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Nokia (s nok) has long held the top spot for handset sales, but Samsung is charging from behind. The company expects to sell 300 million mobile phones in 2011, reports Mobile Business Briefing, up from 280 million last year. While it’s unlikely Samsung will catch Nokia in the overall handset sales just yet — Nokia sold 461 million phones in 2010 — Samsung is showing strength in the more profitable smartphone market, and along with Apple, is expected to outsell Nokia’s smartphones this quarter. Of the 300 million expected sales this year, Samsung figures 60 million of them will be smartphones running Google Android (s goog), Microsoft Windows Phone 7 (s msft) or Samsung’s own Bada mobile platform.
If Samsung does hit the 60 million mark for smartphone sales, it would represent a big boost over the 25 million sold by the company last year and a growing challenge to manage parts and production. As smartphone demand rises, it becomes increasingly important for hardware makers to manage component supplies as well as the handset manufacturing lines. During an interview with Yonhap News Agency, Samsung President of Mobile Communications and Digital Imaging Shin Jong-kyun pointed out the expected milestone and the challenges it takes to source parts and build phones at such a high rate.
“For the first time, Samsung’s cell phone sales will top 300 million this year. It is a very meaningful and important event. To meet the goal, Samsung should manufacture and sell 1 million phones on a daily average and secure components for 1 million handsets every day, which isn’t an easy task.”
Samsung’s Smart Strategy
Samsung is one of several handset makers that embraced Google Android early: a key reason for the company’s current success in the smartphone market. Unlike others who also took to Android early on, however, Samsung didn’t flood the market with numerous Android handsets that are slight variations on a theme. Instead, the company exercised the smart strategy of designing one flagship device, the Galaxy S, and allowed for small carrier customizations. This approach can help reduce component and production challenges by using the same components for the Galaxy S line.
This same strategy, which I predicted would continue late last year, is already in progress for Samsung’s Galaxy S II, which improves over the prior version with a better display and dual-core processor. The new handset, still rolling out across the world in many countries, has already boosted Samsung’s smartphone sales in the second quarter. Analysts estimate Samsung moved 20 million smartphones in the second quarter of this year, largely due to the new handset. If accurate, that figure represents a doubling over Samsung’s smartphone sales from the first quarter of 2011.
Samsung vs Apple
Of course, any talk of the smartphone market of today and tomorrow would be lacking if Apple weren’t part of the conversation. The company bypassed feature phones entirely, a market that helped build both Nokia and Samsung into handset powerhouses. Instead, Apple is focused squarely on the high-profit margins found in smartphones but supplements that with an application and media ecosystem to drive additional revenues and ultimately result in higher handset sales. Last year, Apple sold an estimated 46.5 million iPhones, per Gartner (s it), and thanks to pent-up demand for a Verizon (s vz) iPhone, sold 18.65 million handsets in the first quarter of this year. Add in the strong likelihood of a new iPhone launch within the next two months, updates and improvements to iOS 5, and the new iCloud service, and it’s possible Apple still sells more smartphones than Samsung this year.
Based on last year’s success for Samsung, Om predicted this battle between Apple and Samsung at the end of 2010, saying:
“Samsung has already shown strong sales for its Galaxy S series of Android-based smartphones (over 9.3 million), tablets (one million) and more recently, it announced a new Android-based music player. It also owns the entire component food chain –processors, memory, flash storage and screens — which gives it a key advantage, as most mobile phone makers are grappling with component capacity constraints. In 2011, the battle will really come down between Samsung and Apple.”
Neither of us predicted the current legal issues between the two, however, which has the potential to disrupt Samsung’s momentum. Although the two companies were quietly discussing similarities between their handsets for more than a year, Apple took the discussion to court in April. Samsung has since counter-sued, and if the court case proceeds as planned, it’s unlikely to see a resolution this year. Regardless of who wins in the court, the damage could already be done to Samsung from a component standpoint. The company fabricates the Apple CPU that currently powers iOS devices, but if Apple can find a new fabrication partner, it could decide it no longer needs a “frenemy” in Samsung.