When it comes to keeping up with his target market, Samsung Electronics Co mobile-phone guru Park Sang-jin has a secret weapon -- his son.
"Every time I take a new model home, he picks it up and can use it without even looking at the instructions," he said. "He uses his mobile phone to download things and play games. I don't. Consumers who just use phones to connect aren't our target."
The senior vice president of the world's fourth-largest handset maker says his company's focus on gadgets helps explain Samsung's success at selling more cellphones in a market that's getting smaller.
For teenagers, Samsung has made phones that work as a television, one that fits into a wristwatch and another that works as a music player. For girls, its Queen phone, which resembles a make-up compact, comes in a glossy red case with gold hinges. For the executive, Samsung makes a combination of a mobile phone and a handheld computer packaged into a silver handset with an oversized screen.
The result of Samsung's efforts: the company's market share this year almost doubled to 7.5 percent, up from 4.3 percent a year ago. All the more remarkable is that total industry sales have contracted by about 10 percent, forcing even leader Nokia Oyj of Finland to cut its forecast for industry sales for a fifth time.
Moreover, cellphone sales are a buffer for Samsung, cushioning Korea's most profitable company from one of the worst years ever for chip sales. Supported by a 300 billion won (US$236 million) third-quarter operating profit at its telecommunications unit -- a jump of 20 percent from a year ago -- Samsung has weathered much of the slump in demand for memory chips, its main product.
Investors take note
Samsung's gains against industry leaders such as Matsushita Communication Industrial Co of Japan, which sells its phones under the Panasonic brand, and Motorola Inc haven't gone unnoticed by investors.
"Its telecommunications division is doing well, which is why it should be trading at a premium to its chipmaker competitors," said Cho Min-keon, who manages about 150 billion won at Good Morning Investment Trust Management Co in Seoul.
Cho said he will take advantage of any dip in the price of the shares to buy more. Samsung's shares are up 79 percent this year, compared with the benchmark Kospi index's 40 percent gain.
All the same, the biggest challenge facing Samsung and its competitors is persuading users to trade in their existing phones.
Nokia, the No. 1 mobile-phone maker, said the slowdown in global economic growth is resulting in consumers delaying purchases of new mobile phones.
Nokia last week lowered its estimate for 2001 cellphone sales to 380 million units from 390 million. The company expects between 420 million and 440 million phones to be sold next year.
People who use their phones only to make calls don't care which brand they use and tend to favor cheaper models, analysts say, partly explaining why this year marks the first time handset sales have declined.
To compensate, Samsung has ignored those customers altogether. Instead, the company made a range of phones designed to catch the eye of the gadget-prone.
Park's focus on the mobile phone as a consumer novelty came after business trips to China. Park says he was startled by the number of young women working in bars, which he later found out totaled as many as 40 million. The women, Park realized, had relatively large disposable incomes to buy mobile phones.
RSS