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Samsung - Targeting the high-end phone market

April 15, 2007
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Having entered the Indian market in 1995 in order to sell consumer electronics and home appliances, Samsung India Electronics Limited (SIEL) could not have anticipated the later growth and development of the Indian telecom sector. Nevertheless, just four years later, the company launched its first GSM handset. Now, the Indian GSM handset segment is registering growth rates of 60 per cent per annum.Having cashed in early, Samsung has much to celebrate.

Over the years, India has slowly but steadily become one of Samsung's key markets. The fastest growing telecom market in the world not only has a large urban consumer base but a high replacement segment constituting around 20 per cent of the market.

This is crucial for Samsung, which concentrates on midand high-end phones that are popular with the replacement market. Moreover, with India's semiurban consumers slowly moving away from black-and-white phones to upgraded versions, Samsung is looking at exciting times ahead.

According to Pankaj Mohindroo, president of the Indian Cellular Association, "Samsung's core strength is product technology. The company not only makes its own chipsets but their standard for optics is also very high."

Sensing the huge potential, Samsung has made India its hub for its Southwest Asian regional operations. Samsung India will oversee business in Nepal, Sri Lanka, Bangladesh, the Maldives and Bhutan.

The South Korean company has also started manufacturing mobile phones in India. Set up in Manesar, Haryana, the company's $15 million telecom equipment manufacturing facility has an annual capacity of 1 million handsets. The mobile phones assembled here are exported to six countries: Dubai, Singapore, Malaysia, Indonesia, Vietnam and Thailand.

Samsung originally operated three different companies in India: SIEL, Samsung India Software Operations (SISO), and Samsung Electronics India Information and Telecommunications (SEIIT).

SEIIT, launched in 2000, was initially a 100 per cent owned IT and telecom subsidiary of Samsung Electronics Company Limited, Korea. Apart from mobile phones, SEIIT sold PC monitors, storage products, including hard disk drives, optical disk drives, laser printers and multifunctional products.

However, in order to achieve synergies with different business groups, SEIIT was merged with SIEL. According to the company, the merger not only helped cut overhead costs but improved the companies' brand equity by providing a common platform for reaching out to consumers.The combined entity has excelled in many segments. It captured the number one or two positions in several of its business lines such as TV, video and audio, information technology products, and home appliances.However, it has failed to win the number one or two spot in the handset segment. "The company's only real weakness is that it has seen a considerable drop in its market share," points out Mohindroo.This is surprising considering that the company is a formidable force in the global handset market. As of December 2006, Samsung had the third largest market share worldwide, 11.8 per cent, after Nokia and Motorola. In India, Nokia had 70 per cent market share followed by Motorola and Sony Ericsson with 15 per cent and 8 per cent respectively.

For Samsung, however, this is not a major cause for concern. "We are currently not present in the black-and-white handset segment, which constitutes 40 per cent of the market. Meanwhile, we command 8 per cent of the highand mid-end segment (colour and cameraphones). The ORG GFK Market Research figures are for the entire market, which includes a segment we are not present in," explains Sutikshan Naithani, V.P., Sales and Marketing, Samsung Telecommunications, India.

During the previous year, Samsung has been solely focusing on the high-end segment. A global marketing decision, the company aims to be known as a premium technology or style leader.

The high-end segment has its advantages. Not only are consumers willing to pay a high premium for such phones, they are also willing to replace them frequently.

To capture the segment, Samsung has launched its ultra-thin models. Projected as the world's slimmest phones, they are equipped with features such as a 3 megapixel camera, Bluetooth, MP3 player, and other high-end multimedia functions.

The company has also started introducing other features such as the "mobile phone tracker". This allows consumers to track their lost or misplaced phones. "In the last year, several million phones were lost or misplaced. We have empowered Indian citizens to get their mobile phones back," says Naithani.

All in all, the company is aiming to get closer to style-conscious consumers who want durable feature-rich devices. To this end, it will release a new range of ultrathin phones shortly.

Meanwhile, the company is eagerly awaiting the arrival of 3G services in India as it is geared up to introduce a set of ready-to-deploy 3G phones. With its competitors waiting for the same opportunity, the question of who will dominate the Indian 3G phone market will preoccupy the sector in the future.

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