The mobile phone business globally is booming, at least in terms of shipment figures. But not all suppliers are benefiting. Falling prices are leading to ever-thinner margins, and consumer preferences are proving very fickle.
Korea’s Samsung has just reported a record quarterly profit of around US$6 billion. Its Galaxy phones and tablets contributed most to the rise, with Galaxy smartphones now market leaders worldwide – with double the market share of Apple. Samsung has been sued by Apple for copying aspects of the iPhone. A court in California awarded Apple US$1.3 billion in damages, but Samsung has counter-sued.
Samsung and Apple have so much money that a billion here or there is not going to make any difference. Other phone makers are not doing it so easy. Taiwanese supplier HTC made a small profit last quarter, but the figure was down 75% on falling revenues. Its sales last quarter were only US$2.4 billion, a massive reduction of nearly 50% over the same quarter last year. The company last week issued a warning that revenues and profit will continue to slide.
Even worse are results from ZTE, China’s largest handset provider, which lost US$310 million in the quarter on revenues of US$2.89 billion. The company had previously flagged the poor result, blaming poor economic conditions. According to Juniper Research, ZTE shipped almost 20 million smartphones over the first three quarters with third quarter sales exceeding both Nokia and RIM.
Nokia’s Windows devices have yet to make a significant impact, with the Finnish company shipping just 6.3 million smart devices in the third quarter – a 63% fall compared to the same quarter last year. This was partly due to customers waiting to buy into the new Windows 8 platform, not due until next month. RIM’s recent results – which run to a different financial schedule – nevertheless hint at continuing problems for the Canadian firm with just 7.7 million quarterly smartphone shipments.
The mixed results show the rich man poor man natures of the crowded mobile phone market. The two top vendors, Apple and Samsung, make lots of money. Everybody else struggles. On this form, it’s hard to see once dominant phone companies like Nokia and RIM (Blackberry) ever returning to profitability.
IDC released its quarterly smart phone tracker last week. Samsung is in number one position worldwide with a massive 31.3% the total market (by revenues), followed by Apple with 15.0%, though iPhone 5 sales barely registered in the quarter. RIM, ZTE and HTC each have about 4% market share, with RIM and HTC both declining heavily over the previous year. Nokia has dropped out of the top five for the first time.
Samsung’s Korean rival LG is still having trouble cracking the smart phone market. According to Juniper Research it shipped 7 million smart phones last quarter, a growth of 24% but barely one tenth of Samsung’s 56 million units. “While LG has posted a profit for its smartphone business, it is still facing a challenge when competing against the likes of Apple and Samsung,” says Juniper. “To improve profit margins and compete effectively against players like Huawei, Motorola and HTC, LG needs to improve its smartphone line-up and rebuild its position within the second-tier smartphone segment.”