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Handset Industry: Revival of Korean Handset Makers
A new report by Korea Investment & Securities (KIS) has sumarised the handset market over the past few years. Following the collapse of European makers such as Alcatel and Sagem in 2000, the handset industry is experiencing an oligopoly amid ongoing restructuring.
In 2004, Siemens shut down its handset business as it was unable to keep up with the rapidly-changing handset industry. In 2007, Motorola had problems with its handset business. Even Sony-Ericsson is in trouble in 2008. In Korea, midsized makers closed down their handset businesses. Between 2005 and 2006, Samsung and LG faced difficulties as well. Both companies underwent growing pains due to the lack of low-end phones and baseband chips and trouble with component makers.
However, since 2007, Samsung Electronics (Samsung) and LG Electronics (LG) have been showing meaningful growth due to the management capabilities of the new CEOs. The resurrection of Korean handset makers is something to note when considering the fast product lifecycle which makes it difficult to recover from a state of lull in the handset industry.
KIS says that in 2Q08, LG is expected to rise to the worldÃ's 3rd place past Motorola, and is already seeing a significant improvement in shipment volume and profitability.
The research house forecasts that 2008F handset demand will increase by 12.1% YoY to 1.29 billion units reflecting the shrinking replacement demand in advanced markets and stagnant new subscriber growth in the BRICs. Given that 1Q08 handset demand climbed 13.6% YoY to 294mn units, their full-year estimates should hold up.
By region, handset demand in Europe and North America both inched up 3.0% YoY, while the Asia-Pacific region and the Latin American market maintained growth at the 20% level. 2Q08F handset demand should jump 12.7% YoY to 307mn units driven by robust emerging markets such as China and Latin America. The channel inventory had risen until 2007 due to the fast-growing emerging markets, but should dwindle from 2008 on concerns over the market slowdown. In fact, most handset makers are trimming their days of inventory.
The full reports (pdf file, 40 pages) can be downloaded from the KIS website.
Posted to the site on 23rd May 2008