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The Korean cell phone industry appears to be on the retreat after a heyday in the early years of the Millennium. While the world¡¯s no. 1 and 2 Nokia and Motorola have captured the growing low-end market with simple designs and affordable prices, Korean cell phone makers continue to bet on premium multi-functional phones amid serious trouble due to the strong won but are failing to land any hits.
Samsung Electronics went on the offensive with ambitious mottos such as ¡°Let¡¯s topple Motorola¡± or ¡°Take back the no. 2 spot in the global market¡± two years ago. With the world¡¯s first mass-produced CDMA cell phone, the firm briefly displaced Motorola, which was the no. 1 in Korea in the 1990s, and it conquered the European and North American markets thanks to cutting-edge products including color cell phones and camera phones. For a while, Motorola looked very vulnerable.
But since then, Motorola launched its RAZR slim phone, which is less than 1 cm thick and comparatively simple in design, and it also focused on cheap phones priced at around US$50. So far it has sold more than 50 million RAZR phones and soared ahead of Samsung in terms of market share by some seven percentage points, up from two. Nokia attacked the Korean cell phone maker with both high-end and low-end products in winning designs. At a shopping mall in downtown Dubai, a Nokia phone with a stainless body sells like hot cakes despite a price tag of more than US 5,000, and the model accounts for more than two-thirds of the market there. Samsung Electronics and LG Electronics will have a hard time catching up.
Korean cell phone makers have also made a fatal mistake in ignoring the low-end market. Their flagship models are not doing well, but they insist on high-end products when cheap phones dominate the market in emerging economies such as India, China and Brazil. India sees some 50 million new mobile phone subscribers every year, and Nokia has already taken more than 60 percent of the market with its affordable, simple phones. In Argentina, where they cost some 250 pesos (US$75), they make up some 90.5 percent of the market. Yet Korean firms insist premium products are all that matters. A trade office in Argentina even published a report asking why Korean firms alone among the world¡¯s cell phone makers do not take advantage of a goose that demonstrably lays golden eggs.
Nokia and Motorola are also reducing manufacturing costs by outsourcing 25 percent and 33 percent respectively of their annual production to Taiwan and elsewhere. By contrast, Samsung Electronics and LG Electronics outsource only 5-9 percent of their production. On top of that, they are given to massive marketing wars overseas that only end up eroding each other¡¯s market share there. If they keep entering markets where other Korean firms have already established themselves and try to dump each other out of business, it will help the profitability of neither, experts say. Instead, they need to open new markets.
It is often said that Korean cell phone makers should seek to lead the next-generation mobile telecom markets, looking ahead to the fourth generation for survival.
(englishnews@chosun.com )
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