data Driven Macro Perspective
MurexThesisLetter#1

2. THE STORYLINE
NEW BUSINESSES
CREATED ON TOP OF
IT INFRASTRUCTURE
AN ERA OF SMARTPHONE
ECOSYSTEM : A SMOOTH
INTEGRATION
AN URGE FOR EVEN MORE
DIGITIZATION
WHAT’S TO COME IN THE
NEXT DECADE
THE DAWN AFTER THE
DARKEST NIGHT
©2020 Murex Partners.All rightsreserved.
Late 1990s Early 2000s 2010s Early 2020s 2020s and on

3. THE DAWN AFTER
THE DARKEST
NIGHT
The financial crisis was a catalyst for the nation’s
shift in focus to IT Infrastructure
Fundamental cracks deep inside, South Korea’s
economy was finally exposed during the 1997 Asian
Financial Crisis. It didn’t take long to affect the
everyday lives of its citizens from the devastating
burst of economic situations, which resulted in
numerous corporate bankruptcies and massive
unemployment.
While in the middle of the crisis, the newly-elected
President of South Korea announced the then-
questionable master plan of building IT
infrastructure and incubating IT startups as the
nation’s imminent assignment to overcome the
deadliest economic crisis of all time.
©2020 Murex Partners.All rightsreserved.
Late 1990s

4. 20
0
40
2002 20101997 1998 1999 2000 2001 2003 2004 2005
Korea
20072006 2009
UK
Japan
USA
World
Korea was (and still is) by far the #1 in internet penetration
GDP contribution of IT industry rose dramatically after 1997
1997
5%
6%
1998
31%
-7%
41%
21%
11%
1999
9%
37%
2000
3%
2001
IT Software grew by 412% in 4 years while the whole IT industry
grew by 216%
3.9 5.4 8.8 12.0
44.5
52.1
71.1
91.8
91.4
14.6
16.8
21.0
26.8
30.5
19991997
2.9
1998 2000 2001
97.5
62.1
72.9
127.4
134.0
+412%
+216%
IT SoftwareIT Service IT Hardware
Real GDP Growth IT Industry Growth
Source: World Bank, Department of Statistics of South Korea,
(1) The period the 1997 Asian Financial Crisis impacted the most.
©2020 Murex Partners.All rightsreserved.
RAPIDGROWTHINADOPTIONANDSIZEINITINDUSTRY
1 9 9 7 As ia n F in a n cial Cr is is b eg a n
ADSL f ir s t in tr od u ced b y SK Br oa d band
- Internet Subscribers (per 100 people)
- GrowthTrend of IT Industry in South Korea during the Crisis
- Annual GDP of IT Industry in South Korea (US$B)
23%
23%
14%
16% 20%
GDP Contribution of IT Industry

5. NEW BUSINESSES
CRETAED ON TOP OF
IT INFRASTRUCTURE
As fast internet was introduced to ordinary homes,
internet businesses surged
Unlike the dial-up internet such as Modem, ADSL
didn’t require the interference of home phones and
was 146x faster in speed (56 kbp/s → 8 Mbp/s). An
introduction of ADSL was a game-changer for both
users and entrepreneurs. After ADSL was first
introduced in 1999, the number of broadband
subscribers skyrocketed by 2000%.
As a result, more online businesses were created to
serve the explosive needs of internet users: from
online portals that provide news articles and such
information to social networking services and online
games.
©2020 Murex Partners.All rightsreserved.
Early 2000s

6. Source: Koreanclick, Ministry of SME, Gamemeca, Murex Partners
(1) UV: Unique visitors on average in 2004
(2) CCU: Concurrent Users
©2020 Murex Partners.All rightsreserved.
NEWBUSINESSESONTHERISEINITSERVICE&SOFTWARESECTORS
2,042
4,934
8,798
11,392
1997 1998 20001999
+458%
2.5
3.5
4.3
6.8
8.4
2000 20032001 2002 2004
+36%
Number of startups surges as digital infrastructure matures Free-to-play businessmodel, best suited for online gaming, first
started in Korea
- Online Game Market Size of South Korea (US$B)
- Online Web Portal Service
- List of Online Games Launched Duringthe Recession
Est. 2001
UniqueVisitors1 :18M
Est. 1999
UniqueVisitors1 :8M
Est. 1999
UniqueVisitors1 :7M
Est. 1999
UniqueVisitors1 :23M
Est. 1997
UniqueVisitors1 :24M
Est. 1999
User basein peak:25M
(52%penetration)
Est. 1999
User basein peak:5M
(12.5%penetration)
Est. 1999
User basein peak:10M
(25%penetration)
- Online Social Networking Service
MMORPG
launchedin1998
byNCSoft
CCU 2 inpeak:220K
MMORPG
launchedin2001
byWEBZEN
CCU 2 inpeak:300K
MMORPG
launchedin2003
byNexon
CCU 2 inpeak:620K
MMORPG
launchedin2001
byGRAFFITI
CCU 2inpeak:550k
- Number of startups in South Korea

7. AN ERA OF SMARTPHONE
ECOSYSTEM : A SMOOTH
INTEGRATION
Korean consumers quickly embracing the new
norms as mobile ecosystem rises in the 2010’s
©2020 Murex Partners.All rightsreserved.
As Koreans were at the forefront of internet penetration
starting in the early 2000s, they quickly adopted
smartphones as their next technology platform. Since
smartphones were first introduced in 2009, internet access
on-the-go became much more natural, and the demand soon
accelerated. Smartphone ownership of Korea reached 60% in
2 years and 95% in less than 8 years.
The expansion of mobile ecosystem had a significant impact
on media & entertainment as digital-driven contents have the
power to create greater fandom and cultural wave with the
enhanced social community. At the same time, ecommerce
startups have come up with more efficient and convenient
ways to meet the exponential growth of demands. Soon after,
on-demand startups such as online travel agency and
delivery services serving mobile users began to emerge.
2010s

8. Mobile ecosystem enables easy-buy & easy-arrival user experience
Korea sits atop of other countries in smartphone penetration
Booking through smartphone keeps increasing
Source: Pew Research Center, Ministry of Rural Development of South Korea, HBR, Economic Review, Google Trends, Murex Partners
©2020 Murex Partners.All rightsreserved.
MOBILEECOSYSTEMARRIVESANDCONSUMERSAREREADYFORIT
Mobile ecosystem accelerates expansion of contents-driven
fandom base, both domestic and global
- Adults who report owning a smartphone in 2018(by country, %)
‘12 ‘18‘04 ‘13‘10‘09‘05 ‘20‘06 ‘15‘14‘11 ‘16 ‘17‘07 ‘08 ‘19
0
50
100 iPh on e f ir s t
in tr od u ced
Ga n gn am Style
r ea ched 1 0 0M
view s on You Tu b e
K-Pop
K-Beauty
K - Bea uty p r od u cts
f ir s t in tr od u ced in
th e US via CV S
Ph a r macy
BTS w on
Billb oar d
M u sic Aw a r d
2 0 1 7 “Top
Socia l Ar tis t”
- Market Size : Fresh Food & Early-morning Deliveryin South Korea (US$M)
- Mobile hotelbooking apps
Yanolja
-Est. in2007
-Revenuegrowth
at 70%CAGR
since 2015
Daily Hotel
-Est. in2013
-Acquiredby Yanolja
in 2019
Good Choice
-Est. in2015
-AcquiredCVCCapital
- GoogleSearch Trends : K-Pop & K-Beauty
706 974 688
1,233
2009
253 338
2003
245
2005
506
2007 2011 2013
9
1,776
2015
163
2017
2,752
2019
+12%
+21%
- Leaders in Fresh food & early-morning (FFEM) delivery ecommerce
Market Kurly
-Est. in2014
-First to start early-morning delivery
-RevenueinFFEM : $370M
Coupang
-Est. in2013
-Most valued startup inKorea at $9B
-RevenueinFFEM : $540M
Fresh Food Early-morning Delivery
Before Smartphone Era100
198 329
2172018
2023(e)
MobileOnline
- Market Size: Online Travel in South Korea
95
10
South
Korea
11
Israel Netherlands
16
Sweden
86
Australia US Spain Germany UK
76
5 12
88 87
13
81
13
81
18
80 78
19
Smartphone Mobile phone not smartphone

9. AN URGE FOR EVEN MORE
DIGITIZATION
The COVID-19 was an eye-opener for late adopters,
both individuals and organizations
Since the 1970s, personal computers became widespread
across not only individuals but everywhere. From then on,
organizations in almost every edge of industries have
become digitized at a certain level. Despite the
availability of such technology, some industries remain
low in digitization due to complex relations among
stakeholders for different reasons.
But the outbreak of the COVID-19 pandemic has
dramatically changed our perception around the digital
transformation from the deep down. To survive from
changes in consumer behavior, we now have to utilize
digitization at our best, least with the existing technology.
The impact of the pandemic is so immense that it is
forcing our consumers to look for options, preferably more
digital.
©2020 Murex Partners.All rightsreserved.
Early 2020s

10. WHAT’S TO COME IN THE
NEXT DECADE
We’re at another tipping point, triggered by the
worldwide crisis
In the 2008 Financial Crisis, some might have
thought that the world would not be recovered from
the wound deep down the skin, but others created
opportunities. During the 2008-2009 recession,
many influential startups came out: Uber, Airbnb,
Square, Venmo, Whatsapp, Slack, Groupon, and so
on. In fact, 57% of Fortune 500 companies have
been founded during periods of economic distress.
Would this time period of distressed economy end
up with similar outcomes as in the past? Is it really
the tipping point for the next new decade? What will
be the next big thing in the near future?
©2020 Murex Partners.All rightsreserved.
2020s and on

11. The 2008 Financial Crisis was a tipping point for some sectors
and such trends tend to remain on the slope, up or down
Source: Benedict Evans, McKinsey Global Institute, Murex Partners
©2020 Murex Partners.All rightsreserved.
ATIPPINGPOINT?
Post COVID-19, vaccine or not, requires us to rethink
how we live.
If this is the time for such change, how will Korea’s
digital landscape change and evolve into?
Our next research will cover on sectors and industries
that will shape the future of South Korea in the next
decade.
Thank you.
- US Advertising Spending
Internet
TV
Radio
Magazines
Newspapers
T h e 2 0 0 8 F i n a n c i a l C r i s i s
Consumersremain hesitant to return to some of the in-person
activities that were part of their daily lives before COVID-19
- Expected behavior post-COVID-19compared to pre-COVID-19, net intent %
6
6
-3
-3
12
3
-10
4
US
UK
Italy
Germany
Japan
France
Spain
India
1
-15
-12
-8
-7
-12
4
0 -17
-5
-26
-21
-25
-20
-30
-2
Shop in physical
Grocery stores
Domestic travelGo to the mall
Shop in physical
stores (non-grocery)
-6
17
5
-7
-12
-7
-32
-4