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Tier 2 Mobile Handset Vendors Must Compete on Two Fronts, Says ABI Research
Posted: 30-Apr-2009 [Source: ABI Research]

[Tier 2 mobile handset vendors face significant challenges.]

New York -- Tier 2 mobile handset vendors shipped 80.5 million units last year, a small fraction of the global total. But they face significant challenges when seeking greater market share. They are competing against the Tier 1 giants of the industry, which together control about 70% of the global market. They are also trying to differentiate themselves and create recognizable brands. According to a new study from ABI Research, the most obvious strategies open to them may not be the best.

Industry analyst Michael Morgan says, “Most Tier 2 handset vendors are Chinese, Korean, and Japanese. Many have tried to expand beyond their home regions through international partnerships (often leveraging existing infrastructure deals), but with mixed results. Some have succeeded, but often a variety of factors, intensified by global recession, is forcing vendors to retreat to their home bases.”

Such refocusing is necessary for them at this time, says Morgan. “They’re in the bunker now, but within the next two years they’ll have to come out, because in every region except Japan, the big players – the Nokias, Motorolas, and Samsungs – will be coming in with a vengeance.”

To achieve the volumes they need, the Tier 2s will have to get out and into emerging markets suited to the kinds of phones they make. Those making low-cost phones might consider Latin America. For high-tech, there may be space in the Japanese market – Pantech has had some success there. The good news is that in the high-margin smartphone segment, the arrival of the open source Android OS has lowered the entry threshold, and technically proficient vendors may be able to put their own stamp on the smartphone concept.

The ultra-low-cost handset (ULCH) market may not be as logical an opportunity for these smaller players as one might think. With their huge volumes, the Tier 1s are able to sell ULCHs on paper-thin margins and still profit. Most Tier 2s can’t do that.

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