Samsung wins and loses off Apple iPhone’s success

The successful launch of the iPhone by Apple Inc. and its growing local popularity are presenting Samsung Electronics with a dilemma as it seeks to defend its dominance over the local mobile phone market while simultaneously capitalizing on its role in the iPhone’s production, analysts said yesterday.

Apple began local sales of the product on Nov. 28, and more than 65,000 units were reported sold less than a week later.

Yet the explosive popularity of the i-Phone - which directly competes with many of the Korean electronics giant’s products - is not all bad for Samsung.

Upon the U.S. launch of the iPhone in 2007, market researcher iSuppli estimated that Samsung components made up 29 percent of the prime cost per handset. Samsung was the biggest beneficiary of iPhone sales, according to iSuppli, and other analysts agree that Samsung will remain a key beneficiary of growth in the market for iPhones.

“Demand for NAND flash memory chips is rising largely on Apple’s move to increase the storage capacity of the
iPhone,” said Seo Joo-il, an analyst at KB Investment and Securities. He said contract prices for NAND flash memory chips have increased more than 8 percent.

Apple has been the largest client for Samsung’s NAND flash memory chips, and from July to September, the Korean electronics giant claimed the largest market share in the global market for NAND flash memory chips with 38.5 percent.

Seo expected the Samsung-Apple partership to continue, saying “Apple has recently doubled the capacity of its phones, from 8 and 16 gigabytes to 16 and 32 gigabytes, respectively.”

Yet while the iPhone is a cash cow for Samsung, it could strangle the world’s largest chipmaker at the same time. Apple is not only a large-cap client for the electronics maker, but also an intimidating rival for Samsung, which is also the world’s second-largest mobile phone manufacturer after Finland’s Nokia Corp.

According to researcher Strategy Analytics, Samsung had 20.7 percent of the global mobile phone market in the third quarter, selling 60.2 million units. In the same period, Apple sold only 7.4 million iPhones.

But Apple beat the major players in in terms of operating profits, Strategy Analytics said, making $1.6 billion off its iPhone business from July to September on sales reaching $4.5 billion.

During the three-month period, Samsung’s operating profit came to 1.03 trillion won ($896 million) in the communications sector, which includes mobile phones, with sales of 10.7 trillion won.

Apple has been experiencing tremendous growth due to the success of the
iPhone, as customer satisfaction remains the highest in the industry.

“As users expect greater functionality from their devices beyond telephony, we believe the [smartphone] market will continue to grow faster than the overall mobile phone market,” IDC analyst Ramon Llamas said.

To defend its home market against the iPhone, Samsung recently reduced the price of its 2GB “Omnia II” from 920,000 won to 880,000 won. From Yonhap