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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: slacker711 who wrote (52993)	11/11/2002 9:39:54 AM
From: Eric L	Respond to of 54805

Slacker, First let me comment that I know you follow the progress of handset manufacturers closer than most individuals on these boards, so when you speak on that subject, I listen. Despite that, you are seeing something I'm not seeing, << My comparison was with '00.... >> OK. Gotcha. I either missed that or thought you typo'd (as I'm prone to do). << I think there was somewhere north of 400 million units sold in '00. >> Gartner Dataquest (who I most rely on) estimated sell-in at 412.7 million units in 2000 v. 399.6 million in 2001. They are now estimating 420 million+ this year and around 450 to 460 million in 2003 as are many of the other houses. 2000 & 2001 looked like this: Gartner Strategy Wit Micrologic DataQuest Analytics Soundview Research 2000 412.7m 415.0 440m 403.4m 2001 399.6m 393.4 380m 386.8m << I think this year will also be between 400-420 million units. >> It all depends on the holidays (and in the case of GSM, the availability of color screen models to boost the high end in Europe) but I think this year will see > 420 million. One interesting note is that in May Gartner published Q1 sell-in of 93 million but when they published their Q2 numbers they boosted Q1 to 97.9 million, so we now have: Gartner Strategy Wit DataQuest Analytics Soundview 02 Q1 97.9m 91.0m 91.1m 02 Q2 98.7m 96.7m 99.6m Est Q3 105.0m 105.0m 105.0m Total 301.6m 292.5m 295.7m v. 1st3Q 01 280.9m nordicwirelesswatch.com Any way you cut it, unless Q4 is a total bomb we are running well ahead of last year and Qualcomm's numbers reflect that. << Here is a list (probably incomplete) of 55 manufacturers currently producing GSM subscriber equipment.... How many General Dynamics handsets have you seen lately? >> Not many, and in fact I should have scrubbed that out because the phone is a Motorola Timeport with a GD security module. << I have my doubts about quite a few of the names on that list.... >> Drill down on the ones you have doubts about. With the exception of GD I crossed referenced each manufacturer before posting (albeit rather quickly) to make sure each had at least 1 currently available GSM device on the market. << If you parse through the handset sale numbers, you will find that Nokia probably has around 50% of the GSM unit sales for this year. >> They do. Just shy of 50% (maybe 48%) as a consequence of Motorola's continued dominance of China and the developing market of local Chinese (and Korean) manufacturers ... which has really squeezed out the middle tier of European suppliers. Of course Nokia is the low cost producer in every market they seriously play in which is virtually every market but Japan and Korea and typically they provide more feature for the buck on the low end while still making healthy margin. However ... if you totally remove Nokia's ~50% you are left with an addressable market that is still 1.6x the size of the total cdma market, and actually favors the low end commodity producer in regional markets. If you do the same trick with Samsung you are looking at an addressable Nokialess GSM market that is perhaps 2.5x the size of the total Samsungless cdma market. << even if they are all accurate, I would say that CDMA has generated far more viable handset producers than GSM. >> I don't really see that although that statement may hinge on the usage of the word "viable". If you choose to say "proportionally" more relative to addressable market size, I guess I would buy that, but that brings that word "viable" into play. Here is a list of the 25 vendors currently making 1xRTT devices according to 3G today: AirPrime - Audiovox - Casio - Cellvic - GTRAN - Handspring - Hanwha - Hitachi - Hyundai (Curitel) - KTF - Kyocera - LG & LG Telecom - Motorola - Nokia - Novatel - PC-EPhone - Samsung - Sanyo & Sanyo-Tottori - Sewon - Sierra Wireless - SK Teletech - Ericsson & Sony-Ericsson - Synertek - Toshiba - Yiso ... 15 of those manufacture are playing in the largest cdma market in the world (US): Audiovox - Handspring - Hitachi - Kyocera - LG - Motorola - Nokia - Samsung - Sanyo - Sony-Ericsson - AirPrime - GTRAN - Novatel - Sierra Wireless - Yiso ... and 10 of those manufacture GSM as well as cdma. The 17 local Chinese aren't on the list and I suspect another 10 or so less "viable" manufacturers probably exist. A really well scrubbed list would probably approach the size of GSM manufacturers (but not equal it) but you'll soon see the same deterioration of market that Alcatel & Phillips have experienced on the GSM side, and you'll see dropouts (like NeoPoint, Oki, etc,) and some consolidation, even though the overall market is growing. I think that it is important to note that at the end of 2001 the top 5 manufacturers had 70% market share and through Q2 2002 the top 5 had 75% market share (all technologies). Worst case they'll continue to control > 70%. << How many of other players on that list are profitable or viable....even in the near-term? >> I seriously question if any but the top 10 in the industry can be really "viable" long haul. Right now, Samsung and Nokia are double digit profitable. Nobody else is except maybe LGE (and if they are that could be illusory), but Samsung wouldn't be top 5 without GSM and LGE needs to be successful in GSM to move up the ladder. Motorola is back to profit but single digit only. Nokia took > 80% of the profit in the industry in 2000. Right now Nokia and Samsung are probably sharing 80% of the profit in the industry. I'm going to make 2 assumptions that perhaps I shouldn't make. 1st I'm going to assume that Motorola who is a little late with 1x is going to quickly gain traction with its 1xRTT product line and finish 2003 with a larger % of the market in 2003 than they finish with in 2002. 2nd I'm going to assume that Nokia who is also a little late, just slightly later than Motorola, with 1x is going to slowly gain traction with its 1xRTT product line and finish 2003 with a larger % of the market in 2003 than they finish with in 2002. This combination, if it plays out as I expect it will, is going to put a further hurt on wannabe players trying to gain traction in the evolving cdma market. If Nokia pulls an el foldo that will change the game slightly, but only slightly. << Qualcomm's CDMA infrastructure value chain has had their share of problems (though I would dispute that CDMA was the source of them). >> I didn't say that CDMA was the (primary) source of their problems. I did say that the addressable market share for QCDMA going forward is potentially a problem for their working their way out. I've scrounged about 5 well constructed forecasts (publicly and privately) and I don't like what I see relative to the weakened position of each of them relative to the albeit weakened position of Ericsson, Nokia, Siemens, and Alcatel on the more GSM oriented side. I am BTW considering (just considering) a small position in Ericsson which is why I'm looking at those numbers so carefully. I view the depressed infra market as a coiling spring for ERICD (and NOK). Best, - Eric -

To: slacker711 who wrote (52993)	11/15/2002 3:17:03 PM
From: Eric L	Respond to of 54805

Slacker, << I have my doubts about quite a few of the names on that list >> You might find this November 6, 48 page presentation called GSM Terminals for the Americas prepared by 3GAmericas interesting: 3gamericas.com They claim 54 GSM current subscriber equipment manufacturers worldwide manufacturing 645 models. They also claim 22 manufacturers manufacturing 60 tri-band WorldPhone models (900//1800/1900) and 8 manufacturing another 15 dual-band (900//1900) WorldPhone models. One of the things that I found interesting is that most of the 10 GSM 850/1900 MHz phones already available employ AMR vocoders. I suspect a lot of the models available will be upgraded to color displays over the next 3 to 6 months but with a few exceptions the models for the Americas are a little drab in that respect at the moment in this world headed towards color displays. - Eric -