Samsung, LG Move to Focus on Low-end Phones
By Kim Yoo-chul
Staff Reporter
Samsung and LG Electronics are considering increasing their sales of less pricey, low-end mobile phones in emerging markets next year to make up for a fall in sales of premium phones in North America and European markets.
Leading mobile phone makers including Samsung and LG ― the world's second and fourth largest, respectively ― have already felt some ominous signs from slowing economies as consumers are putting off purchasing pricey handsets.
"Samsung will expand its low-end line-up in 2009, capitalizing on emerging markets, while increasing distribution channels in these regions through cost cuts," a Samsung spokesman said Sunday. Samsung is set to introduce another music-phone very soon.
The official, however, declined to elaborate further. Combined sales of Samsung's SGH-E250 model, which has been selling for between $100 and $150 in Asian and African markets, recently surpassed 10 million less than two years after the model was first introduced in December 2006.
LG Electronics, which has been maintaining its impressive moves in saturated North American and European markets by propelling over $300 high-end models, is also considering increasing the shipment of low-end phones to tackle falling demand in its key markets.
"It's too early for us to immediately implement a `low-end phone strategy,' because we need to increase global market share. But we are seeking better strategies for emerging markets," an LG spokesman said.
With strong distribution channels ― some 100,000 in India and 60,000 in China ― industry leader Nokia is increasing its spending on low-end phones amid slower-than-expected growth in the global mobile phone market.
Even No. 5 Sony-Ericsson has expanded its low-end line-up from the latter half of the year to face off falling phone demand in its traditional western European market.
Analysts have cut their 2009 market growth estimates by as much as half, saying deepening economic concerns will keep consumers frugal. They also say lengthening phone replacement cycles and weakening consumer confidence are other reasons for their weaker sales estimates.
UBS halved its forecast for 2009 global handset growth to a meager 3 percent from 6 percent, pointing to sliding demand in Europe and North America, while JPMorgan cut its expectations for next year handset growth to 6.1 percent from 8.1 percent, citing similar reasons.
"The battle ground for industry leaders has shifted to emerging markets from traditionally-proven spots. Samsung and LG are advised to push low-end phones in emerging markets especially in China, India, Singapore and the Middle East," a Samsung insider said, adding his company will grab more chances in emerging markets over the short-term.
"While Samsung may gain some volume in the third quarter, we believe it will show poor average selling price (ASP) and margin trends in the last quarter," UBS said. ASP is a key indicator gauging profitability.
LG is to announce its third quarter results Monday, while Samsung will follow Friday.