Report pinpoints reasons for phone makers’ decline

Ask Korean cell phone makers why they’re losing their market share overseas, and they will tell you it’s because of their focus on top-end products or the strong won. Some industry analysts, however, take a different view. According to a report released by the LG Economic Research Institute yesterday, Korean firms are falling behind because they are oblivious to changing consumer demand and because excessive diversifying is eating into their cost competitiveness. The institute noted that today’s consumers are more interested in the “emotional” characteristics of cell phones such as the brand, design, and how the phone feels to the touch, whereas Korean firms are preoccupied with adding new functions. A case in point is Motorola’s Razr brand, the institute said, which cut down on functions and emphasized design. Since its release in July 2004, more than 50 million Razr phones have been sold globally, according to the firm’s recent second-quarter performance report. The think tank also criticized Korean firms for having too many models. As of 2005, Nokia and Motorola had between 60 and 70 models while Samsung Electronics Co. and LG Electronics were producing some 90 to 110 different models. More models means more money going into development, distribution, and marketing, the institute said. The report appeared the day after global market analyst IDC released figures on second quarter market share for the world’s top five mobile phone makers. According to IDC, Nokia’s global market share rose from 31.3 to 33 percent on quarter, Motorola went up from 17.5 to 21.8 percent, and Sony Ericsson rose from 6.1 to 6.6 percent. Samsung Electronics’ market share, however, dropped from 12.5 to 11.1 percent; LG Electronics inched up from 6.2 to 6.4 percent. The LG report noted that cell phones constituted 9.6 percent of all Korea’s exports in 2005. “Makers should cut down on costs by focusing on a making a ‘staple’ model,” said Park Jae-beom, a researcher at LG. “Companies also have to create a monitoring system for global consumer trends and needs. If they only focus on Korean consumers, they may lose the big picture.” by Wohn Dong-hee