No. of Recommendations: 4
A Samsung Correction & Updates

In the preceding post's tables there were some miscalculations regarding the relative market share of Samsung and Nokia over the last 6 years. A corrected update is included below.

Electronics conglomerate Samsung is the handset star ascendant. Samsung Electronics Corporation (SEC) Telecommunications division produces about 1/3rd of their revenue, and in Q1 handset revenue of ~$4 Billion USD equated to 32% of their revenue and, and the division had operating profits of $1.09 Billion USD ... mostly generated from handsets. By comparison Nokia had Q1 sales of $6.3 Billion USD exclusive of networks ($8.1 Billion USD including networks) with an overall operating profit of ~$1.4 Billion USD, and comparable operating profit percentage on handsets despite a considerably lower handset ASP.

After permanently bumping Matsushita (Panasonic & National) out of the 6 slot in 2001, and then bumping Siemens who had displaced Ericsson out of the 3 slot in 2002, Samsung became Number 3 in the 'The Big Three' in 2002, and there is little doubt in anyone's mind that they are there to stay. A bigger question is whether or not they can displace Motorola as Number 2, or eventually displace Nokia as Number 1 by 2010, in fulfillment of there publicly avowed intention.

Here are the corrected tables with some added comments beneath them:
Today's Big Three in Unit Sales Market Share

1997 1998 1999 2000 2001 2002 2003
·
Nokia 20.1% 24.3% 26.9% 30.6% 35.0% 35.1% 34.7%
Motorola 28.8% 23.2% 16.9% 14.6% 14.8% 16.9% 14.5%
Samsung 3.6% 4.2% 6.2% 5.0% 7.1% 9.7% 10.5%
·
¹ Sources for above statistics: Herschel Shosteck for 1997
and 1998 and Gartner Dataquest for 1999 through 2003.

·
Nokia Unit Market Share v. Next Nearest Competitor
·
1997 1998 1999 2000 2001 2002 2003
·
Nokia .7x 1.05x 1.6x 2.10x 2.40x 2.07x 2.40x
Motorola 1.4x .95x .6x .48x .42x .48x .42x
·
Nokia Unit Market Share v. Leading Asian Competitor
·
1997 1998 1999 2000 2001 2002 2003
·
Nokia 3.5x 3.0x 4.40x 5.90x 4.90x 3.62x 3.30x
Samsung - - .30x - .20x .28x .30x
Matsushita .28x .33x - .17x - - -
·
Nokia v. Samsung - 6 Year Market Share Increases:
·
Nokia Samsung
·
1998 + 4.2 % points + 0.6 % points
1999 + 2.6 % points + 2.0 % points
2000 + 3.7 % points - 1.2 % points
2001 + 4.4 % points + 2.1 % points
2002 + 0.1 % points + 2.6 % points
2003 - 0.4 % points + .8 % points
-------------- -------------
6 Years + 14.6 % points + 6.9 % points
5 Years + 10.4 % points + 6.3 % points
3 years + 4.1 % points + 5.5 % points
.
Like Nokia, Samsung manufactures GSM, CDMA & TDMA handsets.
In 2003 Samsung's product mix was GSM: 61%, CDMA: 36%, TDMA: 3%
The 2004 estimated product mix is GSM: 65%, CDMA: 34%, TDMA: 1%

Additional Samsung Detail
Q1 2004 Revenue & Profit: Telecommunication Unit of Samsung
·
Trillion Billion % of Samsung Operating O.P
Won USD ¹ Sales Profit USD %
·
Handsets: 4.61 $3.99 32.0%
Systems: .24 $0.21 1.7%
============== ==== ===== ===== ======= =====
Total Telecomm 4.85 $4.20 B 33.7% $1.09 B 25.9%
·
¹ March 31, 2004 conversion rate here and for ASP of $198.51 USD
·
Q1 2004 Handset Unit Sales Technology Mix Breakdown
·
GSM ~14.2m 71%
CDMA ~5.7m 28%
TDMA ~.2m <1%
==== ===== ====
All 20.1m 100%
·
Q1 2004 Handset Geographical Breakdown
·
Korea: 2.6 million units
Export 17.5 million units (all over world)
·
NA 32%
Europe 34%
ROW 34%
·
Product Mix by Feature QoQ:
·
Q1 '04 Q4 '03
·
Camera 34% 25%
Color 81% 73%
·
Samsung Unit sales by Technology by Quarter in 2003
·
Samsung Q1 2003 Q2 2003 Q3 2003 Q4 2003
============ ============= ============== =============
GSM 6.3m 47.2% 7.3m 60.8% 9.36m 62.3% 10.7m 69.0%
CDMA 6.5m 49.2% 4.4m 36.7% 5.12m 34.3% 4.4m 28.4%
TDMA 0.4m 3.6% 0.3m 2.5% .52m 3.4% .5m 3.2%
==== ===== ====== ====== ====== ====== ====== ===== ======
Total 13.2m 100.0% 12.0 m 100.0% 15.00m 100.0% 15.5m 100.0%

Samsung Quarterly Handset Sales Unit Growth (10 Quarters)
·
Q4 01 1Q 02 2Q 02 3Q 02 4Q 02 1Q 03 2Q 03 3Q 03 4Q 03 1Q 02
·
8.8m 9.0m 9.3m 11.6m 12.2m 13.2m 12.0m 15.0m 15.5m 20.1m


Unfortunately for US residents, other than investing in a Korean mutual fund there is no investment play yet to be made in SEC because they don't have a USA ADR listing. An added complication is that an investor can not perform a detailed review of their financials, and part of the reason for their high margins is internal intradivisional sourcing of components.

For those of us that hold Qualcomm there is a significant reason to watch Samsung closely. Samsung has participated closely with Qualcomm in the commercialization of IS-95, IS-95B, 1xRTT, and 1xEV-DO. They are Qualcomm's largest customer (royalties and chipset revenue), their 2nd largest customer for MSM chipsets (units), and potentially Qualcomm's largest customer for 3GSM WCDMA chipsets.

Samsung has, however, developed its own 1xRTT chipset which they are currently delivering in a small quantity of their own CDMA handsets. They are very low key about this for obvious reasons but in their most recent CC in response to an analysts question they commented:

"We believe that our [cdma] chipsets are going to be very competitive."

If Samsung has a weakness, it is that they have not been able to compete profitably with low end products, and instead focus on mid-tier to high end. Potentially they could maximize margin in low end CDMA products by utilizing chipsets of their own design and manufacture, and over time evolve the chipsets up the product range.

Samsung is also developing a 1xEV-DV (CDMA2000 Release C) MSM and CSM which they recently demonstrated at CTIA Wireless, which possibly (probably) incorporates a 1xEV-DO protocol stack of its own design. In addition they are developing a single-chip Dual Band Dual Mode (DBDM) CDMA2000/WCDMA chipset for the Korean market. Other than LG who is developing their own competitive DBDM chipset in collaboration with EoNex, they have no competition for this limited market, since Qualcomm abandoned or postponed its plans to bring the MSM6600 DBDM chipset to market, and if they master the WCDMA protocol stack, they could incorporate it in their own 3GSM WCDMA chipsets.

- IC -
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