Samsung is not a household name in the United States, but the consumer electronics giant is hoping its $10 million brand promotion campaign introduced in the fourth quarter and its aggressive strategy to grab a 40-percent share of the U.S.
CDMA handset market will do the trick.
Samsung Group’s American telecommunications business, Samsung Telecommunications America, is on the fast track in the United States. The company started shipping its first handsets in the United States during mid-1997 under a $6 million contract with Sprint Spectrum L.P. Samsung says it currently has about a 20-percent share of the Code Division Multiple Access handset market, where Qualcomm Inc., Sony Corp., (as well as the Sony/Qualcomm partnership) and Nokia Corp. are its only current competitors.
By the end of last year, it introduced three new models of handsets-two personal communications services products and a dual-mode cellular phone. At the Consumer Electronics’ Show earlier this month, Samsung unveiled its CDMA/AMPS smart phone, which works with the Windows CE 2.0 operating system and comes in a version developed for cellular users and one designed for PCS users. STA expects to introduce more new handsets in February at the upcoming Cellular Telecommunications Industry Association’s Wireless ’98 show in Atlanta.
“This year, each quarter, we will be introducing three new products for cellular and PCS,” said Peter Skarzynski, vice president of sales and marketing for STA’s wireless division.
But the competition will be strong this year in the U.S.
CDMA handset market, and STA will have to contest with some manufacturers that are well known to U.S. consumers.
Qualcomm Inc., which owns the intellectual property rights to Interim Standard 95 technology, was once an unknown in the marketplace, but is now a strong contender. For more than a year, as a partner with Sony, it enjoyed being the lone supplier of CDMA handsets in the United States and had time to garner brand awareness and branch out with its own line of handsets. The company last summer kicked off a major advertising campaign and purchased the naming rights to the football stadium in San Diego. According to Phillip Redman, senior analyst with the Yankee Group in Boston, the Qualcomm/Sony partnership has a 24-percent market share of all digital handset shipments in the United States.
Sony Corp. also has branched away from the partnership, coming out with its own line of handsets. It has a strong brand in the United States as a consumer electronics manufacturer.
Nokia, which began shipping cellular CDMA handsets in August, has a strong name recognition in the marketplace and consumers see its handsets as superior products, said Redman. Wireless giant Motorola Inc., which had planned to introduce a CDMA product last summer, plans to enter the market next month with a cellular tri-mode CDMA handset that supports CDMA, Advanced Mobile Phone Service and narrowband AMPS. The company expects to follow with a PCS handset.
Skarzynski is confident STA has advantages to help it reach its market-share goal. Samsung is the world’s largest CDMA handset provider, with a 60-percent market share in Korea and about a 50-percent share in Hong Kong, he said. And the company holds 40 percent of the entire wireless handset market worldwide. It supplies wireless infrastructure and handsets to the world’s first and largest commercial CDMA system in service in Korea.
“Our experience sets us apart from other companies,” said Skarzynski. “We have one of the best quality records of any wireless terminal supplier anywhere in the world, and we have a time-to-market advantage.” Samsung perhaps is the manufacturer most experienced with CDMA technology.
Samsung also has a strong presence in the semiconductor and electronics market. It is the world’s largest provider of memory chips and computer monitors and the second largest manufacturer of VCRs.
Ira Brodsky, president of Datacomm Research Co. in St. Louis, said STA appears to be the low-cost handset provider in the U.S. CDMA market. Carriers like Sprint PCS, which is streamlining its operations, want to keep handset subsidies down, he said.
“I suspect [carriers] like Sprint will lean heavily on suppliers like Samsung,” he said.
Indeed, Sprint PCS seems to be pushing STA’s handsets over others it offers. Skarzynski said STA’s handsets represented 60 percent to 80 percent of the nationwide carrier’s activations during the fourth quarter.
In related news, Samsung Americas, the central administrative entity for operations in North, Central and South Americas, said it will shift most of its administrative responsibilities to each operating unit, such as STA and Samsung Semiconductor Inc., to enhance its competitiveness under market-based global strategy.
James Choi, a spokesman for Samsung Americas, said the move is not part of the restructuring parent company Samsung Group is making to its businesses in Korea because of economic problems there. Choi said the move was made to eliminate overlapping responsibilities and enable Samsung subsidiaries to react to the fast-changing markets.
Samsung Americas will transfer most of its 30 employees to each operating unit as a result of the reorganization. Samsung said it will continue to grow its $9 billion business in the Americas in a streamlined fashion, bringing decision-making power to the operating unit.
