Smartphone war hits vendor margins
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July 30: An increasingly heated battle in the global smartphone market is set to weigh on handset vendors’ profit margins for the rest of the year, analysts said on Friday.
All top cellphone vendors including Nokia, Samsung Electronics and Research in Motion are rolling out new smartphone models for the holiday sales-fuelled fourth quarter.
“The smartphone market is becoming heavily congested as a host of players seek to boost margins. The reality in the second half is set to be very different,” said analyst Mr Geoff Blaber, from British consultancy CCS Insight.
“The market will swell in volume but price erosion will inevitably result in casualties as value is captured by a minority rather than the majority,” Blaber said.
Research firm Strategy Analytics said the ramp-up in supply will drive higher volumes, but this will pressure margins as vendors fight to outsmart rivals.
The world’s three largest cellphone makers — Nokia, Samsung and LG Electronics — all saw martphone rivalry hitting their profit margins in the April-June quarter.
“Each is in the midst of refreshing its respective product portfolio, with greater emphasis on smartphones during the second half of this year,” said
IDC analyst, Mr Ramon Llamas. “Still, the upward pressure from vendors outside the current top five vendors, particularly Apple and Motorola, will provide tough competition in the quarters to come,” Mr Llamas said.
Samsung warned of weaker margins and profit growth in the second half after reporting telecom unit margins slumped to 7.2 per cent as it boosted marketing spending in the absence of a strong smartphone model.
Samsung is making a big bet on its top model Galaxy S, which went on sale last month, while Nokia is counting on its upcoming N8 model to win a larger share of the high-end market.
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