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The Korean Mobile Phone Industry, 1H 2004 and Beyond

August 23, 2004 / Shan-Tung Wu

33 Page, Statistics Report

US$1,620 (Single User License)

Abstract

In the first half of 2004, Korean handset export volume reached 70 million units while export value stood at US$8 billion. However, underneath this record performance lied dramatic changes in competitive dimension and industry structure. Samsung rolled out a full range of handsets in a departure from its high-end tactics. LG attempted to gain a strong foothold in the 3G market. Pantech decided to set up six sales outlets across the US for its branded business. On the other hand, second-tier makers faced an uncertain future after their foray into the Chinese market proved unsuccessful. Makers such as Sewon and Telson thus filed for bankruptcy in May and July 2004 respectively. The Korean mobile phone industry is again entering a phase of restructuring.

List of Topics
Hurdles ahead for Korea's second-tier makers and consolidated positions for first-tier makers in the first half of 2004 and beyond. Korean mobile phone industry overview 2003, handset export scale, export destinations, leading maker competitive profiles including business revenue, profit margin, ASP, and shipment by region and by system technology.

All Tel, Appeal, Audiovoxuris, Axess Telecom, Bell Mobility, Bellwave, Cadacom, Casio, China Unicom, Cingular Wireless, Corelogic, Cyberbank, DaeDuck Electronic, Erixo Technology, Ezze Mobile Tech, Giga Telecom, Gtran Korea, HanSung Elcomtec, Hosan Tech, Hynix, Inter Tube, KTC Telecom, KTF, KTFT, Kolen, Korea Customs Service, LG, LG Chemical, LG Electronics, LG Innotek, LG Philips LCD, LG Telecom, Lumi-Micro, Makus, Maxon, Metro PCS, Ministry of Commerce, Industry and Energy, Modatel, Modottel, Motorola, Mtek Vison, Neoview Kolon, Ness DisplayNokia, Nokia TMC, Orange, Pantech, Pantech & Curitel, Qwest, Samsung, Samsung Electro-Mechanics, Samsung Electronics, Samsung Group, Samsung SDI, Samsung Techwin, Sanyo, Sejin, Sejin Electronics, Seoul Semiconductor, Sewon, Shimm Tech, SK Teletech, SK Telecom, Sprint PCS, Standard, SunYang Digital Image, Telson, Telus, Terrasem, TNZ, Tomato LSI, Vacom Wireless, Verizon Wireless, VIA, VK

List of Figures
Figure 1 The Korean Mobile Communication Industry's Supply Chain

Figure 2 Korean Major Export Industries' Export Value and Share, 2003

Figure 3 Korean Mobile Phone Export Volume and Value, 2000 - 1H 2004

Figure 4 Korean Mobile Phone Export Destinations by Region, 2000 - 1H04

Figure 5 Korean Mobile Phone Export Destinations by Major Country, 2003

Figure 6 The Korean Mobile Phone Industry's US-bound Export Volume, Value, and Average Export Price, 1Q02 - 2Q04

Figure 7 The Korean Mobile Phone Industry's Europe-bound Export Volume, Value, and Average Export Price, 1Q02 - 2Q04

Figure 8 The Korean Mobile Phone Industry's BRIC-bound Export Value by Country, 2001 - 1H04

Figure 9 The Korean Mobile Phone Industry's China-bound Export Volume, Value, and Average Export Price, 1Q02 - 2Q04

Figure 10 Korean Mobile Phone Value of Shipments to China by Assembly Level, 1Q03 - 4Q03

Figure 11 The Korean Mobile Phone Industry's India-bound Export Volume, Value, and Average Export Price, 1Q02 - 2Q04

Figure 12 The Korean Mobile Phone Industry's Brazil-bound Export Volume, Value, and Average Export Price, 1Q02 - 2Q04

Figure 13 The Korean Mobile Phone Industry's Russia-bound Export Volume, Value, and Average Export Price, 1Q02 - 2Q04

Figure 14 Korean Mobile Phone Market Leading Vendor Sales Volume and Market Share, 2003

Figure 15 Korean Mobile Communications Market Operator - Handset Vendor Supply Relationships

Figure 16 Samsung Electronics Revenue by Business, 1Q03 - 2Q04

Figure 17 Samsung's Mobile Phone Profit Margin and ASP, 1Q 2002 - 2Q 2003

Figure 18 Samsung Electronics' Mobile Phone Shipment Share by Region, 1Q 2004 - 2Q 2004

Figure 19 Samsung Electronics' Mobile Phone Shipment Share by System Technology, 1Q 2003 - 1Q 2004

Figure 20 LG Electronics Revenue by Business, 1Q 2003 - 2Q 2004

Figure 21 LG Electronics' Mobile Phone Shipments by System Technology, 1Q 2003 - 1Q 2004

Figure 22 LG Electronics' Mobile Phone Profit Margin and ASP, 1Q 2002 - 2Q 2003

Figure 23 Pantech's Mobile Phone Profit Margin and ASP, 1Q 2003 - 2Q 2004

Figure 24 LG Electronics' Mobile Phone Shipments by System Technology, 1Q 2003 - 1Q 2004

Figure 25 Pantech & Curitel's Mobile Phone Profit Margin and ASP, 1Q 2003 - 2Q 2004

List of Tables
Table 1 Korean Mobile Phone Export Value Ranking, 1H 2004

Table 2 Samsung Electronics' Global Operations

Table 3 LG Electronics' Global Operations

In the first half of 2004, Korean export share of camera phones and color display handsets rose, and second-tier makers expanded their presence into Europe, North America, and Latin America. Total handset export value thus registered explosive growth. However, this high performance painted drastically different pictures for first-tier and second-tier makers.

First-Tier Makers See Positions Consolidated

In addition to high-end handsets, Samsung expects to reinforce its mid-range and value-line rollouts to capture larger global market share and replace Motorola as the second largest handset vendor worldwide. The strategic move is anticipated to affect handset makers that concentrate on the mid-range and value-line segments.

LG is aiming to consolidate its 3G handset business and attain larger share in the North American and European markets. The CDMA sector is also expected to be further cultivated.

Pantech is expected to focus resources on the North American market. Although Pantech announced plans to set up six sales outlets after the attempt to buy Audiovox, its growth was curbed by the setback to some extent. While Pantech continues to receive orders from Motorola and focuses on the markets in China and Latin America, Pantech & Curitel is expected to drive branded business in Korea, North America, and Europe.

Second-Tier Makers Face Mounting Hurdles

Unlike leading handset vendors, second-tier makers face stern challenges ahead. Sewon and Telson have been seeking opportunities for comeback since they filed for bankruptcy in May and July 2004 respectively. Both makers' competitiveness was severely undermined due to their concentration on contract production and high reliance on the Chinese market. Coupled with a brain drain, Sewon and Telson have become unfavorable targets for potential buyers. The outlook for small Korean design houses also looks dismal.

All these changes are converging to reshape the texture of the Korean mobile phone industry. Leading vendors are now offering traction for the industry growth with their global networks and vertical integration. While Sewon and Telson face a difficult future, other second-tier makers are expected to retreat from the long-cultivated Chinese market. They are looking to other regional markets where first-tier makers have less presence, such as Russia, India, Middle East, Eastern Europe, and Latin America. However, challenges abound for these second-tier Korean makers as they will eventually face stiff competition in these markets.

Glossary of Terms

BRIC		Brazil, Russia, India, and China
CCD		Charged Coupled Device
CCM		Compact Camera Module
CDMA		Code Division Multiple Access
CIS		CMOS Image Senor
CMOS		Complementary Metal-Oxide Semiconductor
DMB		Digital Multimedia Broadcasting
EDGE		Enhanced Data rates for Global Evolution
GSM		Global System for Mobile Communications
HDD		Hard Disk Drive
IC		Integrated Circuit
LCD		Liquid Crystal Display
LED		Light Emitting Diode
MNP		Mobile Number Portability
MP		Megapixel
ODM		Original Design Manufacturer
OLED		Organic Light Emitting Diode
PCB		Printed Circuit Board
PCS		Personal Communications Services
PDA		Personal Digital Assistant
SARS		Severe Acute Respiratory Syndrome
SoC		System on Chip
TDMA		Time Division Multiple Access
TFT		Thin-Film Transistor
WCDMA		Wideband Code Division Multiple Access
Wi-Pi		Wireless Internet Platform for Interoperability

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