Siemens is looking for a joint venture partner in mobile handsets.
German technology group Siemens has confirmed that it is in talks over forming a joint venture in mobile handset production. Board member, Volker Jung, said in a newspaper interview, Only Nokia is capable of achieving [profitability] without a partner in the long run.
Mr Jung has a point. While Nokia has increased its market share compared to 2000 and remained profitable, its biggest rivals have lost market share and made losses. In Q3 2001, Nokia had 33.4% of the market, while its biggest rival Motorola had 15.7%. Siemens was fifth with just 7.2%, behind Ericsson’s 8% and Samsung’s 7.5%. Sony and Ericsson have already merged their handset production.
A tie-up has been rumored between Siemens and Motorola. This would make some sense, creating a handset company that was strong in the US and Europe, and combined Siemens’ production capabilities with Motorola’s strength in components. However, Mr Jung says the partner is more likely to be Asian than American. According to insiders, Matsushita, NEC and Toshiba (which the company already has an agreement with) are candidates.
An Asian partner may be the best move. The launch of 3G services in Europe will provide Nokia’s rivals with their best chance of success, because 3G handsets are so different from current devices. The combination of a Japanese firm that already manufactures 3G handsets, such as NEC or Matsushita, and a European firm with established relationships with networks and distributors, could prove a strong one – exactly the rationale behind SonyEricsson.
Nonetheless, any venture will not face an easy ride. Nokia has managed to stay on top by making handsets that capture consumers’ interest. Judging by the media frenzy over its phone launches this week, the company has not lost its touch. The key for Nokia now is to make sure its 3G offering is on time and keeps to its usual standards. The key for Nokia’s rivals, including Siemens and its partner, is to watch it like a hawk for signs of weakness.
