vol 8, issue 1

Consumer electronics giants stake future on smart handsets

22 January 2013
By Bob Cervi
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Graph showing Samsung's global shipments for 2011 and 2012

Samsung and Apple lead the smartphone market (Source: IHS iSuppli preliminary assessment, December 2012)

Inspection pit at Honda, UK

Low EU sales threaten Swindon jobs

Leading smartphone makers look to entrench their positions, but Europe’s car manufacturers continue to struggle despite rising UK sales.

At the 2013 Consumer Electronics Show in Las Vegas, Samsung gave us a glimpse of a future in which smartphones are made of super-thin foldable plastic. This concept gadget may or may not turn out to be a winner; but the South Korean technology giant can certainly boast of having its finger on the pulse of the buying public. Despite the ever-present competitive threat from Apple’s iPhone (whose version 5 came out in September), Samsung is predicted to hit yet another quarterly record profit, its fifth in a row. Issuing a guidance note, the company said that operating profits for the quarter to the end of December are estimated to rise by 88 per cent to about 8.8 trillion won (£5.1bn), compared with the same quarter in 2011.

This is ahead of analysts’ expectations, and is very much down to the success of Samsung’s flagship Galaxy range of handsets. The company overtook Finland’s Nokia last year to become the world’s biggest mobile phone manufacturer. Criticised for falling behind its more creative rivals in recent years, Nokia’s Lumia smartphone helped it to exceed expectations for revenues in the fourth quarter of 2012, which reached €3.9bn (£3.2bn) - although this was down on the same period in 2011.

By contrast, new mobile models from HTC failed to hit the mark with consumers. The Taiwanese company predicts that its fourth-quarter 2012 net profits will plummet to around T$1bn (£21m), from T$11bn in the same quarter of 2011.

With the continuing popularity of the iPhone 5, and with Samsung widely expected to unveil its Galaxy S4 handset in April, HTC will have its work cut out to gain ground on its principal rivals.

Meanwhile LG, another South Korean handset maker, is seeking to increase market share across its range of consumer electronics products by making major investments this year. The group says it will plough a total of 20 trillion won (£12bn) into its subsidiaries, aimed at boosting production facilities and R&D. The R&D investment will focus on developing smartphone software and next-generation display panels.

When it comes to panel technology, LG beat its rivals to become the first company in the world to put OLED televisions on the market. For now it seems that rivals, who have trailed in LG’s wake on OLED TV sales, are content to be pushing ever-bigger, even-higher definition screens.

Sony, which has vowed to make a comeback in the fiercely competitive TV-set sector after losing market share, can boast some recent success on the smartphone front. Having ended its handset joint venture business with Ericsson over a year ago, Sony has now bounced back with the Xperia Z, which can be used in the shower. But it remains to be seen whether the water-resistant device will help to turn around several consecutive quarters of losses at the Japanese giant.

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Europe’s woes hit carmakers

The news that Honda is planning to cut 800 UK jobs shows just how tough the European vehicle market has become. Honda’s Swindon plant can produce around 250,000 units a year, but turned out 166,000 in 2012. Ironically, latest figures show that new car registrations in Britain rose by 5.3 per cent last year – but the Swindon plant sends around 60 per cent of its output overseas.

Separately, PSA Peugeot Citroen has revealed that its sales in Europe last year were the worst for around two decades, falling by 8.6 per cent, while worldwide sales were down 16.5 per cent. The French company is hoping to receive €18.5bn of state finance.

BMW, meanwhile, has managed to buck the trend on the Continent, with a 1 per cent rise in European sales in 2012. Worldwide sales went up 11 per cent to hit a new record, with leaps of 40 per cent in China and 33 per cent in Russia indicating that these countries will be key markets for premium car brands.

Europe’s biggest-selling car maker, the VW group, is seeking to strengthen its position in commercial vehicles by offering to buy most of the remaining shares in truck maker MAN that it does not already own. According to some analysts, the move, if successful, would help VW to reap more benefit from its MAN and Scania brands, enabling it to present a strong challenge to Daimler and Volvo in the commercial vehicle market.  

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