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27 11 2002
NEW YORK (Reuters) - Samsung Electronics Co. (05930.KS), the world's No. 3
maker of mobile telephones, is capturing the bulk of the U.S. market for
pricier phones and is poised to gain further share, officials said on
Tuesday.
"When you get in the higher price point products at $150 and above, we are
about 45 percent of the market," Randy Smith (news - external web site),
Samsung's vice president of U.S. wireless product marketing, told analysts
and reporters at an annual strategy briefing.
He was referring to a recent study of the U.S. mobile phone market by market
research firm J.D. Power and Associates that showed Samsung topped
arch-rivals Nokia (news - web sites) and Motorola in customer satisfaction,
product design and high-price buyers.
"We are getting a disproportionate share of the 'upgraders' who want more
features in their next phone," Peter Skarzynski, senior vice president of
U.S. mobile phone sales for Korea's biggest electronics maker, said at the
briefing here.
Samsung is confident about its position in the U.S. market as it enters the
end-of-year holiday selling-season because replacement sales of phones to
carriers and major electronics retailers remain strong, with wholesale
orders still streaming in. While the final verdict won't be delivered until
after Thanksgiving, officials see all signs pointing positive.
"Our sell-through to customers is going very well," Skarzynski said in an
interview at the sidelines of the analyst briefing. "Even at this late
stage, we continue to receive orders because of great sell-through in all of
our products."
Samsung has captured the early lead in the U.S. market for the most advanced
new phones, which offer not only voice, but new text and e-mail handling
features, bright color screens, and built-in camera features. Soon it
promises to offer even a wristwatch-style mobile phone.
Citing industry research data, Skarzynski said its share of U.S. phone sales
based on CDMA (news - web sites) technology is in the low 20-percent range.
Its U.S. share of GSM phones, a market it entered only last year, is in the
high-teens as a percentage, or about one-sixth of the market.
VULNERABLE IF MARKET RESISTS HIGH-PRICED WARES
But Samsung's very strength also makes it vulnerable, as the overwhelming
percentage of U.S. consumers have come to expect new phones to be supplied
for less than $100, or even free, said John Jackson, mobile analyst with
Yankee Group, an independent market research firm that is a unit of Reuters.
Samsung is riding the wave of a market in which 28 percent of U.S. mobile
phones, or 41 million phones, are estimated to be two years or older.
Customers will either upgrade in the next 18 to 22 months or their phones
will break, according to industry data.
Samsung's richer mix of high-priced phones exposes it to the danger of
unsold inventory unless consumers now begin to demand little-understood
features like music ring tones, picture-swapping via camera phones, even
text-messaging.
That strategy remains perilous in a market where over the last year --
thanks to subsidies from U.S. mobile operators desperate to capture new
subscribers -- fully one-third of Americans paid nothing for a new phone and
85 percent paid less than $100, according to Yankee Group data.
Skarzynski said Samsung's worldwide plan was to add 10 million units of
phone production capacity in 2003, up from the more than 40 million mobile
units it expects to build in 2002.
This suggests Samsung will continue to gain market share as the ranks of
global mobile phone suppliers dwindle to three major players -- Nokia,
Motorola and Samsung -- even as the market grows to between 420 million and
430 million new handsets in 2003 from 2002 sales forecasts of just over 400
million.
Company officials declined to make specific predictions.
Building on its manufacturing prowess and dominance in Korea, which has
emerged in the past two years as the world's most advanced mobile market,
Samsung has doubled its percentage share to become No. 3 in the world in
2002 with a 10 percent share, up from No. 6 in 2000.
The company is betting that the success Samsung has seen in Korea's advanced
mobile market will play out in the United States and globally.
Samsung's strategy is to build on its close ties with a handful of major
U.S. carriers and extend them to become the preferred supplier of high-end
phones across all major carriers, including AT&T Wireless, where it
currently has no contracts, but hopes to win some in the coming year.
Skarzynski pointed to recent wins at carriers such as T-Mobile (DTEGn.DE),
the No. 6 U.S. supplier of mobile services, and Cingular, the joint venture
of BellSouth (NYSE:BLS - news) and SBC (NYSE:SBC - news) that is No. 2 in
the U.S. mobile service market.
These companies are turning to Samsung for feature-rich phones that draw
customers who spend far more on their monthly bills, Samsung officials say.
To this end, T-Mobile has in the 13 months since it began selling Samsung
phones jumped to become one of Samsung's top five customers worldwide, he
said.
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