Samsung and LG are set to take on the likes of Motorola and several fringe brands who are struggling to grab market share in the highly volitile mobile phone market.
Samsung and LG Electronics, the world’s No. 2 and No. 5 handset manufacturers, are using Motorola’s troubles to bolster their presence in the global mobile phone market.
Samsung plans to capitalize on Motorola’s weakness by intensifying efforts to introduce expensive cell phones featuring high-speed data capabilities, in a bid to solidify its runner-up position after Nokia. LG is set to inject more capital into marketing to sharpen its weaker brand recognition.
Motorola said its fourth-quarter profit declined 84 percent, sending its global market share down to 14.4 percent in 2007 from 21.7 percent in 2006, the year its brand was the highest, due to the successful launch of Razr models.
Motorola CEO Greg Brown admitted that Motorola’s slim offerings had failed to meet the rapidly-growing demand for high-end phones in the U.S. and Europe, as well as emerging market demand for low-priced devices.
“We didn’t say this is the bottom. The year 2008 will be a challenging year and the recovery of mobile devices will take longer than previously expected,” Brown said.
Moody’s credit ratings agency has also been reviewing the company for a possible downgrade of its ratings, due to continued delays in turning around its handset business.
Through 2007, Samsung Electronics saw its market share rise to 14.6 percent from the previous year’s 11.4 percent, while LG Electronics also saw its share increase to 7.3 percent over the same period, according to data from Strategy Analytics.
Industry leader Nokia raised its market share to 39 percent thanks to standardized modules on its phones and strong R&D and manufacturing networks with a strong brand power, while No. 4 Sony-Ericsson increased its market share by 2 percentage points, the research firm said.
Despite the strong push by the two local handset players to diversify product portfolios with a greater focus on high-end phones, it seems evident that Nokia will remain the dominant player in the market for the next decade.
“We cannot compete with Nokia by adopting similar strategies. What we pursue is to release technology-focused pricey phones and to respond to demand case by case through supply chain management,” a Samsung spokesperson said.
Samsung Electronics, which seeks to sell 50 million phones costing over $200 each in this year’s total projection of 200 million, is engaged in the final stages of building a handset plant in Vietnam with a production capacity of over 100 million per year.
LG Electronics also plans to sell 40 million high-end phones this year. The company plans to use 20 percent more capital for marketing while increasing the share of high-end phones in emerging markets by 50 percent.