Samsung chairman vies to overtake Finnish group as world's biggest handset manufacturer by 2010
War has been declared in the market for mobile phones. Samsung, the Korean electronics giant, has thrown down the gauntlet to its archrival Nokia. At stake is nothing less than becoming the world's number one manufacturer of mobile phone handsets.
Lee Kunhee, the chairman of Samsung, says he wants to overtake Nokia as the world's number one manufacturer of handsets by 2010, threatening the Finnish company's global dominance. The prize is enormous, made all the more valuable by the anticipated boom in demand from consumers keen to get their hands on the latest gizmos and gadgets which third-generation (3G) mobile services will start to deliver next year. Mr Kunhee issued his challenge in an interview with the Korea Times earlier this week, claiming that Samsung will sell 2.5 million more mobile phones this year than originally expected and that by 2010 his company will be earning $25bn (£15bn) from mobile phone manufacturing.
Not only is Nokia facing intense competition from rival manufacturers, but its relationship with its customers, such as Vodafone and mmO2, is becoming increasingly tricky too. Yesterday the Finnish press was full of comments made by Peter Erskine, the chief executive of mmO2, who claimed 3G handsets starting to appear from Asian manufacturers were generally superior to Nokia's.
The likes of Vodafone, which is rumoured to be well down the road to picking Samsung as its launch partner for 3G services next year, are uneasy about the amount of power that Nokia wields in this $67bn-a-year market.
Exploiting these tensions between Nokia and Vodafone is where companies such as Samsung can steal a march. Ben Wood, an analyst at Gartner, the telecoms and technology research group, said: "Can Samsung take over from Nokia as the world's number one? 2010 is a long way off, but there is no doubt that Samsung has been consistently gaining market share over the past three to four years."
Certainly Nokia's most recent financial figures show things have started to stall. In the first nine months of this year, Nokia's sales were down 2 per cent and profits were off 12 per cent. Market share figures for total handset sales from Strategy Analytics show that in 2002 Nokia had a 35.1 per cent share of the 429.2 million handsets supplied to network operators. By the end of the third quarter this year that share had fallen to 33.8 per cent, while Samsung had gone from 9.8 per cent to 11.2 per cent. Another big gainer was LG, Samsung's Korean rival, which went from 3.7 per cent to 5.7 per cent.
One reason for Nokia's declining market share is simply down to the laws of economics. When a company is as large as Nokia, quite often the only way it can go is down. "With such a strong grip on the global market, it's bound to start competing against itself," Neil Mawston of Strategy Analytics said.
But a much bigger risk facing Nokia is that it loses out to Samsung in the race to supply 3G handsets in key markets such as the UK. The evidence so far is that Nokia is already miles behind.
3G Today, an industry website, shows that Nokia has 10 different 3G handsets available. Samsung, however, has a startling 108 models to choose from. The launch of 3G services next year represents a new frontier in technology and has provided something of a fillip to the likes of Samsung, LG and Sanyo to steal an advantage over their bigger rival.
Ed Brewster, the head of external affairs at 3, the third- generation network launched by Hutchison Whampoa, said: "3G gives manufacturers a new way to break into the market ... and they really are taking advantage of it."
But probably the greatest battle Nokia faces is with Vodafone. "One of the key concerns for operators such as Vodafone is that Nokia wields too much power and dictates what goes on in the handset market," says Mr Mawston.
Press reports have suggested that Nokia will lose out to Asian manufacturers when Vodafone comes to start placing firm orders for large numbers of 3G handsets next year. Vodafone is being extremely coy about who is going to get its business. It is only going to start full commercial trials of its 3G network next month. A Vodafone spokesman insisted it was keeping its options open, with orders going to those suppliers who can deliver on time to its specifications.
Developing closer ties with Samsung provides a valuable counterweight to the might of Nokia and gives Vodafone greater bargaining power. Vodafone, which has 10 per cent of the world's 1.25 billion mobile phone customers, wants to have more say in how handsets are designed and how they work. It wants to make sure the kit is as effective as possible to ensure customers will use their phones at every conceivable opportunity, boosting Vodafone's bottom line.
But at the moment the only markets where the network operators tend to dictate to the handset manufacturers are Japan and Korea, elsewhere Nokia is in the driving seat. "The design of Nokia's handset for the Vodafone Live! platform had no more than a few per cent of input from Vodafone," Mr Mawston said. "But the Vodafone input into the Sharp device for Vodafone Live!, in terms of the specifications made, was more like 30 per cent. Certainly network operators want to take more control of the market."
Whatever threats Nokia faces, it still wins all the plaudits for the excellence of its designs and their simple-to-use functions. Its traditional "candy bar" design for handsets is facing pressure from the modish flip tops which are being supplied by its rivals, but it still has a massive power base in western Europe where it has a 50 per cent market share.
It sees all this talk about being overthrown as the number one mobile phone manufacturer as no more than wishful thinking on the part of its competitors. "The network operators are our customers. We cooperate and discuss things with them all the time. We have built this industry together," Kari Tuuti, a spokesman for Nokia, said."We are not planning to stop here. We are targeting a 40 per cent market share and when we reach that we will set ourselves an even higher target.
"Nokia has great financial strength, huge scale and immense [customer] loyalty. People will continue buying the brand."
War has been declared in the market for mobile phones. Samsung, the Korean electronics giant, has thrown down the gauntlet to its archrival Nokia. At stake is nothing less than becoming the world's number one manufacturer of mobile phone handsets.
Lee Kunhee, the chairman of Samsung, says he wants to overtake Nokia as the world's number one manufacturer of handsets by 2010, threatening the Finnish company's global dominance. The prize is enormous, made all the more valuable by the anticipated boom in demand from consumers keen to get their hands on the latest gizmos and gadgets which third-generation (3G) mobile services will start to deliver next year. Mr Kunhee issued his challenge in an interview with the Korea Times earlier this week, claiming that Samsung will sell 2.5 million more mobile phones this year than originally expected and that by 2010 his company will be earning $25bn (£15bn) from mobile phone manufacturing.
Not only is Nokia facing intense competition from rival manufacturers, but its relationship with its customers, such as Vodafone and mmO2, is becoming increasingly tricky too. Yesterday the Finnish press was full of comments made by Peter Erskine, the chief executive of mmO2, who claimed 3G handsets starting to appear from Asian manufacturers were generally superior to Nokia's.
The likes of Vodafone, which is rumoured to be well down the road to picking Samsung as its launch partner for 3G services next year, are uneasy about the amount of power that Nokia wields in this $67bn-a-year market.
Exploiting these tensions between Nokia and Vodafone is where companies such as Samsung can steal a march. Ben Wood, an analyst at Gartner, the telecoms and technology research group, said: "Can Samsung take over from Nokia as the world's number one? 2010 is a long way off, but there is no doubt that Samsung has been consistently gaining market share over the past three to four years."
Certainly Nokia's most recent financial figures show things have started to stall. In the first nine months of this year, Nokia's sales were down 2 per cent and profits were off 12 per cent. Market share figures for total handset sales from Strategy Analytics show that in 2002 Nokia had a 35.1 per cent share of the 429.2 million handsets supplied to network operators. By the end of the third quarter this year that share had fallen to 33.8 per cent, while Samsung had gone from 9.8 per cent to 11.2 per cent. Another big gainer was LG, Samsung's Korean rival, which went from 3.7 per cent to 5.7 per cent.
One reason for Nokia's declining market share is simply down to the laws of economics. When a company is as large as Nokia, quite often the only way it can go is down. "With such a strong grip on the global market, it's bound to start competing against itself," Neil Mawston of Strategy Analytics said.
But a much bigger risk facing Nokia is that it loses out to Samsung in the race to supply 3G handsets in key markets such as the UK. The evidence so far is that Nokia is already miles behind.
3G Today, an industry website, shows that Nokia has 10 different 3G handsets available. Samsung, however, has a startling 108 models to choose from. The launch of 3G services next year represents a new frontier in technology and has provided something of a fillip to the likes of Samsung, LG and Sanyo to steal an advantage over their bigger rival.
Ed Brewster, the head of external affairs at 3, the third- generation network launched by Hutchison Whampoa, said: "3G gives manufacturers a new way to break into the market ... and they really are taking advantage of it."
But probably the greatest battle Nokia faces is with Vodafone. "One of the key concerns for operators such as Vodafone is that Nokia wields too much power and dictates what goes on in the handset market," says Mr Mawston.
Press reports have suggested that Nokia will lose out to Asian manufacturers when Vodafone comes to start placing firm orders for large numbers of 3G handsets next year. Vodafone is being extremely coy about who is going to get its business. It is only going to start full commercial trials of its 3G network next month. A Vodafone spokesman insisted it was keeping its options open, with orders going to those suppliers who can deliver on time to its specifications.
Developing closer ties with Samsung provides a valuable counterweight to the might of Nokia and gives Vodafone greater bargaining power. Vodafone, which has 10 per cent of the world's 1.25 billion mobile phone customers, wants to have more say in how handsets are designed and how they work. It wants to make sure the kit is as effective as possible to ensure customers will use their phones at every conceivable opportunity, boosting Vodafone's bottom line.
But at the moment the only markets where the network operators tend to dictate to the handset manufacturers are Japan and Korea, elsewhere Nokia is in the driving seat. "The design of Nokia's handset for the Vodafone Live! platform had no more than a few per cent of input from Vodafone," Mr Mawston said. "But the Vodafone input into the Sharp device for Vodafone Live!, in terms of the specifications made, was more like 30 per cent. Certainly network operators want to take more control of the market."
Whatever threats Nokia faces, it still wins all the plaudits for the excellence of its designs and their simple-to-use functions. Its traditional "candy bar" design for handsets is facing pressure from the modish flip tops which are being supplied by its rivals, but it still has a massive power base in western Europe where it has a 50 per cent market share.
It sees all this talk about being overthrown as the number one mobile phone manufacturer as no more than wishful thinking on the part of its competitors. "The network operators are our customers. We cooperate and discuss things with them all the time. We have built this industry together," Kari Tuuti, a spokesman for Nokia, said."We are not planning to stop here. We are targeting a 40 per cent market share and when we reach that we will set ourselves an even higher target.
"Nokia has great financial strength, huge scale and immense [customer] loyalty. People will continue buying the brand."
3287.99
1275.09
