Tuesday, December 18, 2007

Samsung fights Nokia in low-price segment

Business News - Tuesday December 18, 2007


Samsung fights Nokia in low-price segment


Samsung plans to jump into the untapped low-end mobile handset market in 2008 in an attempt to break Nokia's grip on the US$1.5-billion-baht market in Thailand.

The South Korean handset maker announced it would use a ''price dumping'' strategy in the low-cost handset segment, with the aim of doubling its share to 20% in the local handset market next year.

''The policy was in response to the Finnish giant which has controlled more than 60% of the Thai handset market for years,'' said Kwang Kee Park, the managing director of Thai Samsung Electronics Co.

In the upcountry market, he added, Nokia's market share is even bigger, at more than 70%.

Mr Park said Thailand's handset market contracted by 5% in terms of value this year even as industry-wide sales volume rose by 12%, indicating most of sales were cheap products.

He attributed the negative growth to what he called an ''unbalanced market structure'' at the supply level, defined and shaped by Nokia.

Mr Park said the low-cost segment of the handset market was currently dominated largely by Nokia, with a total market share of 90% in the segment. Nokia is expected to earn up to $1 billion in sale revenue out of $1.5 billion total in the Thai market this year.

He said Nokia's dominant position had led to dealers stocking Nokia phones at more than 60% of their total products, leaving little room for other brands to compete for bigger market shares.

By global standards, he said, a company with a 40% market share is already described as a monopoly player.

For the Thai handset market, which Mr Park sees as having matured, Nokia should not control more than 30% at most. Nokia now controls a 60% share, followed by i-Mobile of Samart with 10- 12%, Samsung 9-10% and Motorola with 8-9%.

Mr Park admitted that Samsung had been severely affected this year as its premium handset sales fell far short of the target.

He said Samsung planned to introduce up to six low-end handset models in the Thai market next year, priced between 2,000 baht and 3,000 baht.

''We don't care about the profit margins next year as we want to balance the market structure and promote fair competition.''

Mr Park said Samsung expected to sell 1.5 million handsets out of a total of nine million units, with revenue of $200 million in 2008, up from 1.1 million out of 8.5 million industry-wide with revenue of $120 million this year.

The company sold 960,000 units, generating revenue of $89 million in 2006.

He said Samsung planned to implement a direct-to-the-retail strategy in which distributors would be bypassed next year after facing a lawsuit by one of its major distributors on charge of deceit.

Mr Park said Samsung aimed to transform its mobile phones from a ''technology gadget'' to a ''fashion and lifestyle'' product next year.

He also said that Samsung planned to spend up to $5 million to build a lifestyle avenue for young people over the next three months. The site, potentially located at Siam Square, is aimed at symbolising the Samsung brand.

Bangkok Post

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