Mon, Aug 02, 2004 page11

• Handset vendors vie for position

  CELLPHONE MARKET Taiwan makers' low-price strategies of the past are no longer a sure path to increased market share, as global brands are moving aggressively to win the favor of local consumers

  • By Lisa Wang / STAFF REPORTER
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  Dazzled by the rash of new mobile phones pitched into the local market for the summer buying season, Yuan Chien-wen (袁千雯) is sitting in front of her laptop searching for a new phone on the Web. She wants to replace her OKWAP clamshell phone.

  "What I want is very simple -- a stylish camera phone that I can use to chat with friends and share pictures," said Yuan, a 23-year-old graduate student living in Taipei.

  

  Young Taiwanese try out multifunctional cellphones. Early signs indicate that young consumers may be switching their focus from locally made cellphones to big international brand names, lured by a wider product spectrum and multimedia functions.

  PHOTO: SEAN CHAO, TAIPEI TIMES

  After using an OKWAP phone made by Taiwan's Inventec Appliances Corp (英華達) for one year, Yuan said she wants to switch to an international brand. On a tight budget, Yuan last July bought the OKWAP handset, plus a new number, from local mobile operator Far EasTone Telecommunications Co (遠傳) at a cost of NT$5,000.

  This time, her online search has led her to Nokia Oyj's latest model, the 7610, as the top pick.

  But, like many of her peers in Taiwan, Yuan will have to stand in a long line for the pricey Nokia which sells for around NT$20,000 a unit, without subsidies from mobile operators.

  "The Nokia phone has been a hit since its launch," said a saleswoman surnamed Ker at a branch of mobile phone chain store Aurora Corp (震旦行) in downtown Taipei. Auroa has 230 outlets around the nation, excluding franchises.

  Global brands gain

  Yuan's case is an early sign that Taiwanese youngsters, the main market for consumer electronics, may be starting to shift their attention to big international brand names away from locally made cellphones, lured by a wider product spectrum and stronger multimedia functions, such as MP3 players and games.

  Last year, Taiwan's three major handset vendors, led by BenQ Corp (明基電通) reaped gains in the local market, doubling their market share to 25 percent from 10 percent the previous year, helped by a low-price strategy, according to market researcher Market Intelligence Center (MIC, 市場情報中心), based in Taipei.

  "The macro environment was unfavorable to foreign companies last summer amid fears over the fatal SARS epidemic," MIC analyst Marty Kung (龔俊光) said.

  Most international handset vendors, including Motorola Inc, took a conservative approach to avoid possible inventory losses as the flu-like disease kept consumers from shopping last year, Kung said.

  Local players, however, adopted the reverse strategy, boosting product portfolios to strengthen market position, and combining this with affordable price tags, Kung said.

  market saturation

  Taiwan consumers bought about 6 million mobile phones last year, and MIC predicts the number will only inch up to 6.2 million this year, given fierce competition in a market that is nearly saturated.

  "Things are changing now. International competitors are gearing up to win back local consumers' support and that will put local vendors in a tough fight to safeguard their home turf," Kung said.

  "This time, I doubt the low-price strategy will help local vendors to lure more customers, as big names like Motorola are joining the price war," he said.

  Motorola, which previously ranked No.1 in the NT$40 billion Taiwan market, while lagging behind Nokia in the global market, suffered a significant setback in 2003 as the company was unable to roll out new models, in part because of formidable technological glitches.

  Motorola is making a comeback bid, however, and plans to more than double its new models and offer a full range of products to the Taiwanese market.

  "We aim to grab 30 percent market share by year-end," said Heidi Huang (黃玉瑩), a marketing director of Motorola's Taiwan division.

  The strategy is working so far, with Motorola grabbing a 25 percent market share during the first half of 2004, during which the US mobile phone giant unveiled 12 new models.

  fewer Taiwan models

  Compared to Motorola's up to 30 new models planned for 2004, Inventec, which targets young students, only plans to launch about 10 mobile phones, most of which will be priced in the middle range, selling below NT$10,000 per unit.

  "With fewer models, Inventec may be vulnerable to increasingly stiff competition, compared with BenQ, which has a wider product lineup," Kung said.

  Inventec, the nation's No. 2 cellular phone vendor, launched its first one-megapixel camera phone, the i516, earlier this month. The clamshell phone sells for NT$15,800, about 20 percent lower than other phones in the same class.

  Inventec aims to sell 1.2 million mobile phones this year, having sold 400,000 handsets to local users in the first six months of 2004.

  BenQ -- which plans to roll out at least 10 models, including its first one-megapixel camera phone, the S700, later this quarter -- lowered its sales target for 2004 to 1 million units from the projection of 1.2 million it made late last year, according to Danny Yao (姚鴻洲), an executive at BenQ.

  Motorola is the most aggressive among foreign handset vendors in recouping lost ground, but it is certainly not the only one hoping to regain past glory in Asian markets such as Taiwan.

  To lure back Asian consumers, Nokia, the world's biggest cellphone vendor, has switched from developing only bar phones, and is now slated to roll out three to five foldable models in the second half of the year.

  In the past three years, Nokia's local market share has dropped to 15 percent from 30 percent, as the Finnish mobile phone giant stuck to a long-term policy of rolling out bar phones only.

  Swedish-Japanese cellphone maker Sony Ericsson Mobile Communications Ltd swung to profitability last year and is further strengthening its global market position, with market share rising to 5.6 percent in the first quarter, from 4.9 percent a year earlier, according to Gartner Inc, a market research firm.

  Sony Ericsson's local strategy reflects this momentum. The world's No. 5 handset brand launched a handful of models in the first half, but it also plans to introduce five more models in the second half, including a 1.3-megapixel camera phone, the S700i, and a smartphone P910i, a revamp of the P900, launched early this year.

  "With an improvement in our product portfolio, we aim to grab a 10 percent local market share this year," said Steven Yeh (葉順發), president of Sony Ericsson's Taiwan branch.

  In the first six months, Sony Ericsson introduced only two new models, the P900 and T630, but these have proved hits.

  South Korean phone makers Samsung Electronics Co and LG Electronics Inc, meanwhile, only had a combined 10 percent share of the local market last year, which is relatively small compared to their 16-percent global market share.

  Samsung and LG appear to have been less aggressive in their promotion campaigns.

  south korean brands

  "The inaction gives second-tier Korean phone brands such as Innostream, Gplus and Pantech a chance to nibble into their bigger South Korean rivals' market shares," MIC's Kung said.

  The three smaller South Korean companies, which usually attract widespread attention from young people by using pop divas to endorse their phones, took about a 10 percent local market share last year.

  In addition to these three brands, which target expensive high-end mobile phones, local telecom retailers like Arcoa Corp (全虹通信) are introducing more Korean cellphones in light of booming demand.

  Lee Fei-fei (李霏霏), a 22-year-old editor at a Taiwanese publishing company, said she wants a clamshell phone she saw being promoted by Korean diva Jun Ji-hyun in a recent TV commercial.

  Jun became popular among local youngsters after starring in the romantic comedy My Sassy Girl (我的野蠻女友), which was a blockbuster around Asia in 2002. The handset Jun shows in the commercial is from VK Corp of South Korea, a new brand, and is sold exclusively at the 350-outlet Arcoa chain.

  As of June, Arcoa said it had already sold a combined 20,000 units of the VK 520 and VK 530 foldable phones equipped with a 300,000-pixel camera. The retailer is considering introducing more VK models later this year.

  With competition growing rapidly, the question now is whether Taiwanese mobile phone vendors will be able to retain the market share gains made in the past two years.

  "I think the mobile phone market will not change drastically this year. But, it'll be a tough battle for the players to safeguard their market positions, including home brands and foreign ones," Kung concluded.
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