SEOUL, South Korea—As promised, the world’s two tier-one Korean handset vendors rebounded from their second-quarter doldrums.
Based on handset shipment volumes—and despite a strong showing in North American markets—LG Electronics Co. Ltd. slipped to fifth place in global rankings behind a surging Sony Ericsson Mobile Communications L.P., with 16.5 million units shipped in the quarter. Sony Ericsson shipped 20 million handsets in the quarter. Samsung Electronics Co. Ltd. retained its comfortable, third-place ranking with more than 30 million handsets shipped.
In terms of the United States’ carrier-driven market, the vendors’ results underscore that two basic approaches to the market have proven workable in the short-term. LG, which delivers twice as many CDMA as GSM handsets, has prided itself on delivering whatever the U.S. carrier customer desires. Sony Ericsson works only in GSM (40 percent of the U.S. market) and has largely ignored carrier customization to instead rely on its Japanese consumer electronics DNA in music and imaging.
However, their relative success in these approaches is difficult to gauge. LG reported a big, third-quarter sales jump in North America, while Sony Ericsson does not break out sales by region and is believed by analysts to do far better globally than in the United States.
As for Samsung, the company reported mobile handset revenue of $4.7 billion in the third quarter, up 2 percent from the year-ago quarter, out of total quarterly revenue of $15.9 billion. Samsung makes semiconductors, LCDs, digital media and home appliances, as does LG.
The vendor reported shipping 30.7 million handsets globally, up nearly 15 percent from about 27 million shipped in third quarter a year ago.
The vendor credited sales of its portfolio in the United States and its “Ultra Edition” thin handsets in Europe for what it said were record shipments for a quarter, pushing profit margins just above 11 percent, a one point drop from the year-ago quarter.
In its outlook for the fourth quarter, the company suggested that replacement market demands and 3G market growth would drive increased shipment volumes and average selling prices for the firm as it launches Ultra Edition handsets in 3G. The company said it expects to exceed its annual shipment target of 115 million units, thanks in part to plans to launch 30 news phones in the fourth quarter alone.
The results keep Samsung in third place among global handset vendors; second-place Motorola Inc. has roughly double its market share, while fourth place Sony Ericsson has roughly half its market share. CIBC World Markets said in an investors’ note that, long-term, Samsung is likely to continue losing market share to Nokia Corp. and Motorola because it does not compete effectively in emerging markets, where volume sets the top two vendors apart from the pack.
Samsung’s semiconductor business is the only unit that outperforms handsets; third-quarter earnings in that division were $5.1 billion, a strong showing based on increased demand for and a surge in DRAM memory prices. The company said it would invest $1 billion to expand memory semiconductor manufacturing, which is growing 7 percent, year-on-year. That business is expected to grow with demand from the PC sector and from mobile handsets.
LG reported that quarterly revenue from its handset business was $2.2 billion—a 5-percent jump from the previous quarter, but down slightly from the year-ago quarter’s revenue of $2.4 billion.
The vendor returned its mobile handset business to profitability, earning $83 million on its $2.2 billion in sales, an improvement from its loss last quarter, but down from its $129 million profit on $2.4 billion in sales in the year-ago quarter.
Total handset shipments were 16.5 million units, up 7 percent from the year-ago quarter. By technology, 10.5 million were in CDMA handsets—reflecting a U.S.-centric approach—5.6 million were in GSM and a mere 500,000 were in W-CDMA. The vendor reported that CDMA shipments were up by 14 percent over the previous quarter due to the launch of its Chocolate handset in the United States.
LG’s outlook for the fourth quarter focused on follow-up models to the Chocolate phone in CDMA, including music-centric handsets, global expansion in the GSM market and an upswing in demand in Europe, Japan and the United States in W-CDMA sales.
