Nokia, the world's largest mobile phone-maker, has slipped some ground. As per the latest revenue reports, Nokia's net profit has declined by seven per cent.
And the reason for that is clear - the average selling price (ASP) of a Nokia phone has fallen close to 13 per cent from a year ago. Yet, the company sold more mobile phones than its rivals in markets like India and China.
Romal Shetty, director (telecommunications) at KPMG, says, "Despite Nokia losing some share to players like Apple and Blackberry, it is probably the only company that is not undercutting device prices."
According to IDC's EMEA mobile phone tracker, in the second quarter of 2007, the region consumed 87 million units, growing at around eight per cent annually. In emerging markets, Nokia retained its more-than-50 per cent share, while Samsung and Sony Ericsson improved their positions.
Motorola, the lone loser in the first quarter of 2007, saw a drop of 4.5 per cent in market share, reportedly owing to the lack of new phone models. Well, the mobile handset market is notoriously fickle.
"Motorola has paid the price for its ultra low-cost handsets and over-reliance on the RAZR line," says Gartner's senior research analyst, Neha Gupta. "It needs to correct its supply chain organisation and distribution logistics, along with replenishing its ageing product lines and not undercutting its prices too much," warns Shetty.
Nokia has substantial cash reserves to ramp up R&D and handset production, in order to overcome any weaknesses in its line-up. But can it stumble? The answer is "yes" and Nokia's senior management knows it.
Devinder Kishore, director marketing, Nokia India, reasons, "Nokia set a benchmark of sorts by investing $150 million in a manufacturing facility in Sriperumbudur and a design studio in Bangalore, and increasing its focus on R&D."
Kishore sheds light on Nokia's India strategy: "We are working towards the 'next wave' of mobile experiences and have identified a strategic road map to become an internet services company."
However, just two years ago, Nokia failed to perceive the rising interest in clamshell designs in the mass segment, thereby allowing Samsung and Motorola to make inroads into the market. Later, of course, it rolled out a half-dozen or so clamshell handsets which helped stem the loss of sales.
Samsung, reports IDC, has gained significant ground, overtaking Motorola in handset revenues, and continues to gain on unit shipments with a 17 per cent market share. Says Asim Warsi, head marketing, Samsung, "We have witnessed an increased volume of entry-tier handsets in India that has driven growth for us."
However, Samsung's ASP, as that of Sony Ericsson, has eroded in the push for market-share and the stress on entry-level models. Samsung's ASP in the quarter was $148, down five per cent from the previous quarter.
At number four, Sony Ericsson had the largest shipment increase last year. The company has announced plans to establish an R&D site in Chennai, a move that should aid its manufacturing agreements with partners Flextronics and Foxconn. "This means that Sony Ericsson is taking the India competition seriously," says Gupta.
LG sold 18.4 million units in Q2 of 2007, notching a market share of 6.8 per cent, say Gartner analysts. "Variants of the Chocolate phone, now at a very competitive price, have helped the company," they add.
Anil Arora, business head (GSM & kitchen appliances), LG India says, "Our expansion into lower-end handsets will be very important to maintain a balanced portfolio in India. Besides, we are targeting premium customers with our Shine series."
A year ago, LG Electronics's operating margins hovered at just above zero. In another year, however, LG could be pushing it above the 10 per cent mark, an achievement that IDC attributes to high-end devices like the Chocolate phone.
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