Seoul: The proliferation of smartphones in South Korea is transforming this former "walled garden" ruled by local players into one of Asia's most promising destinations for global Internet and social networking firms.

A solid, wireless broadband infrastructure, feature-packed new models from homegrown giants Samsung and LG, and an explosion in mobile applications and services have all contributed to the breakneck speed of smartphone adoption.

In just 18 months the number of smartphone subscribers in South Korea has exploded more than ten-fold to top 10 million, or around a fifth of the population, according to the Korea Communications Commission (KCC).

South Korea ranks first in Asia and third globally in smartphone penetration, according to eMarketer, lagging only the United States and Western Europe.

All this is music to the ears of handset makers and application developers.

"Korea is interesting because it's got a large, tech-savvy and concentrated population," said Andrew Mason, founder and CEO of group-buying site Groupon, which launched services in Korea in March. "It's the perfect market for Groupon."

Smartphones have become a "Trojan horse into the Korean market" for the likes of Google and Facebook, which had a head start on local firms in optimising their offerings for smartphones, said Richard Min, partner at Seoul-based startup incubator, Seoul Space.

Foreign entrants have moved quickly to capitalise on the changing landscape. Twitter launched a Korean-language website in January after seeing a 3,400 per cent spike in the volume of Korean tweets in 2010. It now has around 3 million local users, according to market research firm, Daumsoft.

Facebook opened a Seoul office late last year to seize on the "great momentum" in Korea, a company spokesperson said.

And Groupon Korea already ranks among the top four players in South Korea's increasingly crowded social commerce market, with a growth rate that is "accelerating every week," said local CEO, Hee Seung Hwang.

Arguably the biggest beneficiary of Korea's smartphone explosion has been Google, whose previous attempts to woo local Internet users were disappointing. As of March 2011 it held a mere 2 per cent sliver of the standard Internet search market, according to Seoul-based research house, Metrix Corp.

But Metrix estimates Google now vies with Korea's Daum Communications for second place in the mobile Internet search market, with a share of more than 15 per cent.

Google's Android operating system, on which Samsung and LG's latest smartphone offerings are based, powered only 3 percent of South Korea's mobile phones in March 2010. That figure jumped to 60 percent by January 2011, KCC data shows.

The onslaught of imported competition has rattled local Internet industry leaders Daum, NHN , and SK Communications, whose domestic and PC-based focus may now be coming back to haunt them. "Without a major shift, (Korean Internet firms) are in trouble," says Min of Seoul Space.

Foreign companies  making inroads

Seoul: Korean firms acknowledge that foreign competitors are making inroads, but also say they are taking steps in response.

"[Foreign companies] are strengthening their position in the domestic mobile content market with relatively high brand awareness," says Lee Ram, director of NHN's Portal Strategy Department.

But Naver's introduction of new services such as mobile messaging and web storage has resulted in a "number of users moving from Google to Naver," Lee added.

Daum has developed new mobile applications such as the Yozm social networking service, which has already signed up more than 2 million users, according to Daum vice president of corporate communications Lee Byung-sun.

SK Comms, meanwhile, is banking on an online marketplace for new games and applications, said CFO Koo Ki-hyang. The struggle for Korea's Internet users has spilled into the legal arena. In April Daum and NHN filed a lawsuit against Google with Korea's Fair Trade Commission, arguing the pre-installation of Google Search on Android phones was stifling competition.

Google rejected the allegations. "Android is an open platform... we do not require carriers or manufacturers to include Google Search on Android-powered devices," a spokesperson said.

Few seem ready to count Korea's incumbents out. The healthy performance of home-grown applications like instant messaging service KakaoTalk point to a deep local pool of innovation and the market remains tricky to navigate.