8/8/2019 Motorola Fading in China

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the gap globally with archrival Nokia.

Motorolas position in China was

stronger than what it [was] globally,

says Aloysius Choong, research man-

ager in Singapore or market research

rm IDC. It was making a lot o the

right moves. Motorolas sales in China

totaled $2.6 billion in 2007, or 7% o its

global revenues. That was down rom

$4.6 billion or nearly 11% in 2006.

What went wrong? To some extent,

Motorola in China aces the sameproblem that plagues the

company elsewhere: It

ailed to produce an encore

to the popular Razr phone,

launched in 2004. In China,

coming out with new mod-

els is important because

big-city consumers replace

their phones requently and

put a priority on models

that are cool-looking but

reasonably priced. They

havent come up with the

next-generation product

that replaces [the Razr],

says Mark McKechnie,

telecom equipment analyst

with American Technology Research.

The guys that replaced it were Nokia,

Samsung, and even LG. Indeed, when

rivals came out with similar models,

Motorolas new entries were pricey

multimedia phones that didnt con-

nect with consumers. While the U.S.

company developed a smartphone

or China, the Ming, the expensive

touch-screen device did little to boost

Motorolas overall market position.

Chinese consumers have soured on

the Motorola brand. Chen Xin, a 37-

year-old Beijing resident who works

or a local ino-tech company, once

bought ve Motorola phones over a

our-year span. But now he preers

Nokia and Sony Ericsson models,

calling Motorola phones ugly and not

very easy to operate.

By Bruce Ehor

BEijing

For years, Motorola has

proudly displayed its corpo-

rate logo atop its China headquarters

in central Beijing. But Motorola rival

Samsung Electronics was an ocial

sponsor o the Olympics, and Chi-

nese ocials decreed that no other

company could advertise cell phones

during the Games. So, while Sam-

sung plastered its ads all over town,

Motorola couldnt even keep its sign

on the building.

The advertising blackout

was just the latest setback or

Motorola in what has been a

bruising two years in China,

which was long a successul

market or the company. For

years, Motorola was No. 1 or

No. 2 in the China mobile-

phone market. But

its share has plum-

meted rom more

than 21% in 2006

to an estimated

7.9% this year, according to Gartner.

In contrast, Nokias share has topped

38% o the market, while Samsung is

likely to grab 8.3% this year to move up

to No. 2, Gartner estimates (chart).

Motorola cant aford to continue its

nosedive. With 583 million cell-phone

users, China is the worlds largest mo-

bile market. Last year, Chinese bought

176 million handsets and are likely to

purchase 192 million in 2008, Gart-

ner says. That compares with sales

o 186 million phones this year in the

U.S. and Canada. The drop in China

is particularly painul or Motorola,

because beore the slide the ast-

growing market had helped it narrow chartbyrayvella/bw

marketing

moool:

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8/8/2019 Motorola Fading in China

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eciency is one reason its handset op-

erating margins run about 20%, while

Motorola barely breaks even, says

American Technologys McKechnie.

The news rom China isnt all bleak

or Motorola, however. The Schaum-

burg (Ill.) company has won important

inrastructure contracts with Chinese

carriers recently. In early August,

Motorola announced it had landed

$431 million in contracts to provide

China Mobile, the market leader, with

second-generation GSM equipment.

Thats up rom $394 million or the

same period in 2007. Motorola is also

working with the other two cellular

operators, China Unicom and China

057

SEPTE MB ER 8, 2008 I BUSinESSWEEK

Urba Chese

put a prorty o

cool-look,

reasoably

prced phoes

It hasnt helped that Motorolas

competitors have been so good at tack-

ling the China market. As an Olympics

sponsor, Samsung associated itsel

with the eel-good experience that

millions o Chinese enjoyed rom the

Games. The Korean company sells

inexpensive models such as the Anycall

CC03, a hit with rst-time mobile

users, as well as premium models. We

try to make sure Chinese early adopters

are among the rst to have our top-

o-the-line phones, says Roh Ki Hak,

senior vice-president.

For its part, Nokia remains com-

ortably ahead o the pack, thanks to

its wide range o models. Nokia has

really covered every segment, says

Dave Carini, an analyst in Beijing with

Maverick China Research. Nokia also

has been a leader in streamlining its

Chinese distribution system, cutting

out middlemen and working directly

with retailers. The Finnish companys

Telecom, says Simon Leung, president

o Motorola Asia-Pacic. We are the

only ones with the technology to ad-

dress the needs o all three o them, he

says. As or its handset problems, we

took our eyes of the ball a little bit,

Leung admits. But Motorola will be

launching new phones soon, he prom-

ises. One model: an updated version o

the Ming smartphone, which eatures

stand-alone GPS mapping and smart

handwriting technology.

Will that be enough to turn around

Motorolas ortunes in China? I would

not write them of, says Sandy Shen,

research director or mobile devices

with Gartner in Shanghai. But given

the depth o the problems, she adds, I

wouldnt hold my breath. ~

With Roger O. Crockett in Chicago