Manufacturer updates

Many of our members - especially the ones active in the Indian, Middle East, and African markets are beginning to distribute low cost Chinese Manufactured handsets. We think that there is a good business case here as on the one hand the end user is getting a lot more features for his money, and on the other hand, the sales margin is somewhat higher than handsets from the tier 1 manufacturers. Obviously, great care needs to be taken in selecting the supplier, in order to ensure that the quality, reliability as well as all the certifications correspond to expectations. This is another story.. but more on that at a later time.

For the time being, last Friday's announcement from Nokia, confirms that it is finally starting to feel the heat from this end of the market-place. Just in case you have not heard, Nokia said it expects to lose market share this quarter due to a "tactical decision to not meet certain aggressive pricing of some competitors." It is obvious that the "some competitors" Nokia was referring to included Samsung and LG but primarily the Chinese low cost manufacturers such as Huawei, ZTE, and Lenovo.

Apart from the fact that - if you are holding onto some Nokia shares you would have lost more than 10% on Friday, what does it all mean for Nokia. Is this the beginning of the end of world dominance for the Finnish manufacturer? We have often seen a scenario where in a particular market or product category, low cost manufacturers chip away at the low end segment of the market place, forcing out other players, who can no longer turn a profit there and are then forced into higher end, value added type products. It is only a matter of time before these manufacturers acquire the technology and know how that enable them to seriously compete in all segments of the market place. We have seen this in the car industry, consumer electronics, computing, etc. The next few years promises to be a challenge for Nokia, who has already been exploring other sources of revenue; e.g. services, music etc. However, this competes head to head with their main customers the network operators, and it is a delicate balancing act to do. Still, never under-estimate the Finnish giant, founded in 1865, as a paper mill, it has navigated many storms before.

As for the low end Nokia handsets; in the coming weeks, we will be watching the Nokia pricing very closely, it may be that the low end stock becomes somewhat more scarce and stabilizes or increases in price.

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