HTC’s extended period as the only major with a commercial Android handset is finally coming to an end, with Samsung unveiling its first phone for the Google platform, the I7500, initially in an exclusive with O2 Germany. It is also in talks with Vodafone New Zealand, which expects to offer the new device in the third quarter, and hopes to have a US carrier signed soon, plus an Asian launch in the third or fourth quarters.
The touchscreen I7500 joins an increasingly crowded line-up of high profile launches for June, with new iPhones, the Palm Pre, the Nokia N97 and new HTC models also expected to ship. There is no pricing for the Samsung device yet, but some details have been released. These show the product being fairly average as Samsung smartphones go, in terms of feature set, with the operating system its main claim to grab headlines. This suggests Samsung may position Android for affordable smartphones and midrange webphones, probably the OS’s natural home in the phone world, at least in its current immature state. Specs include HSPA support, 5-megapixel camera, 8Gb of internal memory, Wi-Fi, 3.2-inch OLED touchscreen and one-click access to Google apps like Mail, Maps and Android Market. This last will reinforce nervousness about the extent to which the supposedly open OS is being tightly integrated with Google’s own services.
It appears that the O2 exclusive is just for Germany to start with, but it is not clear whether it might extend to other European territories – the UK, Ireland, Czech Republic and Slovakia ‘ or even parent Telefonica’s Spanish homeland. In the UK and Ireland, O2 always has the problem of positioning new smartphones so they do not cannibalize its all-important iPhone exclusive, while the Telefonica group is said to be negotiating for an exclusive for the Palm Pre launch.
In Germany, though, where O2 is dwarfed by T-Mobile and Vodafone, it needs eye-catching handset launches to fend off the incumbent’s iPhone and other rivals like the Vodafone HTC Magic. Vodafone recently announced pricing for the Magic, and O2 will need to match or better this with the similarly profiled I7500 ‘ in Germany, for instance, the Magic will be offered for €60 with a basic €25-per-month data tariff, or just €1 with a high end €120-per-month package, all deals for two years. As its New Zealand arm’s pounce for the I7500 shows, Vodafone is getting increasingly serious about Android.
Vodafone and now Samsung are turning Android into a more international phenomenon than it has been to date. In many ways it is as US-centric as Symbian is European, and needs to broaden its spheres of influence. However, Samsung will still be particularly keen to see the I7500, and two other Android models it plans this year, succeed in the US, where it wants to solidify the market lead it snatched from Motorola last year. It is expected to announce a CDMA Android smartphone, probably similarly spec’d to the I7500, soon, with a Sprint Nextel launch rumored.
Samsung stepped up its Android development activities at the start of this year to steal a march on other majors planning handsets for the Google platform, such as Sony Ericsson and Motorola. ‘We are accelerating the development process for Google phone in order to meet the specific needs of local carriers,’ a Samsung spokesperson said in January.
Meanwhile, the original Android device, the T-Mobile G1 (aka HTC Dream) is now available in nearly all the operator’s territories ‘ the Netherlands, Czech Republic, Austria, Germany and Poland have joined the US and UK, though T-Mobile faces some positioning dilemmas in its native Germany, where it is also the exclusive carrier for the Apple iPhone.
Samsung has streamlined some handset activities over the past six months to respond to the downturn in consumer spending, and has slashed prices on basic models in order to come out of the recession with increased market share. But it has also stepped up investment in development of high end models, the most buoyant segment. In January it looked to reduce its cost base in order to make lower device prices viable, and consolidated four business units – semiconductors, liquid crystal displays, mobile phones and televisions ‘ into just two major divisions. One of these, Digital Media and Communications, headed by Choi Gee-sung, unites televisions and cellphones to reduce overheads and leverage channels and supply chains more effectively.
These various strategies are bearing some fruit, and in its first quarter Samsung saw mobile phones offsetting the effects of recession on some of its other businesses. While it said it was too early to call a recovery in demand or prices across the consumer electronics market as a whole, it did say it expected to outperform in mobiles.
The company reported a 72% year-on-year drop in first quarter net profit to KRW619bn ($458.1m), though this resoundingly beat analyst forecasts of JRW149bn, mainly because of a rebound in cellphone margins. Operating profit was KRW148bn, well below last year’s KRW2.15 trillion, but surpassing forecasts of a loss of KRW152bn. Sales also beat expectations at KRW18.6 trillion. Telecoms margins were up from 2% in Q408 to 12% with cellphones the main factor.
Samsung remains vulnerable to the weakness and slow recovery of two of its other key businesses, memory chips and LCD screens, but it is more confident about phones and the rest of its semiconductor operations. Like LG, it has shifted its focus more heavily towards high end, higher margin handsets as smartphones have been the most buoyant sub-sector, although it has also cast its net widely in emerging markets and new form factors, in order to steal share from rivals.