LG, Samsung to Take Over Global Handset Market

Motorola Inc. announced on Wednesday that it would spin off its handset division. The world’s third largest handset manufacturer based in the United States has recently been losing shares in the market.

The global handset industry is likely to face grave change as some analysts predict that Korea’s LG Electronics will outdo Japan’s Sony Ericsson and become the world’s fourth largest handset maker soon, with its record high handset sales in the first quarter.

Foreign media including the Wall Street Journal reported on March 27 that Motorola, which lost $1.2 billion last year, decided to split into two publicly traded companies, answering a long-standing demand by activist investor Carl Icahn who owns 6.3% of Motorola shares.

The biggest U.S. maker of mobile phones is expected to finalize its split next year. One of the two firms will focus on manufacturing handsets and the other will produce set-top cable boxes and wireless network equipments.

Motorola CEO Greg Brown said, “Split will help improve the handset division’s capital structure and foster more flexible management. We have no plan to hire new CEO who will lead the handset division, or to sell the division.”

In the meanwhile, the world’s fifth largest handset maker LG Electronics’ sales have rapidly grown. The company sold one million units of Viewty Phone, 700,000 units of Voyager Phone and 500,000 units of Venus Phone in Europe and North America in the second half of 2007.

Investment firms including Woori Investment and Securities, Daeshin Securities, and Morgan Stanley had initially predicted that LG Electronics would sell 22 million units of handsets in the first quarter. However, they raised their estimation to 22.9-24 million units. The Korean handset maker’s sale record is 23.7 units in the fourth quarter in 2007.

On the other hand, Sony Ericsson recently announced that it has lowered its estimation of the first quarter sale from 25.1 million units to 22 million.

Germany’s Deutsche Bank predicted that LG Electronics’ handset market share would increase 1.1 percentage points to 8.3 percent in the first quarter from last year`s 7.2 percent, outdoing Sony Ericsson which is predicted to take 8 percent of the global handset market.

If the prediction proves true, LG Electronics will beat Sony Ericsson to become the world’s fourth largest handset manufacturer in seven quarters since the second quarter of 2006.

The handset industry predicts that Motorola’s first quarter sale will reach only 30 million units, thus benefiting both Sony Ericsson and LG Electronics.

Market analysis firms including Gartner and CCS Insight said, “While Motorola undergoes split process, its competitors will make a good use of the chance and struggle to grab more market share.”

Korea’s Samsung Electronics, closely following Finland’s Nokia, has been also showing brisk moves, as it boosted the manufacturing volume of cheaper handsets at newly built factories including the one in China’s Huizhou. It also decided to build a factory in Vietnam.

In its February report, research firm Strategic Analytics forecasted, “Nokia’s estimated sale of handsets in the first quarter will drop 22.3 million units from the previous quarter to reach 111.2 million units while Samsung Electronics’ sale will increase 200,000 units from a quarter ago to 46.5 million units.”

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