The Gap Between Handset Makers Widens

The gap between the top tier and bottom tier of handset makers continues to widen. Taiwan-based HTC posted is worst quarter in two years. But Samung’s smartphone sales pushed its fourth-quarter profits higher. There is little reason to believe that Samsung will not continue to gain market share.

The fourth-quarter net income of HTC dropped 26% to $364 million. The firm has begun to look like Motorola did in 2006. The U.S. company sold 130 million units of its revolutionary RAZR phone. Sales disappeared when consumers turned to other products. Motorola lost its lead in what many view as the earliest period of smartphones. It could not follow the RAZR with another phone that had as much a broad appeal worldwide. HTC products currently lose out to new products from Samsung and Apple (NASDAQ: AAPL). The Taiwan-based firm will have to introduce hot-selling new smartphones to turn itself around. As Research In Motion (NASDAQ: RIMM) found recently, and Motorola at mid-decade, the process is easier said than done.

Samsung sits at the other end of the spectrum. It is the only smartphone company that has mounted a charge against Apple. Its profits reached a record $4.5 billion last quarter. Much of the improvement was attributed to smartphone sales. Samsung has ridden the success of its Galaxy model. It also markets a popular tablet that competes with the iPad.

Samsung has developed a product line that allowed it to pass Apple in smartphone sales in the third quarter. With its Android-based devices, which are built with features similar to the iPhone’s, Samsung has pressed an improvement in sales that it believes will allow it to take the world’s number one handset position from troubled Nokia (NYSE: NOK).

What makes one smartphone more popular than another is to some extent intangible. Most Android-based handsets have similar features. Samsung has included those features in a powerful product line. Those products are backed by one of the largest consumer electronics firms in the world. Samsung has taken the lead in smartphone sales and it will be difficult for competitors to overcome it.

Douglas A. McIntyre