No. of Recommendations: 37
The mobile wireless handset market (a pure "royalty" game, by Geoff's definition of same) remains the single largest consumer electronics market both in terms of unit volume and revenue, and drives a thriving market for components, including but not limited to wireless IC chipsets, memory, displays, and software.

Handset manufacturers have just finished the 3rd consecutive quarter of booming handset sales, and there appears to be no end in sight. In 2003 the market saw estimated handset revenue in excess of USD $80 million and this year the market will top USD $90 Billion.

Q1 2004 saw absolute blow outs by Motorola and Samsung who shipped more units in Q1 than they did in the Q4 2003 holiday season, and it also saw an uncharacteristic blow up by market leader Nokia. Most importantly most of the major manufacturers are showing improved margins although none come close to rivaling Nokia and Samsung respectively the 4ty, and 3rd most profitable IT companies in the world, but things could be changing.

Handset momentum going into Q2 is a strong as I can ever remember, and without question, there is a clear shift to more data-centric voice models. Clearly mobile wireless data is starting to experience tornado growth, driven by color displays, imaging phones, standardized MMS, and WLNP.

Geoffrey Moore once described the life of market leading 'kings,' and commented on the handset royalty game this way:

"All of these companies lead their respective markets, but none has the power to manipulate a de facto standard, and none enjoys high switching costs. Thus Motorola, despite it's 50% [way back when] market share in cell phones, is under severe margin pressure cellular access providers who threaten to substitute another vendors product for their free-phone offer to their customers." - RFM, page 63 -

Below is a preliminary recap of Q1 2004, a full recap of 2003, some historical data for handset sales and market share dating back to 1997, and forecasts for the future from Strategy Analytics, Kaupthing Bank of Iceland/Sweden, and a more conservative one from Deutsche Bank, USA. I'll comment further when all the Q1 detail is in.
====================================================================
I. 2003 and Preliminary Q1 2004 Handset Unit Sales
·
Company 2003 2003 ¦ Q4 2003 Q4 2003 ¦ Q1 2004 Q4 2003
Sales ¹ Share ¦ Sales ¹ Share ¦ Sales ² E Share
¦ ¦
Nokia 180.7m 34.7% ¦ 54.6m 34.2% ¦ 44.7m 30.0%
Motorola 75.2m 14.5% ¦ 22.4m 14.0% ¦ 25.3m 17.0%
Samsung 54.5m 10.5% ¦ 16.5m 10.3% ¦ 20.1m 13.5%
Siemens 43.8m 8.4% ¦ 15.0m 9.4% ¦ 13.0m ³ 8.7%
SEricsson 26.7m 5.1% ¦ 7.9m 4.9% ¦ 8.8m 5.9%
LG 26.2m 5.0% ¦ 9.7m 6.1% ¦ 8.75m 5.8%
Others 113.0m 21.8% ¦ 33.5m 21.1% ¦ 29.25m ³ 19.6%
====== ====== ¦ ====== ====== ¦ ====== ======
Total 520.0m 100.0% ¦ 159.6m 100.0% ¦ 148.9m 100.0%
·
¹ Gartner 2003: Includes iDEN and WLL shipments.
Excludes ODM to OEM shipments.
² Q1 2004 is a mix of sell in or sell through reported by vendors
³ Estimated: Siemens (not reported) is estimated as is 'Other'

====================================================================
II. 2003 Handset Sales: The Year in Review
====================================================================
Gartner Global Sales to End Users (Sell-Through) in 2003 ¹
·
Company 2003 2003 2002 2002 2003
Sales (000) Share Sales (000) Share +/-
·
Nokia 180,672.4 34.7% 151,421.8 35.1% -0.4%
Motorola 75,177.1 14.5% 72,852.6 16.9% -2.5%
Samsung 54,475.1 10.5% 41,684.4 9.7% +0.8%
Siemens 43,754.3 8.4% 34,618.0 8.0% +0.8%
SEricsson 26,686.3 5.1% 23,112.9 5.4% -0.3%
LG 26,213.7 5.0% 13,797.6 3.2% +1.8%
Others 113,009.6 21.8% 94,143.8 21.7% +0.1%
========= ====== ========= ====== =====
Total 519,988.5 100.0% 431,631.0m 100.0% -
·
¹ Gartner: Includes iDEN and WLL shipments.
Excludes ODM to OEM shipments.

·
Gartner Quarterly Global Sales to End Users (Sell-Through) in 2003
·
1Q 03 1Q 03 2Q 03 2Q 03 3Q 03 3Q 03 4Q 03 4Q 03
Vendor Units Share Units Share Units Share Units Share
·
Nokia 39.5m 35.0% 41.2m 35.9% 45.4m 34.2% 54.6m 34.2%
Motorola 16.6m 14.7% 16.7m 14.6% 19.5m 14.7% 22.4m 14.0%
Samsung 11.9m 10.5% 11.3m 9.9% 14.9m 11.2% 16.5m 10.3%
Siemens 8.6m 7.6% 8.1m 7.0% 12.1m 9.1% 15.0m 9.4%
SEricsson 5.4m 4.8% 6.3m 5.5% 7.1m 5.3% 7.9m 4.9%
LG 5.0m 4.5% 4.4m 3.8% 7.1m 5.3% 9.7m 6.1%
Others 25.8m 22.9% 26.9m 23.3% 26.9m 20.2% 33.5m 21.1%
====== ====== ====== ====== ====== ====== ====== ======
Total 112.7m 100.0% 114.9m 100.0% 132.9m 100.0% 159.6m 100.0%
·
Kaupthing Bank Global Mobile Sales Estimates for 2003
·
Vendor 1Q 03 1Q 03 2Q 03 2Q 03 3Q 03 3Q 03 4Q 03 4Q 03
Units Share Units Share Units Share Units Share
·
Nokia 37.9m 33.7% 40.8m 35.3% 45.3m 33.8% 55.3 35.5%
Motorola 16.6m 14.8% 16.7m 13.7% 19.5m 15.1% 22.4m 14.4%
Samsung 11.9m 11.7% 11.3m 10.4% 14.9m 11.2% 16.5m 10.0%
Siemens 8.6m 7.1% 8.1m 7.0% 12.1m 8.9% 15.0m 9.8%
SEricsson 5.4m 4.8% 6.3m 5.8% 7.1m 5.3% 7.9m 5.1%
LG 5.0m 5.0% 4.6m 3.8% 7.1m 5.7% 9.7m 5.7%
Others 25.8m 22.9% 26.9m 23.3% 26.9m 20.0% 33.5m 19.5%
====== ====== ====== ====== ====== ====== ====== ======
Total 112.5m 100.0% 115.6m 100.0% 134.1m 100.0% 155.7m 100.0%
·
Source: Kaupthing Bank (Iceland/Sweden)
·
2003: Kaupthing Bank on Average Unit Selling Price (ASP)
·
ASP in USD USD ASP in EUR EUR
Q1 Q2 Q3 Q4 2003 Q1 Q2 Q3 Q4 2003
=============== ==== =============== ====
Nokia 155 155 140 150 150 145 135 124 127 132
Motorola 147 148 145 146 146 137 129 129 124 129
Samsung 192 192 194 197 194 179 170 172 165 171
Siemens 132 130 118 116 124 123 114 105 98 110
SEricsson 160 191 207 213 193 149 168 184 180 172
LG 164 161 156 158 160 153 142 139 132 141
=== === === === === === === === === ===
Average 158 163 160 163 161 148 143 142 138 143
·
2003: Kaupthing Bank on Revenue Leaders Market Share in 2003

2003 2003 2003 USD 2003
Company Units ASP in USD Revenue $$$ Share

Nokia 179m $150 ~ $26.9 B 33.1%
Motorola 75m $146 ~ $11.0 B 13.5%
Samsung 56m $194 ~ $10.9 B 13.4%
Siemens 43m $124 ~ $5.3 B 6.5%
SEricsson 27m $193 ~ $5.2 B 6.4%
LG 27m $160 ~ $4.3 B 5.3%
Others 110m $161 ~ $17.7 B 21.8%
====== ========== ======
Total 518m ~ $81.3 B 100.0%
·
2003: Strategy Analytics, IDC, Et Al Sell-In v. Gartner Sell Through
·
Q1 03 Q2 03 Q3 03 Q4 03 CY 2003
·
IDC 107.6m 118.3m 130.1m 167.8m 533.4m
Kaupthing Bank 112.5m 115.6m 134.1m 155.7m 518.0m
Gartner Dataquest 112.7m 114.9m 132.9m 159.6m 520.0m
Strategy Analytics 109.1m 110.9m 131.9m 164.4m 516.2m
Deutsche Bank USA - - - - 469.0m
====================================================================
III. 2003 Handset Sales by Technology
====================================================================
The CDMA Handset Market in CY 2003
·
Strategy Analytics SA & Qualcomm
================== ==================
Units Share Units Share
·
1. LGE 21.3m 21.6% 21.3m 18.8%
2. Samsung 20.4m 20.7% 20.4m 18.0%
3. Motorola ~18.7m 19.0% ~19.0m 16.8%
4. Nokia 12.3m 12.5% 12.3m 10.9%
5. Kyocera 10.9m 11.0% 10.9m 9.6%
6. Sanyo 3.5m 3.5% 3.5m 3.2%
0. Other ~11.6m ~11.7% ~25.6m ~22.7%
====== ====== ====== ======
Total ~98.7m 100.0% 113.0m 100.0%
·
The GSM Handset Market in CY 2003 (Strategy Analytics ¹)
·
Units Share
·
Nokia 146.0m 42.2%
Siemens 43.3m 12.5%
Samsung 33.8m 9.8%
LGE 6.1m 1.8%
Other 116.8m 33.7%
====== =====
Total 346.0m 100.0%
·
¹ Source: Korea Times and Korea Herald abstracting Strategy Analytics
·
2003 Handset Sales by Technology
·
Strategy Brian Modoff
Analytics SA & Qualcomm Deutsche Bank USA
=============== =============== =================
Units Share Units Share Units Share

GSM 346.0m 67.0% 346.0m 67.0% 313.1m 66.8%
CDMA 98.7m 19.1% 113.0m 21.9% 106.0m 22.6%
WCDMA -- -- 4.0m 0.7% 1.9m 0.4%
Other 71.5m 13.9% 71.5m 13.9% 48.0m 10.2%
====== ====== ====== ====== ====== ======
Total 516.2m 100.0% 516.2m 100.0% 469.0m 100.0%
·
The Brand Factor: 2003 Top Global Brands as Valued by Interbrand
·
Brand Value % change Brand Value Country
2003 over 2002 of
Rank Brand $ MILLIONS prior year $ MILLIONS Origin
·
1 Coca-Cola 70,453 1% 69,637 US
2 Microsoft 65,174 2% 64,091 US
3 IBM 51,767 1% 51,188 US
4 GE 42,340 2% 41,311 US
5 Intel 31,112 1% 30,861 US
6 Nokia 29,440 -2% 29,970 Finland
20 Sony 13,153 -5% 13,899 Japan
25 Samsung 10,846 31% 8,310 South Korea
79 Panasonic 3,257 4% 3,141 Japan
80 Ericsson 3,153 -12% 3,589 Sweden
81 Motorola 3,103 -9% 3,416 US
·
Data: Interbrand, J.P. Morgan Chase & Co., Citigroup, Morgan Stanley
====================================================================
IV. Historical Handset Data Through Year Ending 2003
====================================================================
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%
Siemens 2.5% 3.3% 4.6% 6.5% 7.4% 8.0% 8.4%
SEricsson 16.2% 14.4% 10.5% 10.0% 6.7% 5.4% 5.1%
LGE ·Moved into the 6th slot in 2003· 3.2% 5.0%
Matsushita 5.7% 8.1% 5.5% 5.2% 4.1% 3.3% 2.9%
·
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 2.34x 2.40x
Motorola 1.4x .95x .6x .48x .42x .43x .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 3.60x 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 + 0.8 % points + 2.7 % points
2003 - 0.4 % points + .8 % points
-------------- -------------
6 Years + 16.1 % points + 7.0 % points
5 Years + 10.9 % points + 6.4 % points
3 years + 4.8 % ponts + 5.6 % 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%

.
Handset Unit Sales Growth to 2003 from 1999
.
2003 2002 2001 2000 1999
Company Units Units Units Units Units
.
Nokia 180.7m 151.4m 139.7m 126.4m 76.3m
Motorola 75.2m 72.9m 59.1m 60.1m 47.8m
Samsung 54.5m 41.7m 28.2m 20.6m 17.7m
Siemens 43.8m 34.6m 29.8m 27.0m 13.0m
SonyEricsson 26.7m 23.1m 27.0m 41.5m 29.8m
LG 26.2m 13.8m - - -
Panasonic - - - 21.5m 15.6m
Others 113.0m 94.1m 115.9m 115.6m 83.4m
Total 519.9m 423.4m 399.6m 412.7m 283.6m
·
Note: Ericsson sales only in 2001. Sony 2001 and earlier sales
included in Others. No iDEN sales included except for 2003.

====================================================================
V. Looking Forward to 2004 and Beyond
====================================================================

* Given the strength of Q1 2004, Several analysts and research houses may revise their current standing forecasts upward.

* There is growing optimism that 3GSM WCDMA will begin a significant volume ramp this year or next.

* Gartner in mid-March forecasted handset sell through at 580 million units this year, up from 520 million units in 2003.

* Qualcomm last week increased their 2004 'cdma' handset forecast from January's estimate of 138m-146m units to 152m-160m units (30%-37% YOY growth).

* Strategy Analytics in early March forecasted global handset sell-in will grow 14% in 2004 to 596 million units, and 11% to 662 million units in 2005.
Strategy Analytics on Handset Sales Growth (March 2004)  
·
· Global handset sales will grow 14% in 2004 to 596 million units.
11% in 2005 to 662 million units.
·
· CDMA sales will grow 24% to 117 million units in 2004 ...
... with a CAGR of 12% through 2009.
·
· GSM sales will grow 20% in 2004 ...
... with a CAGR of 11% through 2009.
·
· 3G handset sales will account for 21% of total global sales in 2004
·
· 98% of handsets sold worldwide will be 3G devices in 2009, with the
remainder being primarily GSM/GPRS handsets being sold into emerging
markets & low-end, voice-centric segments in mature global markets.
·
Kaupthing Bank Forecast of Handset Sales and Share (April 6)
·
=================¦==================¦=======================
Unit Shipments ¦ Market Share ¦ ASP USD/EUR
=================¦==================¦=======================
2004 2005 2006 ¦ 2004 2005 2006 ¦ 2004 2005 2006
=================¦==================¦=======================
Nokia 201m 223m 245m¦ 33% 34% 34% ¦143/114 144/114 139/110
Motorola 84m 89m 93m¦ 14% 13% 13% ¦149/118 145/115 139/110
Samsung 79m 94m 106m¦ 13% 14% 15% ¦191/161 189/150 179/142
Siemens 53m 57m 60m¦ 9% 9% 9% ¦131/104 129/102 126/100
SEricss 30m 33m 38m¦ 5% 5% 5% ¦212/173 208/165 183/145
LG 34m 39m 43m¦ 6% 6% 6% ¦165/131 158/125 151/120
Others 124m 130m 138m¦ 20% 20% 19% ¦ - - -
==== ==== ====¦ ==== ==== ==== ¦ - - -
Total 603m 664m 723m¦ 100% 100% 100% ¦======= ======= =======
¦ Average ASP:¦165/134 162/129 153/121
¦Market Value (USD)¦$99.5 B 107.6 B 110.6 B
¦Market Value (EUR)¦ 80.8 B 85.6 B 87.5 B
·
Deutsche Bank¹ Handset Sales (000 Units) (April 19, 2004)
·
2004 2005 2006 2007 2008
·
GSM 342.7m 364.0m 371.0m 363.4m 335.4m
3GSM WCDMA 16.5m 33.5m 56.7m 107.3m 167.1m
CDMA 124.7m 144.0m 163.7m 176.4m 182.3m
TDMA 19.2m 11.2m 8.8m 4.3m -
PDC 11.9m 5.7m 3.1m 1.9m .2m
Analog/Other 1.5m - - - -
====== ====== ====== ====== =======
Total Units 516.4m 558.3m 603.2m 653.2m 685.1

Total 'cdma' 141.2m 177.5m 220.4m 283.7m 349.4
Percent of All 27.3% 31.8% 36.5% 43.4% 51.0%
====================================================================

Notes for Above

* Reported handset sales "estimates" vary by source.
* Gartner is the primary data source for histirical sales unless otherwise noted.
* Starting in 2003 Gartner started including iDEN and WLL handsets
* Prior to 2003 Gartner did not include iDEN and WLL handsets
* Gartner's number's often differ from those reported by manufacturers, SA, pr IDC
--> Gartner reports sell through not sell-in
--> Most manufacturers report sell-in (Nokia an exception)
--> Gartner excludes ODM to OEM shipments.
--> Because of above some sales reported by Samsung or LG (e.g.) may be branded other than Samsung or LG. This is probably most applicable to product produced in China by their JVs.
* Gartner (like all agencies) continuously scrubs and adjusts prior numbers.
* There are no 'official' handset sales numbers, but I consider Gartner as the closest thing to official that exists.
* On 'cdma' estimated sales I consider Qualcomm's to be best source even though they don't always match up with others.
* Strategy Analytics (SA) is the only public source I have access to other than Deutsche Bank USA that is consistently tracking or forecasting CDMA sales.
* The Report on Nokia that I extracted the Kaupthing Bank material above from is an excellent data source. Credit to the author/analysts Paul Hansson and Mikael Laséen. Their data jibes closely with Gartners.
* Deutsche Bank USA's forecasts are included but it should be noted that Brian Modoff's estimates are significantly lower than others, particularly for non-cdma product.
* Normal disclaimers apply. It is possible that data above comtain's typos, miscalculations or transposition errors.

Some Source Links for data included here:

· Deutsche Bank Forecast: http://tinyurl.com/2hdt8
· Gartner et al Historical Detail: http://tinyurl.com/2p5lg
· Kaupthing Bank Forecast: http://tinyurl.com/2oyy9
· Qualcomm 2004 CDMA Forecast: http://tinyurl.com/23wyv
· Strategy Analytics 2004-2009: http://tinyurl.com/2689c

###

- IC -
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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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No. of Recommendations: 0
One thing that is a factor in handset success, but not visible in the numbers, is the quality of the developer or app dev program of these handset makers. Nokia has by far the best app dev program. This is critical because these new handset purchases are driven by content and Nokia devices are the best supported devices when you consider the sheer volume of Java and Symbian games and applications available for them.
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