Samsung and LG take aim at Nokia

Moon Ihlwan
23 Feb 2009

As the movers and shakers of the mobile industry meet in Barcelona for the annual Mobile World Congress, which kicked off on Feb. 16, few handset makers see a brighter 2009 than the Koreans. Even as the undisputed leader, Finland's Nokia (NOK), is bracing for the global mobile-phone industry's first year of contraction in eight years, executives at Samsung Electronics and LG Electronics say they are determined to grab market share from rivals new or old. 'The keyword for 2009 is yet more dramatic growth,' says Lee Younghee, Samsung's vice-president for overseas marketing.

The Korean phonemakers were among the best performers in the past year. After Samsung overtook Motorola (MOT) as the world's second-largest handset maker in 2007, LG passed Motorola as the No. 3 in 2008. To keep up the momentum, LG President Skott Ahn has set a target of achieving double-digit market share for the first time this year, against an estimated 8.6% last year, when LG hit a sales record of 100.7 million units, up 25% from a year earlier.

LG's goal is to outdo Apple (AAPL) by matching its innovation and offering superior phone functions. Ahn points out that although consumers get emotional satisfaction with the iPhone's intuitive design and easy use, its frequent disconnection and short battery life force many users to carry two phones. 'My plan is to let consumers carry just one' by providing easy use, rapid response, attractive design, and excellent connectivity, he says.

Parade of hits

Turning up the dial on innovation isn't new for LG. In fact, it has emerged from a second-tier mobile-phone player three years ago to one of the top three by making a splash with such hit products as the Chocolate, Shine, and Viewty phones, each of which sported a distinctive look and feel. Also, in the race to launch a touchscreen model in 2007, it beat the iPhone by three months with its Prada phone, designed in a tieup with the luxury Italian fashion house.

In a new attempt to create buzz, LG is unveiling in Barcelona its new flagship handset, called Arena, featuring touch-based, three-dimensional menus. With a gentle sideways touch, the cube-based menu rotates four customized home screens for direct access to all functions, including video, MP3 music, ultra-fast Internet access, and GPS-based location services. LG is also collaborating with Intel (INTC) to develop a smartphone using the American chip giant's new processor, code-named Moorestown, designed to reduce power consumption below that of the Atom chip now widely used in netbook computers.

LG's path to success is similar to that of crosstown rival Samsung. Taking advantage of the downward spiral of Motorola and hemorrhaging Sony Ericsson, the joint venture between Japan's Sony (SNE) and Sweden's Ericsson (ERIC), the Korean electronics powerhouse has been cementing its position as the only credible challenger to Nokia. In the past two years, Samsung has increased its global market share by 5.1 percentage points, to 16.7%, and executives have said the company's target is to top 20% this year.

The Koreans"”along with many industry watchers"”expect their party to continue for the time being. Thomas Kang, senior analyst at Strategy Analytics, figures the Koreans could widen their presence in emerging markets now dominated by Nokia, thanks to a weak Korean currency that allows Samsung and LG to cut prices with limited impact on profits. The won has lost its value against the dollar by nearly a third in the past year.

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