Monday, April 12, 2010

Can Samsung, LG Claw Way Out of iPhone Hole?

Wherever you go in Korea right now, you would see people carrying iPhones. The used to be Samsung or LG dominated phone user population suddenly changed its taste to something not so Koreanish...Apple's iPhone.
A very interesting article today at the Korea Times tackled the competiveness of Samsung ang LG in the smartphone world as Apple's iPhone is getting more profit.  
Worries are running high that the relatively weaker smartphone lineups at Samsung Electronics and LG Electronics might dampen the overall profits of the world's second- and third-biggest handset vendors, respectively, according to market watchers and analysts.
They say smartphones produced by top-tier players such as Apple and Microsoft and the aggressive promotions even from the followers of the South Korean duo are poised as bigger threats for the bottom line in their profits.
"The outlook seems murky for Samsung's handset business. The operating profit for its telecommunication division in 2010 is expected to fall 4 trillion won due to its weaker smartphone lineups and massive promotions," a high-ranking industry watcher told The Korea Times.
"The challenging outlook is based on a weaker competitive edge for Samsung's smartphones. It has revised the sales target for Bada-embedded smartphones to some 25 million units. But that means Samsung should spend more on promotions," he added.
Bada, which means ocean in Korean, is a mobile platform developed last year by Samsung Electronics. It remains uncertain whether Bada will appeal to software developers and handset majors.
The average selling price (ASP) for Samsung phones outside the peninsula declined by 12 percent from the first quarter to the fourth quarter of last year.
Strategy Analytics (SA) forecasts the operating profit for Samsung's telecom unit to fall 8.3 percent in 2010 from 9.7 percent in 2009, which observers claim is due to less competitiveness in smartphones. Samsung's market share for smartphones was 3 percent, last year.
To water down such uncertainties and to quell concerns about its weaker lineups, Samsung was recruiting software-talent and creating necessary task force teams to build up its mobile ecosystem, though company spokesmen were mum over the latest changes.
Things are as bad, if not worse, for LG Electronics. LG doesn't have its own mobile operating system.
Analysts say the situation will worsen for the world's No. 3 handset maker as times passes unless its top decision-making executives take bold action.
SA says LG, which is looking to sell 140 million phones this year, will suffer a freefall of its operating profit to 4 percent in 2010 from 7.3 percent in 2009.
A recent survey conducted by JP Power indicated that LG was delisted from the top five in terms of consumer satisfaction in smartphones. Samsung was ranked fourth, while Taiwan's HTC was No. 3. LG's 2009 share in smartphones was less than 2 percent.
I tried asking my Korean friends why they changed their phones into iPhones, all of them said the phone is really good so it is worth it even if it is expensive.
Actually the price is almost similar with other phones in Korea so people would tend to take iPhones without minding the price.
This is something that Korean smartphone industry should think of if they want to stay on business for a longer time...

Full Story: Can Samsung, LG Claw Way Out of iPhone Hole?
by Kim Yoo-chul (

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