The Taiwanese Mobile Phone Industry in 1H 2002 and Beyond
August 12, 2002 / Feng Lin
34 Page, Statistics Report
US$1,190 (Single User License)
Abstract
Worldwide mobile phone shipments saw relatively low consecutive growth of 5% in the second quarter of 2002 to reach 98.7 million units. Despite this sluggish growth in the worldwide mobile phone industry, Taiwanese handset makers hit a new record of 6.84 million shipments in the second quarter of 2002, increasing 55% compared to the first quarter. Further attributing to Taiwanese makers' success in dodging the effects of the worldwide slump, Taiwanese shipments from the first half of 2002 nearly matched that of total shipments for all of 2001.
ODM shipments accounted for 89.6% of second quarter shipments, and as more leading international vendors bring production facilities online in China, share of Taiwanese CKD shipments jumped from 10% in the first quarter of 2002, to 21.8% in the second quarter. The growth in demand for ODM shipments also stems from the support Taiwanese makers receive from key components suppliers such as Texas Instruments, Hitachi, and Conexant, which held market shares of 72.9%, 56.2%, and 61.3% respectively in the second quarter of 2002.
While international vendor certification and higher yield rates have resulted in the rapid climb of Taiwanese handset shipments, competition from Korean makers and EMS providers in China awaits on the horizon. This report will offer an examination of these potential threats, in addition to detailed analysis of the first half.
Samsung's Rise in the Mobile Phone Industry
Samsung's R&D capabilities are primarily centered around CDMA handsets. After creating number of models boasting popular industrial design and entertainment functions over years of exposure in the Korean market, the company turned its attention to GSM market in Europe and the rest of Asia. By taking advantage of the conglomerate's high degree of vertical integration, rolling out differentiated mid-range and high-end GSM models, and cooperating with operators, Samsung had the world's fifth highest shipment volume in 2001. In the first quarter of 2002, the company put out the third highest shipment total, and has seen the most rapid growth of any international mobile phone maker.
Taiwanese makers are focusing production on mid-range and value-line models for Western European and North American makers, as opposed to the mid-range and high-end mobile phones Samsung offers. Therefore, the shipment volume of Taiwanese makers should not be significantly affected in the short term. However, over the long term, Western European and North American makers will focus on industrial design and software capability to challenge Japanese and Korean makers for a larger share of the Asia-Pacific market. Taiwanese makers will then need to invest more resources on industrial design and software capability to attract ODM orders from international brand-name vendors in Western Europe, North America, Korea, and Japan.
Mobile Phone Standardization
Wintel open architecture has helped the PC industry flourish and has rapidly pushed these products to a very mature stage. Similarly, the release of Motorola and EMPs' technology platforms, TI and Agere's respective acquisitions of protocol stack providers Condat and Optimay, as well as the release of DCR chipsets by RFMD, Conexant, and Hitachi, have all sped up GSM mobile phone standardization and lowered technological entry barriers. These developments will help new entrants decrease time to market, lower R&D investment costs, speed up the learning curve and lower yield rates, which will pose a considerable threat to other mobile phone manufacturers.