Korean phone makers defy Q1 shipment slowdown

26 Apr 2007
00:00

While rivals succumbed to a seasonally weak first quarter for mobile-phone shipments, Korean phone makers Samsung and LG bucked the trend by posting respectable growths in their sales.

Market research firm iSuppli Corp. said number three handset maker Samsung Electronics Co. Ltd. was the only company that registered positive growth during the quarter, while fellow South Korean mobile-phone brand LG -- though the company's volume did not rise -- delivered an impressive performance among the top brands in the market.

Global mobile phone shipments in the first quarter fell by 12.8% sequentially, declining to 253 million units, down from 290.1 million in the fourth quarter, according to the report. Such a decline is typical following the peak fourth-quarter buying season, as evidenced by the fact that four out of the top-five mobile phone makers experienced a sequential decrease in unit shipments.

Samsung defied the trend with a 9.1% increase in shipments to 34.8 million units during the period, up from 31.9 million units in the fourth quarter of 2006. Samsung was the only top-five phone brand to increase its unit shipments on a sequential basis in the first quarter.

"Samsung's success was mainly due to its strong sales growth in Asia ," said Tina Teng, analyst for wireless communications at iSuppli Corp.

Teng credited Samsung's rising sales of low-end, inexpensive mobile phones for its increased shipments and market share. However, this rise came as a double-edged sword for Samsung, with the company's increased percentage of low-cost mobile phone shipments cutting its Average Selling Price (ASP). Samsung's mobile-phone ASP declined by 10% during the first quarter.

On the other hand, shipments of LG Electronics declined only by 6.5%, which actually marked the second-best performance among the top-five brands in the first quarter. On top of that, LG's operating margin improved significantly during the quarter, rising to 6.6%, up from 1.3% during the fourth quarter of 2006, the report added.

Just one year ago, LG's mobile-phone business raised red flags with the company posting negative operating profit during two consecutive quarters.

The company's exports slightly outperformed the seasonal average with only a 10% decline. Even better than that, the company managed a 57.6% increase in shipments in its home market in South Korea.

"The success of LG's Chocolate phone, combined with solid demand for high-end phones and significant improvements in company cost structure, suggest that LG has great potential to gain market share in 2007," Teng said.

The advances by Samsung and LG were made at the expense of US-based Motorola, which posted the most disappointing results among the top-five mobile-phone brands. In the first quarter, shipments declined by 30.9% to 45.4 million units, down from 65.7 million in fourth quarter. This was the largest percentage and unit decline among the top-five brands, the report revealed.

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