Samsung, LG face stalled mobile phone market growth

SINGAPORE/SEOUL: Wrestling with falling mobile phone sales and shrinking market shares, South Korea’s Samsung and LG yearn for the days when their high-tech, pricey phones were the talk of the town.

The South Korean makers face stalled volume growth whereas rivals Nokia Oyj and Motorola Inc are cashing in on trends to go slim and stylish in advanced markets or cheap in emerging markets, such as India.
Analysts say Samsung Electronics Co Ltd and LG Electronics Inc should shift their focus to low-cost phones to catch up, or take the lead, in next-generation technology phones or mobile TV handsets.
“Nokia, Motorola and Sony Ericsson have experienced tremendous growth globally over the last few years – much of this can be attributed to the low-cost handset market, an area where LG and Samsung are not particularly strong,” said Bengt Nordstrom, an analyst with wireless consultancy inCode.
Another issue has been their inability to establish a strong brand, analysts said. Nokia has the scale and brand to control the market, Motorola has achieved cult-status with its blockbuster ultra-thin RAZR, and Sony Ericsson has focused on music and photography, leveraging the Sony Walkman and Cybershot brands to enhance its appeal to younger users. “Samsung and LG’s lack of differentiation is holding them back,” Nordstrom said.
Just two years ago, Samsung was poised to overtake Motorola’s number 2 spot, but its market share is now half the size of Motorola’s, with 26.3 million phones sold against the US rival’s 51.9 million in the April-June quarter.
One reason is the RAZR. Take Chua Chin Yang, a 27-year-old Singaporean freelance writer, who ditched his Samsung C200 handset this year. “I switched to Motorola because its handset designs look better and feel better, compared with Samsung’s, which are bulky and so uncool,” said Chua. “I love the RAZR because it’s so slim, easy to carry and the materials used to make the phone are also hardy.”
Nokia saw a 29 per cent boost to 78.4 million phones, but LG yielded its number 4 position to Sony Ericsson, selling 15.3 million phones against its rival’s 15.7 million.
LG also saw Motorola and Nokia eating into its business with key operators Verizon Communications Inc and Hutchison Telecommunications, leading to losses in its handset business for the second quarter in a row.
“The two megatrends in GSM over the last two years are ultra-thins and smart phones. Samsung has underperformed in both markets,” said Strategy Analytics analyst Neil Mawston. “Samsung cannot afford to miss the next megatrend, whatever it may be.”
With a focus on advanced cellphones and a few low-cost models, Samsung and LG have also missed out on the boom in emerging markets.
“Both Samsung and LG have advanced in next-generation technologies, such as WCDMA, HSDPA, WiMax and multimedia, but these markets have not blossomed yet,” said Suran Seong, analyst with research firm Ovum. “The convergence trend where several technologies or functionalities are packed into a phone, which the Korean vendors have stressed, may not be what all users want,” she added.
LG also had a late entry into the GSM market – the dominant digital mobile standard. About 60-70 per cent of its revenues come from CDMA technology, which is facing shrinking demand. “Starting the GSM business late was one big mistake we made,” LG Electronics finance chief Y.S. Kwon told investors recently.
The world’s two 2G mobile standards are GSM and CDMA. GSM was advocated by governments of western Europe and by firms, including Ericsson and Nokia, while CDMA was backed by the US and companies like Qualcomm Inc.
“The core problem for LG is its limited GSM distribution network. It launches a cool device like the chocolate phone, but struggles to get them on operators’ shelves,” said Mawston. – Reuters

Source- http://www.btimes.com.my

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