Samsung Electronics unveiled four new smartphone models under its flagship Galaxy line Wednesday, expanding its offerings of cheaper phones to tap growth in emerging markets.
Samsung will enter a lower-end market ripe with cutthroat competition from Chinese producers including ZTE Corp and Huawei Technologies, as well as a host of no-brand producers pumping out hundreds of millions of phones for consumers in China, Africa and other developing economies.
The move also signals an intensifying battle with Apple, Samsung's biggest competitor and customer, as the U.S. firm is set to launch a lower-cost version of the iPhone 4 and its much-anticipated iPhone 5 soon, according to sources.
Smartphone makers are increasingly moving down the value chain to target the low-end segment and attract mass customers, especially those in China and India, said Lee Seung-woo, an analyst at Shinyoung Securities.
It's an inevitable trend but will at the same time lower margins. Only a handful of top-tier manufacturers can survive in that end.
Samsung forecast Wednesday that cheap models costing below $200 would account for more than half the overall smartphone market by 2015 in volume terms, up sharply from last year's 16 percent.
Samsung seeks to expand market share in the emerging market with models costing around $200, as those markets have lower smartphone penetration rates compared with advanced markets, a spokeswoman quoted an executive from Samsung Electronics' mobile division as telling a meeting of the group's executives Wednesday.
APPLE-SAMSUNG BATTLE HEATS UP
Apple and Samsung are locked in a bruising patent fight in the United States, Europe and Asia, as they jostle for top title in the smartphone market after ending Nokia's 10-year reign in the second quarter.
Apple has long stuck to the higher end of a booming mobile device arena, but is now seeking new markets to sustain the rip-roaring pace of growth that has enthralled Wall Street.
The introduction of cheaper models comes just a day before Samsung goes to a German court to try to overturn a ban on its selling Galaxy tablets in the country.
Samsung is also awaiting a crucial ruling by a Dutch court on Apple's requests to ban a much wider Galaxy line of products in the Netherlands and European Union.
Samsung, which is rolling out its latest Galaxy Tab 10.1 tablet globally, hopes to raise tablet sales more than five-fold this year and sell 60 million smartphones.
The Korean firm is the nearest rival to Apple in smartphones and its shipments in the second quarter were just 1 million units short of Apple's 20.3 million unit sales, according to market data.
Shares in Samsung fell 2.1 percent, versus a 1.2 percent drop in the wider market.
CHEAP MODELS VS. CHINESE COPYCATS
Samsung expanded its Galaxy smartphone range to five categories spanning the high, mass and low-end segments.
Its new mid-to-high end Galaxy W will have a 3.7-inch screen and a 5-megapixel camera, while the mid-tier Galaxy M Pro and lower-end Galaxy Y Pro will be Samsung's first Galaxy models with qwerty keyboards.
The fourth Galaxy Y model, aimed at emerging market consumers, is an entry-level product with a 2-megapixel camera and processor speeds of 832 megahertz (MHz).
Samsung launched its first Galaxy product in June 2010 and its followup Galaxy S II, launched in April this year, has sold more than 5 million units.
The new Galaxy lineup, all running on Google's Android platform version 2.3, will be unveiled to the public at an annual electronics fair in Germany in early September.
The global smartphone market is expected to account for around 64 percent of the total handset market this year in dollar terms, up from 54 percent a year ago, according to industry data.
Much of that growth is expected to come from lower cost emerging markets, where margins are slimmer and competition is tough.
Small underground factories that churn out China's grey market cellphones, mostly in Shenzhen, are giving global brands a run for their money.
As many as 900 million phones a year are produced in Shenzhen, including big brands such as Huawei and ZTE but also lesser-known names like G'five and Daxian, according to industry estimates. Put end to end, those China-made phones could circle the earth at least twice.
Some 200-300 million of these grey-market handsets are cellphones that are not recognized or licensed by Chinese regulators.
While feature phones make up much of their output, these cellphone makers are increasingly also producing copycat versions of Apple and Samsung smartphones.
Indian ringtones, African languages -- we can ask the factory to load up whatever you need, said Xu Shan, who runs a small store in Shenzhen that sells mobile phones from smaller local brands such as Daxian and Jugate.
(Additional reporting by Lee Chyen Yee in HONG KONG; Editing by Jonathan Hopfner and Lincoln Feast)