Innovation, strategy boost Samsung's share of cellphone market
philly.com
By ANDREA AHLES
Star-Telegram Staff Writer
Posted on Tue, Jun. 25, 2002
RICHARDSON - Look out, Nokia and Motorola.
Samsung is gaining quickly in the mobile phone market.
In less than five years, the South Korean manufacturer - better known for televisions, DVD players and other consumer electronics - has become the third-largest wireless phone maker and has continued to grow faster than its competitors.
With features such as voice-activated dialing and sleek phone designs, Samsung has gained a 10 percent market share, with more than $1 billion in sales last year. The company has already sold nearly 10 million phones in the first quarter, and it is on track to sell more than 35 million phones this year.
And although Samsung Telecommunications America is proud of the company's third-place position, its goal is to be in the top two.
"You have to be a leader. Simple as that," said Pete Skarsynski, senior vice president of sales and marketing for the Richardson-based U.S. subsidiary of Samsung. "That's basically what drives our wireless business."
To gain one of the top positions, Samsung, which has about 500 employees at facilities in Richardson and Plano, has focused on making innovative products, entering new markets and increasing its brand awareness.
As it has developed new mobile phone models, Samsung has added new features such as color screens, global positioning systems and multiple ring tones. The company has two new flip phones, the N400 and A500, which have color screens and instant messaging capability. Samsung will introduce the phones this summer.
The company also has focused on midpriced and high-end models - phones ranging in price from $100 to $400 - and has left the lower-cost phone market to its competitors.
The strategy has worked well, said Charles Golvin, an analyst at Forrester Research in Cambridge, Mass.
"If you do a side-by-side comparison of an equivalently priced competitor phone with a Samsung phone, the Samsung phone has more features," Golvin said.
For example, the Samsung phone can store 300 names in its address book, while a competing phone may store 200 names. Samsung phones were also among the first models to have voice-activated dialing, analysts said.
Samsung has also taken its innovative phone features and introduced them to new customers by entering markets such as the United States and Europe.
In the mid-1990s, Samsung sold mobile phones in its native South Korea but was not a serious competitor in the international market. But in 1997, the company signed a three-year, $600 million contract to provide phones for a U.S. carrier, Sprint PCS.
Samsung completed that contract within two years and then signed a one-year, $1 billion contract with Sprint. The partnership between the two companies has prospered as the Samsung 3500 phone is the top-selling phone in Sprint PCS' history.
The company continues to work with Sprint PCS in developing new models, and Samsung has a team of South Korean engineers working at Sprint PCS' headquarters in Overland Park, Kan. Samsung's network operations division also built part of Sprint PCS' network in Puerto Rico.
Sprint PCS plans to unveil its next-generation wireless network, which has faster wireless data speeds, later this summer and will debut it with new Samsung phones.
"The relationships that the two companies have formed over the years have really put us ahead with our customers as we go to our nationwide rollout of our third-generation network," said Jim Mickey, Sprint PCS Southwest region president of consumer sales.
Often, a customer walks into a Sprint PCS store asking specifically for a Samsung phone, Mickey said, and Samsung handsets continue to be Sprint PCS' bestselling models, he said.
Although all of the Samsung phones for the U.S. market are manufactured in South Korea, the phones are shipped to Samsung's logistics center in Plano, where the company performs quality inspections and then ships the phones to carriers, Skarsynski said.
Because Samsung Telecommunications is part of $25 billion conglomerate Samsung, the company is able to get parts for its phones from Samsung's semiconductor and components divisions. As a result, it takes two to three weeks to make a Samsung phone, ship it from the factory and get it into a customer's hands, Skarsynski said.
Most of the crucial development work on a phone is performed in South Korea, but in Richardson, Skarsynski's group picks which designs fit the U.S. market and what type of customization is required for North American customers. Samsung's local work force has grown from about 30 employees in 1997 to 500 now.
In the United States, Samsung's products are primarily carried by Sprint PCS and Verizon Wireless. The company has recently introduced phones with VoiceStream but has no relationships with the No. 2 and No. 3 carriers, AT&T Wireless and Cingular.
Analysts say most of Samsung's rapid growth in the past three years has been from entering growing markets, such as the United States and Latin America, instead of increasing market share in areas where the company is already a strong competitor.
The company sold 29 million handsets last year, compared with just 7 million in 1998.
"The real question becomes, can Samsung become a more mature mobile phone manufacturer in developed markets like Western Europe?" said Bryan Prohm, an analyst at Gartner Dataquest. "If they can leverage the same kind of designs and form factors, that bodes well for their ability to grow market share in places where they're not a traditional competitor."
Western Europe, traditionally a stronghold for No. 1 cellphone maker Nokia, had virtually no growth in its wireless sales market last year, leaving mobile phone makers hoping that customers would replace their older phones this year with next-generation phones.
Skarsynski said Samsung believes that its new phone models with large color screens will prompt European customers to upgrade their phones.
With its 10 percent market share, analysts say Samsung still has a long way to go if it wants to catch up with Motorola, which has a 15 percent market share, and Nokia, which has a 35 percent market share. It remains to be seen whether Samsung has enough momentum to pass Motorola, Prohm said, adding that Motorola's reinvigorated phone portfolio makes Samsung's goal even more challenging.
Despite the gap between Samsung and its competitors, the South Korean company plans to be a leader in the wireless industry, Skarsynski said. The company is planning to spend $50 million on corporate branding in the United States this year.
Part of that marketing program was an ad campaign during the Winter Olympics and the company's co-sponsorship of the Samsung/RadioShack 500 NASCAR race in April at the Texas Motor Speedway.
But with its lofty goals, Skarsynski says the company must get quality Samsung phones into the hands of customers.
"I'm trying to get this person over here to be a Samsung advocate at the end of the day," Skarsynski said. "I want him to have a phone and keep him coming back to find out what's new from Samsung."
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Andrea Ahles, (817) 390-7695
aahles@star-telegram.com |
