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MarketLine Industry Profile

Mobile Phones in the United States

March 2020

Reference Code: 0072-0152

Publication Date: March 2020

WWW.MARKETLINE.COM MARKETLINE. THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED

Mobile Phones in the United States

Industry Profiles

1. Executive Summary

1.1. Market value

The United States mobile phones market grew by 1.9% in 2019 to reach a value of $192 billion.

1.2. Market value forecast

In 2024, the United States mobile phones market is forecast to have a value of $224.1 billion, an increase of 16.7% since 2019.

1.3. Market volume

The United States mobile phones market shrank by 0.8% in 2019 to reach a volume of 1,325.9 Average MOU.

1.4. Market volume forecast

In 2024, the United States mobile phones market is forecast to have a volume of 1,167.8 Average MOU, a decrease of 11.9% since 2019.

1.5. Category segmentation

Postpaid is the largest segment of the mobile phones market in the United States, accounting for 59.2% of the market's total volume.

1.6. Geography segmentation

The United States accounts for 24.3% of the global mobile phones market value.

1.7. Market rivalry

The US mobile phones market is dominated by a small number of large-sized companies, such as Apple, Samsung, LG Electronics and Lenovo. Rivalry is increased due to the limited number of competitors and the high penetration of mobile phone devices, which intensifies R&D expenses and price competition.

1.8. Competitive Landscape

Mobile Phones in the United States

Industry Profiles

The US mobile phones market has declined marginally in the historic period, intensifying rivalry somewhat. However, moderate growth is expected in the forecast period which should help to alleviate this. The leading players in the US market include Apple, Samsung, LG Electronics and Lenovo Group. These are global technology firms with significant annual revenue which facilitates significant investment in technological innovation for this market. Foldable smartphones and 5G capability are the latest features to affect the market.

Mobile Phones in the United States

Industry Profiles

TABLE OF CONTENTS

1. Executive Summary2

1.1. Market value ................................................................................................................................ 2

1.2. Market value forecast .................................................................................................................. 2

1.3. Market volume ............................................................................................................................. 2

1.4. Market volume forecast ............................................................................................................... 2

1.5. Category segmentation ............................................................................................................... 2

1.6. Geography segmentation ............................................................................................................ 2

1.7. Market rivalry ............................................................................................................................... 2

1.8. Competitive Landscape ............................................................................................................... 2

2. Market Overview8

2.1. Market definition .......................................................................................................................... 8

2.2. Market analysis ............................................................................................................................ 8

3. Market Data10

3.1. Market value .............................................................................................................................. 10

3.2. Market volume ........................................................................................................................... 11

4. Market Segmentation12

4.1. Category segmentation ............................................................................................................. 12

4.2. Geography segmentation .......................................................................................................... 13

5. Market Outlook14

5.1. Market value forecast ................................................................................................................ 14

5.2. Market volume forecast ............................................................................................................. 15

6. Five Forces Analysis16

6.1. Summary ................................................................................................................................... 16

6.2. Buyer power ............................................................................................................................... 17

6.3. Supplier power ........................................................................................................................... 18

6.4. New entrants .............................................................................................................................. 20

Mobile Phones in the United States

Industry Profiles

6.5. Threat of substitutes .................................................................................................................. 22

6.6. Degree of rivalry ........................................................................................................................ 23

7. Competitive Landscape25

7.1. Who are the leading players? .................................................................................................... 25

7.2. How is technological innovation shaping the strategy of leading players? ............................... 25

7.3. What are the strengths of the leading players? ......................................................................... 26

7.4. What threats do the leading players face? ................................................................................ 26

8. Company Profiles27

8.1. Apple Inc .................................................................................................................................... 27

8.2. Samsung Electronics Co Ltd. .................................................................................................... 31

8.3. Lenovo Group Limited ............................................................................................................... 35

8.4. LG Electronics, Inc. ................................................................................................................... 40

9. Macroeconomic Indicators44

9.1. Country data .............................................................................................................................. 44

Appendix 46

Methodology ............................................................................................................................................. 46

9.2. Industry associations ................................................................................................................. 47

9.3. Related MarketLine research .................................................................................................... 47

About MarketLine ..................................................................................................................................... 48

Mobile Phones in the United States

Industry Profiles

LIST OF TABLES

Table 1: United States mobile phones market value: $ billion, 2015–19 10

Table 2: United States mobile phones market volume: Average MOU, 2015–19 11

Table 3: United States mobile phones market category segmentation: Average MOU, 2019 12

Table 4: United States mobile phones market geography segmentation: $ billion, 2019 13

Table 5: United States mobile phones market value forecast: $ billion, 2019–24 14

Table 6: United States mobile phones market volume forecast: Average MOU, 2019–24 15

Table 7: Apple Inc: key facts 27

Table 8: Apple Inc: Annual Financial Ratios 28

Table 9: Apple Inc: Key Employees 29

Table 10: Apple Inc: Key Employees Continued 30

Table 11: Samsung Electronics Co Ltd.: key facts 31

Table 12: Samsung Electronics Co Ltd.: Annual Financial Ratios 33

Table 13: Samsung Electronics Co Ltd.: Key Employees 34

Table 14: Lenovo Group Limited: key facts 35

Table 15: Lenovo Group Limited: Annual Financial Ratios 37

Table 16: Lenovo Group Limited: Key Employees 38

Table 17: Lenovo Group Limited: Key Employees Continued 39

Table 18: LG Electronics, Inc.: key facts 40

Table 19: LG Electronics, Inc.: Annual Financial Ratios 42

Table 20: LG Electronics, Inc.: Key Employees 43

Table 21: United States size of population (million), 2015–19 44

Table 22: United States gdp (constant 2005 prices, $ billion), 2015–19 44

Table 23: United States gdp (current prices, $ billion), 2015–19 44

Table 24: United States inflation, 2015–19 44

Table 25: United States consumer price index (absolute), 2015–19 45

Table 26: United States exchange rate, 2015–19 45

Mobile Phones in the United States

Industry Profiles

LIST OF FIGURES

Figure 1: United States mobile phones market value: $ billion, 2015–19 10

Figure 2: United States mobile phones market volume: Average MOU, 2015–19 11

Figure 3: United States mobile phones market category segmentation: % share, by volume, 2019 12

Figure 4: United States mobile phones market geography segmentation: % share, by value, 2019 13

Figure 5: United States mobile phones market value forecast: $ billion, 2019–24 14

Figure 6: United States mobile phones market volume forecast: Average MOU, 2019–24 15

Figure 7: Forces driving competition in the mobile phones market in the United States, 2019 16

Figure 8: Drivers of buyer power in the mobile phones market in the United States, 2019 17

Figure 9: Drivers of supplier power in the mobile phones market in the United States, 2019 18

Figure 10: Factors influencing the likelihood of new entrants in the mobile phones market in the United

States, 2019 20

Figure 11: Factors influencing the threat of substitutes in the mobile phones market in the United States,

2019 22

Figure 12: Drivers of degree of rivalry in the mobile phones market in the United States, 2019 23

Mobile Phones in the United States

Industry Profiles

2. Market Overview

2.1. Market definition

The Mobile Phones market includes mobile phone service revenues and average minutes of use (MOU). Market values are made up of total mobile revenues containing revenues from mobile service providers and other members of the mobile service value-chain for the provision of mobile telephony services, excluding revenues from the sale of devices. Market volumes are made up of two segments: prepaid and postpaid, which consist of prepaid average monthly MOU and postpaid average monthly MOU. Minutes of use are made up from the average of voice minutes used in mobile subscriptions, including both incoming and outgoing calls, but not including M2M/IoT voice services.

All currency conversions are carried out at constant average annual 2019 exchange rates.

For the purposes of this report, the global market consists of North America, South America, Europe, Asia-Pacific, Middle East, South Africa and Nigeria.

North America consists of Canada, Mexico, and the United States.

South America comprises Argentina, Brazil, Chile, Colombia, and Peru.

Europe comprises Austria, Belgium, the Czech Republic, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Norway, Poland, Portugal, Russia, Spain, Sweden, Switzerland, Turkey, and the United Kingdom.

Scandinavia comprises Denmark, Finland, Norway, and Sweden.

Asia-Pacific comprises Australia, China, Hong Kong, India, Indonesia, Kazakhstan, Japan, Malaysia, New Zealand, Pakistan, Philippines, Singapore, South Korea, Taiwan, Thailand, and Vietnam.

Middle East comprises Egypt, Israel, Saudi Arabia, and United Arab Emirates.

2.2. Market analysis

The US mobile phones market has declined marginally in the historic period. In 2019 the market showed signs of recovery growing at 1.9%. This is expected to continue into the forecast period with moderate growth expected.

The US mobile phones market had total revenues of $192.0bn in 2019, representing a compound annual rate of change (CARC) of -0.6% between 2015 and 2019. In comparison, the European market declined with a CARC of -0.8%, and the Asia-Pacific market increased with a compound annual growth rate (CAGR) of 2.1%, over the same period, to reach respective values of $162.7bn and $337.0bn in 2019.

The mobile phones market has saturated due to the high penetration of smartphones in the country, 77% as of 2018. With mobile phones, consumers tend to keep hold of them for extended periods of times as they often are expensive and if on a contract, consumers are obliged to pay for the phone over an extended period of time, commonly around one or two years. As a result, demand tends to stem from upgrades which are infrequent. New releases and technological innovation can spur demand.

Market consumption volume increased with a CAGR of 0.7% between 2015 and 2019, to reach a total of 1,325.9 average MOU in 2019. The market's volume is expected to fall to 1,167.8 average MOU by the end of 2024, representing a CARC of -2.5% for the 2019-2024 period.

Growth in market consumption but a decrease in value for the historic period suggests that consumers have been purchasing cheaper phones. This suggests that during this period value for money and reliability were seen as more important than the latest features. The increase in online retailers selling similar mobile phones at cheaper prices reduced the number of consumers purchasing mobile phones from high street stores to a great extent. Brands such as Huawei have become successful providing budget smartphones, but the firm has been banned from the US over perceived links with the Chinese government.

Mobile Phones in the United States

Industry Profiles

Postpaid had the highest volume in the US mobile phones market in 2019, with a total of 784.7 average MOU, equivalent to 59.2% of the market's overall volume. In comparison, Prepaid had a volume of 541.2 average MOU in 2019, equating to 40.8% of the market total.

Postpaid was the most successful segment for the mobile phone market due to it seeming to be the “cheaper” option according to consumers. Postpaid phones require consumers to sign a contract with a mobile network operator making them pay a monthly sum for their mobile phones, usually up to 12 or 24 months. The monthly sum varies according to the mobile network operator and is at least 500% cheaper than the total cost of the phone. Most consumers are willing to pay a smaller price for a longer period of time for a product, rather than a larger price for a shorter period of time, as prepaid requires a significant upfront fee which not everyone can afford. By paying monthly, users can afford high end phones without making a large one-off payment.

The performance of the market is forecast to accelerate, with an anticipated CAGR of 3.1% for the five-year period 2019 - 2024, which is expected to drive the market to a value of $224.1bn by the end of 2024. Comparatively, the European and Asia-Pacific markets will grow with CAGRs of 2.3% and 2.5% respectively, over the same period, to reach respective values of $181.9bn and $381.3bn in 2024.

At the time of writing it is extremely difficult to predict how the market will perform in the coming years due to the widespread outbreak of COVID-19. This novel coronavirus was declared a pandemic by the WHO in March 2020. While the true impact of COVID-19 is difficult to assess due to the nature in which the situation is rapidly changing, it will undoubtedly have a detrimental impact on this market’s performance. However, due to the majority of value coming from contract and monthly pay as you go cards the mobile phones market should not be as seriously affected as others.

Mobile Phones in the United States

Industry Profiles

3. Market Data

3.1. Market value

The United States mobile phones market grew by 1.9% in 2019 to reach a value of $192 billion.

The compound annual rate of change of the market in the period 2015–19 was -0.6%.

Table 1: United States mobile phones market value: $ billion, 2015–19

Year $ billion € billion % Growth

2015 197.0 220.6

2016 194.8 218.2 (1.1%)

2017 190.2 213.0 (2.4%)

2018 188.3 210.9 (1.0%)

2019 192.0 215.1 1.9%

CAGR: 2015–19 (0.6%)

SOURCE: MARKETLINE M A R K E T L I N E

Figure 1: United States mobile phones market value: $ billion, 2015–19

SOURCE: MARKETLINE

M A R K E T L I N E

Mobile Phones in the United States

Industry Profiles

3.2. Market volume

The United States mobile phones market shrank by 0.8% in 2019 to reach a volume of 1,325.9 Average MOU.

The compound annual growth rate of the market in the period 2015–19 was 0.7%.

Table 2: United States mobile phones market volume: Average MOU, 2015–19

Year Average MOU % Growth

2015 1,291.4

2016 1,305.4 1.1%

2017 1,319.4 1.1%

2018 1,336.4 1.3%

2019 1,325.9 (0.8%)

CAGR: 2015–19 0.7%

SOURCE: MARKETLINE M A R K E T L I N E

Figure 2: United States mobile phones market volume: Average MOU, 2015–19

SOURCE: MARKETLINE

M A R K E T L I N E

Mobile Phones in the United States

Industry Profiles

4. Market Segmentation

4.1. Category segmentation

Postpaid is the largest segment of the mobile phones market in the United States, accounting for 59.2% of the market's total volume.

The Prepaid segment accounts for the remaining 40.8% of the market.

Table 3: United States mobile phones market category segmentation: Average MOU, 2019

Category 2019 %

Postpaid 784.7 59.2%

Prepaid 541.2 40.8%

Total 1,325.9 100%

SOURCE: MARKETLINE M A R K E T L I N E

Figure 3: United States mobile phones market category segmentation: % share, by volume, 2019

SOURCE: MARKETLINE

M A R K E T L I N E

Mobile Phones in the United States

Industry Profiles

4.2. Geography segmentation

The United States accounts for 24.3% of the global mobile phones market value.

Asia-pacific accounts for a further 42.7% of the global market.

Table 4: United States mobile phones market geography segmentation: $ billion, 2019

Geography 2019 %

Asia-pacific 337.0 42.7

United States 192.0 24.3

Europe 162.7 20.6

Rest Of The World 98.3 12.4

Total 790 100%

SOURCE: MARKETLINE M A R K E T L I N E

Figure 4: United States mobile phones market geography segmentation: % share, by value, 2019

SOURCE: MARKETLINE

M A R K E T L I N E

Mobile Phones in the United States

Industry Profiles

5. Market Outlook

5.1. Market value forecast

In 2024, the United States mobile phones market is forecast to have a value of $224.1 billion, an increase of 16.7% since 2019.

The compound annual growth rate of the market in the period 2019–24 is predicted to be 3.1%.

Table 5: United States mobile phones market value forecast: $ billion, 2019–24

Year $ billion € billion % Growth

2019 192.0 215.1 1.9%

2020 196.7 220.3 2.4%

2021 202.4 226.7 2.9%

2022 209.0 234.1 3.3%

2023 216.5 242.5 3.6%

2024 224.1 251.0 3.5%

CAGR: 2019–24 3.1%

SOURCE: MARKETLINE M A R K E T L I N E

Figure 5: United States mobile phones market value forecast: $ billion, 2019–24

SOURCE: MARKETLINE

M A R K E T L I N E

Mobile Phones in the United States

Industry Profiles

5.2. Market volume forecast

In 2024, the United States mobile phones market is forecast to have a volume of 1,167.8 Average MOU, a decrease of 11.9% since 2019.

The compound annual rate of change of the market in the period 2019–24 is predicted to be -2.5%.

Table 6: United States mobile phones market volume forecast: Average MOU, 2019–24

Year Average MOU % Growth

2019 1,325.9 (0.8%)

2020 1,376.3 3.8%

2021 1,350.2 (1.9%)

2022 1,308.3 (3.1%)

2023 1,224.5 (6.4%)

2024 1,167.8 (4.6%)

CAGR: 2019–24 (2.5%)

SOURCE: MARKETLINE M A R K E T L I N E

Figure 6: United States mobile phones market volume forecast: Average MOU, 2019–24

SOURCE: MARKETLINE

M A R K E T L I N E

Mobile Phones in the United States

Industry Profiles

6. Five Forces Analysis

The mobile phones market will be analyzed taking mobile phone manufacturers as players. The key buyers will be taken as retailers and network operators, and technological manufacturers for mobile telephony as the key suppliers.

6.1. Summary

Figure 7: Forces driving competition in the mobile phones market in the United States, 2019

SOURCE: MARKETLINE

M A R K E T L I N E

Buyers tend to be large, and are therefore able to negotiate favorable contracts, although their bargaining power and profitability is limited regarding new, popular products due to price and stock competition with other buyers.

Suppliers provide technology, equipment and parts for mobile phone manufacturing. Such technology is often highly specialized, leaving suppliers reliant on this supply agreement, particularly as some parts can be unique to a certain manufacturer.

The rise of the smartphone allows new entrants to exploit a burgeoning position in the market, although in many developed economies such as the US, this market is becoming highly saturated.

Considering the increasingly high penetration of smartphones, newcomers may be put off by high capital outlay, the scale economies necessary to compete with incumbents who have excellent brand reputations, and strict regulations regarding health and safety and the environment.

Mobile Phones in the United States

Industry Profiles

6.2. Buyer power

Figure 8: Drivers of buyer power in the mobile phones market in the United States, 2019

SOURCE: MARKETLINE

M A R K E T L I N E

This market is made up of two categories of buyers. Firstly, there are big store retailers such as Wal-Mart, Costco and Best Buy, which purchase handsets to sell on to end-users. These players are large in size, which increases buyer power. However, the number of players in this market are few and end-users possess a large amount of awareness with regards to these players, meaning that retailers will attempt to accommodate the products of as many players as possible, reducing their power.

The second category of buyers are mobile network operators such as AT&T, Verizon, and Sprint Corporation in the US, many of whom now conduct their own retail operations. There are a small number of large mobile network operators, strengthening their position when bidding for contracts with market players, although the size of the market players themselves negates this advantage. However, their position is precarious due to rapid technological progress, which means that buyers are required to stock the latest innovative products in order to meet end-user demand. Moreover, buyers tend to compete on price in a saturated market such as the US, which may also squeeze the profits of players. Buyers, especially network operators, are also open to exclusive deals with manufacturers.

Switching costs in the market are relatively low, increasing buyer power. Buyers in the market, such us Amazon or AT&T, tend to have high bargaining power due to their big financial power, meaning that they are able to buy in bulk at relatively low prices. Retailers and network operators of this kind sign short-term contracts with market players due to the nature of the market. The mobile phones market changes according to the technological advantages that each market player might possess, rendering it a very fast paced market. Therefore, a buyer signing a long-term contract with a market player could lead to high losses, making short-term contracts more appealing as they present lower exit costs.

Furthermore, some market players, most notably Apple and Samsung, have forward integrated. As of 2019, Apple operates hundreds of stores across the globe, including 272 stores across the US alone. This reduces buyer power, as player forward integration is a real possibility in this market. Additionally, online retailing is also increasing the independence of players, with almost all players operating online stores where end-users can directly purchase their mobile phones; this also reduces buyer power.

Overall, buyer power is assessed as strong.

Mobile Phones in the United States

Industry Profiles

6.3. Supplier power

Figure 9: Drivers of supplier power in the mobile phones market in the United States, 2019

SOURCE: MARKETLINE

M A R K E T L I N E

Manufacturers are divided into two categories. Firstly, there are software manufacturers, such as Google, who produces Android. This category does not apply to Apple and Microsoft mobile phones, as they produce their own operating systems, although the dependence of other major players on software supply is crucial. Secondly, there are electronic manufacturers who produce most of the components on a contract basis. Some of the largest semiconductor companies in the mobile phone industry are Qualcomm, Foxconn, Jabil Circuit, Taiwanese Semiconductor Manufacturing Company (TSMC), and Skyworks Solutions. As market players are typically much larger companies than suppliers, they are better able to influence supply contracts. This also happens because mobile manufacturers tend to have more than one supplier for a range of components.

What is more, mobile phone manufacturers have to be careful about who they choose to supply them, as unethical suppliers could result in negative connotations with their brand image. The alleged poor treatment of factory workers at companies such as Foxconn has increasingly been a focus in recent years due to damning revelations about the working conditions of the Taiwanese company, which supplies components to the likes of Apple, BlackBerry, Dell, Motorola, and Sony. However, the relatively small number of contract electronics manufacturers, and their increasing size and diversity, tends to increase suppliers' power. In addition, market players are heavily reliant on the quality and efficiency of the software and products provided in order to innovate.

Revenue that is generated from the supply of mobile phones to manufacturers is not essential to them, as suppliers provide services to a wide range of industries, particularly in the electronics field. The same can be said for marketing and advertising companies that provide services to the mobile phones market. There has been instability in raw material prices and the uncertainty has been adversely affecting manufacturers' margins. The dependence of mobile phone manufacturers on semiconductor suppliers is shown when these companies release increased earnings statements, as mobile manufacturers' stock prices also increase, which is a sign of escalated demand. The trend towards smartphones has strengthened supplier power, as more complex components require rare materials which need to be used in the production process.

Switching costs for suppliers are higher than switching costs for buyers, decreasing supplier power. Suppliers have to sign long-term contracts in order to get lower prices for the raw materials they require, as prices for raw materials are easily affected by the stock market. Raw materials that originate from oil, steel and other commodities are very likely

Mobile Phones in the United States

Industry Profiles

to experience high levels of volatility. Thus, in order for suppliers to obtain them at lower prices, they would have to sign long-term contracts.

As entry barriers ease off in markets throughout the world, profitability is expected to switch from handset manufacturers to the manufacturers of key performance enhancing components and modules (both hardware and software).

This market's supply chain is made more complicated by the fact that some players also act as suppliers. For instance, Samsung – which enjoys a greater degree of diversification than some of its rivals in the market – manufactures a proportion of Apple's iPhone processors. While Apple is seeking to reduce its reliance on Samsung in the wake of increased competition and animosity between the two, this level of integration increases supplier power in Samsung's case. Samsung's vertically integrated position also gives it a better competitive advantage so far as access to components is concerned.

Overall, supplier power is assessed as moderate.

Mobile Phones in the United States

Industry Profiles

6.4. New entrants

Figure 10: Factors influencing the likelihood of new entrants in the mobile phones market in the United States, 2019

SOURCE: MARKETLINE

M A R K E T L I N E

Smartphones offer the basic functions of a regular mobile phone along with, for example, touchscreen, cameras, GPS navigation, Wi-Fi and mobile broadband access. There is also a market for cheap, pre-paid phones in the US. These phones, known colloquially as 'burners', are phones bought in stores with a certain number of minutes pre-loaded onto them. They remain a popular telecoms solution in the US. Once the minutes have been used, the phone is disposed of. However, smartphones continue to account for a far greater volume share of the US market.

Analytically, capital outlay involving research and development into new technology and production facilities is costly and competing with the likes of Apple and Samsung on this front is virtually impossible for a new entrant. Huawei has attempted to enter the US market but has been unable to break the dominance of Apple and Samsung due to a mixture of reasons, ranging from the established position of the current giants to end-users not resonating with the Huawei name and brand. US media accusations regarding Huawei working for the Chinese government have also compounded the company's problems in the US market. This difficulty to break into the US market reduces the threat of new entrants.

There are restrictions in this market, most of which relate to human health and safety and environmental issues. There are stringent laws relating to science-based regulation and the adoption of emission guidance by the International Commission on Non-Ionizing Radiation. Furthermore, the effect of the use of mobile phones on health is closely monitored, with studies being conducted on the possible side effects of the electromagnetic radiation produced by mobile phones.

Intellectual property rights can also serve as a strong barrier to entry, as the prolonged dispute between Samsung and Apple over patents demonstrates. In 2013, Samsung was ordered to pay Apple $1.05bn in relation to mobile phone software patents as part of a case that began in 2011. Patenting forces competitors to innovate, but success is not guaranteed and other platforms, such as Windows Phone or Blackberry, have floundered in the market. The increasing adoption of Android as the operating system of choice for many manufacturers (it has a global smartphone market share of around 80%) has played a key role in this and illustrates how important it is to have an agreement with a sought-after OS system developer.

The strong growth once seen in this market is no longer apparent in large markets such as the US, so it is not an attractive prospect for new entrants. Declining handset prices and slowing smartphone sales are indicative of this saturated demand.

Mobile Phones in the United States

Industry Profiles

Attempts at customer base monetization have also been made by main players in the market – such as Apple's App Store and Samsung's App Store – with varying degrees of success, although such players typically accrue revenues by taking a cut of the proceeds from the sale of apps produced by third parties through their respective digital distribution platforms, rather than their own software. While companies could follow a similar strategy in the US, the country's high smartphone penetration rate gives potential new entrants a smaller target market – upgrades aside – and it is likely that the country will not give prospective new entrants the same growth opportunities as those seen in emerging markets, such as India, where the smartphone segment still has significant room for growth.

Competition among big brand names in the market tends to be fierce, reducing the threat of new entrants. Big brand names such as Apple and Samsung tend to compete constantly with each other, trying to produce the most innovative and “cutting edge” mobile phone in order to obtain the market share of their competitors. Consumers in the market tend to be highly influenced by the brand names of companies of that scale, influencing them to buy the new products of a company based on the brand name alone. In addition, products from companies such as Apple are regarded as an indicator of one’s social stature. This means that consumers sometimes buy very expensive phones, such as the iPhone 11 Pro or Samsung Galaxy S20+, to show others that they have the financial means to buy such a high-priced device. This strengthens the brand image of those mobile phone manufacturers, rendering entry to the market extremely difficult.

Moderate to high fixed costs are keeping new entrants at bay, as it hard to operate and maintain a profitable mobile phone manufacturing company. In order for a market player to operate functionally, it has to be able to produce revenues that surpass fixed costs to a great extent. Those fixed costs most of the time include high electricity bills, over-priced rent, highly trained personnel, trucks and automobiles required for the transfer and logistic procedures of the products, and others which are based on the size of the company. Most of the market players tend to be big in size, meaning that they will have high fixed costs in order to maintain their facilities and transport their goods. Thus, they would have to be very profitable in order to cover those costs, making them very competitive, reducing the chances of entry from smaller companies.

Overall, the threat of new entrants is assessed as moderate in the US.

Mobile Phones in the United States

Industry Profiles

6.5. Threat of substitutes

Figure 11: Factors influencing the threat of substitutes in the mobile phones market in the United States, 2019

SOURCE: MARKETLINE

M A R K E T L I N E

One possible substitute for mobile phones is fixed-line telephones. However, this threat is seen as minimal, as mobile phones offer the advantage of being able to use them over a much wider geographical area – wherever they pick up a signal. Not only this, but there has been an observed increase in households that have substituted fixed-line telephones with mobile phones. Moreover, many mobile phones now offer benefits that have enabled them to become substitutes for many other electrical appliances, including laptops, televisions, MP3 players and cameras. Whilst laptops also offer many of the features that mobile phones are marketed on, such as internet access, video calling through programs such as Skype, email, TV, GPS, music and portability, they are not a strong substitute, as they do not possess many of the benefits of a mobile phone, such as size, weight and the seamless ability to call others.

Tablet computers could be seen as a substitute for smartphones, but large-screened smartphones (known as "phablets") negate this threat to a large extent. The fact that tablet sales have declined globally for the last several consecutive years supports this. This has led to many players operating in the tablets market, such as HTC and Dell, pulling out of that market, emphasizing the fact that the mobile phones market has successfully been able to counter the impact of this potential substitute.

Overall, the threat of substitutes is assessed as weak.

Mobile Phones in the United States

Industry Profiles

6.6. Degree of rivalry

Figure 12: Drivers of degree of rivalry in the mobile phones market in the United States, 2019

SOURCE: MARKETLINE

M A R K E T L I N E

The US mobile phones market is dominated by a small number of large-sized companies, such as Apple, Samsung, LG and Lenovo. Rivalry is increased due to the limited number of competitors and the high penetration of mobile phone devices, which intensifies R&D expenses and price competition. The introduction of smartphones has added another competitive dimension, with Apple and those using the Android operating system (including HTC, LG, Samsung and Sony) establishing themselves as major players. Simultaneously, some of the most established mobile phone manufacturers have experienced an adverse effect.

Additionally, BlackBerry, a company that was successful in the early smartphone market, has seen revenues, and profitability, plummet over the past few years as consumers have moved to competitors' offerings. Consequently, Blackberry was acquired in 2016 by TCL, a Chinese corporation with diverse operations in terms of electronic devices, such as televisions, air conditioners, and refrigerators. Since this, a new line of mobile phones has been introduced: the Blackberry KeyONE in 2017, followed by the KEY2 and KEY2 LE in 2018.

In the US market, some of the major players' diversity of operations, such as Samsung or LG, is expected to exert pressure on Apple, exploiting its greater dependence on the mobile phones market. Ultimately, the capability of these major players to undercut prices would result in an intensive rivalry regardless of Apple's strategy to undercut.

Also present in this market, however, is a second tier of smaller manufacturers with phones that are targeted towards niche markets or produced for specific regions. In fact, many companies focus on offering budget alternatives to the main players' core offerings – such as Xiaomi and Huawei – which puts significant pressure on the leading players to drop prices to remain competitive. However, Huawei is currently banned from the US due to fears over its connection with the Chinese government. While Apple operates independently of many players in the market by virtue of its closed iOS ecosystem – which itself serves as a means of differentiation and appeal, especially amongst its large and loyal customer base – the open Android platform is much more fragmented and competitive. In the Android sector, budget devices sit alongside high-end, flagship smartphones from the major manufacturers, varying in form, screen size, build quality, processing power and, most importantly, price. However, as the market progresses, the differentiation that premium devices hold over their budget competitors will diminish.

Consumers are already moving towards cheaper devices, bringing down the average selling price of mobile phones. As such, market leaders are faced with a difficult decision to make: do they bring the price of their flagship models down to compete more effectively with budget manufacturers; or do they invest in expensive R&D to give their next model

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Industry Profiles

a new differentiating feature? Either would have a negative impact on profitability, and there is no guarantee that any differentiating feature will be met with enthusiasm by consumers. Of course, most of the major manufacturers in this market have a product range that spans the budget and premium sectors, but even a consumer shift from a manufacturer's high-end offering to its mid-range selection of handsets would have a negative top and bottom-line impact.

Having said that, Huawei, despite repeated attempts, has been unable to establish a significant position in the US market. A number of reasons have been given to explain this, including general end-user indifference towards the Huawei name and brand, coupled with negative media coverage which has repeatedly alleged that Huawei is working in conjunction with the Chinese state and will thereby allow Chinese state officials to spy and listen to US calls. Regardless of the truth of this, Huawei has been unable to establish a significant position in the US due to these reasons, even as it continues to expand its operations globally. Their inability to challenge incumbents in the US market reduces rivalry slightly.

Market penetration is high, and when including phones that are not acquired with a contract, market saturation is even higher. This puts more pressure on manufacturers to continually invest in new technologies to encourage existing mobile subscribers to upgrade their existing handsets. This, in addition to high fixed costs, serves to increase the level of rivalry in the market. Although mobile cellular subscriptions are highest in Western countries, developing countries such as China and India have experienced astonishing growth in recent years.

Existing market players such as Apple, Samsung, LG and Sony tend to be big in size and compete with each other for the market leader position. The fact that there is more than one clear leader in the market increases rivalry. Rivalry in the market is highly influenced by the brand name of each of the market players. Brand names such as Apple or Samsung are more recognizable and consumers tend to prefer these two brands because they are highly regarded as social stature indicators, meaning that a consumer could indicate their social stature by the mobile phone brand they possess.

Overall, rivalry is assessed as strong.

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7. Competitive Landscape

7.1. Who are the leading players?

Apple Inc is a US technology firm. The firm designs, manufactures, and markets mobile communication and media devices, personal computers (PCs), portable and wearable devices. The company also offers related software, services, accessories, networking solutions, and third-party digital content and applications. The firm reported annual revenue of $260.2bn in the 2019 fiscal year, $102.3bn of this came from the US. The iPhone accounted for $142.4bn of total 2019 revenue.

Samsung Electronics Co Ltd, a part of the Samsung group, is a consumer electronics firm based in South Korea and a leading player in the US mobile phones market. Samsung offers a range of electronic products including smartphones, TVs, tablets, laptops, and household appliances. The company reported annual revenue of $209.6bn for the 2019 fiscal year.

LG Electronics, Inc. is a South Korean consumer electronics firm and leading player in the US mobile phones market. The firm develops, manufactures and sells products including mobile phones, TVs, PCs, and household appliances. The firm recorded annual revenue of $55.8bn for the 2018 fiscal year.

Lenovo Group Limited is a Chinese provider of consumer, commercial, and enterprise technology. Its portfolio of product and services covers PCs, servers, workstations, storage, smart TVs, and mobile products, including tablets, smartphones and applications. In May 2018, the company created a new business segment, Intelligent Devices Group (IDG), by combining the PC and Smart Device Business Group (PCSD) and the Mobile Business Group (MBG). The firm reported total annual revenue of $51.0bn for the 2019 fiscal year, of which 13% was from the MBG.

7.2. How is technological innovation shaping the strategy of leading players?

In the mobile phones market technological innovation is a key strategy for leading players. New technological features can give leading players an edge over rivals. Apple has taken steps to improve the camera capabilities of its new iPhones. For example, the iPhone XR introduced a number of new capabilities such as Portrait Mode, Smart HDR, Portrait Lighting, and Depth Control. The marketing campaign behind the XR was also predominantly focused on demonstrating these new features. Another camera upgrade on the more recent iPhone 11 is Deep Fusion, which improves photo quality and optimizes details for pictures taken in medium-light settings. The phone also has a 12- megapixel front-facing camera.

A new smartphone trend which emerged in 2019 was foldable phones. Motorola, acquired by Lenovo in 2014, revived the Motorola Razr as a folding smartphone. The phone was meant to be launched in 2019, but was delayed until early 2020 due to high demand. This comes 15 years after the original Razr changed the landscape of the mobile phones market. Motorola was once a popular phone brand but has since lost market share to rivals. Through reviving a once popular device in a modern format, Lenovo is looking to provide a unique selling point, particularly with numerous other foldable smartphones hitting the market in 2019. LG have adopted a simpler model for its foldable smartphone with the second display as a foldable accessory. The product looks less slick than others on the market due to the gap between the screens but provides a cheaper alternative. The firm demonstrated how the attachable screen can be used as touchscreen control pad for video games, to view two people full screen on group calls, and to view YouTube footage on one screen and comments on another. The Samsung Galaxy Fold, described by the firm as a luxury item, is

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one of the most expensive foldable phones on the market. The folding feature will create a 7.3inch (18.5cm) tablet like display which will be able to run three apps simultaneously.

Another key technological innovation for the US mobile phones market, which rose to prominence in 2019, is the introduction of 5G. Lenovo introduced the first 5G capable device. It sold the 2018 4G handset, Motorola Z3, paired with a 5G Moto Mod, which added 5G capabilities. It was first introduced in the US, exclusively on the Verizon network. The Galaxy S10 5G features the firm's largest-ever non-folding phone display and promises faster data speeds when networks become available. LG is another company that has announced a 5G handset, namely the LG V50 ThinQ 5G, launched at Mobile World Congress 2019. Verizon, AT&T, and T-Mobile began offering 5G in more US cities in 2019, and the prevalence of the latest technology is expected to become increasingly common in 2020, especially in metropolitan areas. Apple has yet to announce a 5G capable device but this is likely to change with the release of the iPhone 12 in 2020.

7.3. What are the strengths of the leading players?

Apple uses both direct and indirect distribution channels to effectively reach its customers in the consumer, small and mid-sized business, and education, enterprise, and government markets. In most of its major markets, the company sells its products and resells third-party products directly to consumers and small-and mid-sized businesses through its retail and online stores and direct salesforce. The company’s retail stores are typically located in high-traffic locations in shopping malls and urban shopping districts. By operating its own stores and locating them in desirable high-traffic locations, the company is better positioned to ensure improved customer buying experience and attract new customers. The stores are designed to simplify and enhance the presentation and marketing of the company’s products and related solutions.

Samsung, LG Electronics, and Lenovo are some of the world's leading companies in technological innovations across mobile communication devices, home appliances, and electronic devices. Leading manufacturers, operating across a diverse range of technology products, are not solely reliant on the performance of the mobile phone market.

7.4. What threats do the leading players face?

With the postpaid segment accounting for 59.2% of the US mobile phones market firms are heavily dependent on the cellular network providers. Firms rely on cellular network carriers for distribution and related services. The inability of these network carriers to attract and retain customers, or widespread termination of any agreements, may prove unfavorable for leading players. Dependence on network providers could affect the profitability of players in the case of a failure of a cellular carrier. With $142.4bn of Apple’s $260.2bn 2019 annual revenue coming from the iPhone, the firm is particularly reliant on mobile phones and therefore its business is more susceptible to this threat.

In this highly competitive market, competition is characterized by aggressive price cutting and downward pressure on gross margins, and the frequent introduction of new products. Competition is intensified by evolving industry standards, rapid adoption of technological and product advancements by competitors, short product life cycles, and the price sensitivity of consumers. Companies must compete on factors that include product price, features, relative price and performance, quality and reliability of product and services, design innovation, third-party accessories and software ecosystem, distribution and marketing capabilities, and corporate reputation.

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8. Company Profiles

8.1. Apple Inc

8.1.1. Company Overview

Apple Inc (Apple) designs, manufactures, and markets mobile communication and media devices, personal computers (PCs), portable and wearable devices. The company also offers related software, services, accessories, networking solutions, and third-party digital content and applications. Apple’s product portfolio includes iPhone, iPad, Mac, iPod, Apple Watch, Apple TV. It offers various consumer and professional software applications such as iOS, macOS, iPadOS, and watchOS operating systems, iCloud, AppleCare, Apple Pay, and accessories. Apple sells and delivers digital content and applications through Apple Store, App Store, Mac App Store, TV App Store, Watch App Store and Apple Music. The company’s business operations span the US, Europe, the Middle East and Asia-Pacific. Apple is headquartered in Cupertino, California, the US.

The company reported revenues of (US Dollars) US$260,174 million for the fiscal year ended September 2019 (FY2019), a decrease of 2% over FY2018. In FY2019, the company’s operating margin was 24.6%, compared to an operating margin of 26.7% in FY2018. In FY2019, the company recorded a net margin of 21.2%, compared to a net margin of 22.4% in FY2018.

8.1.2. Key Facts

Table 7: Apple Inc: key facts

Head office: One Apple Park WayCupertino, California, United States

Number of Employees: 137000

Website: www.apple.com

Financial year-end: September

Ticker: AAPL

Stock exchange: NASDAQ

SOURCE: COMPANY WEBSITE M A R K E T L I N E

8.1.3. Business Description

Apple Inc (Apple) designs, manufactures and markets mobile communication and media devices and personal computers. The company sells software, services, accessories, networking solutions and third-party digital content and applications.

The company classifies its products and services into five categories: iPhone, iPad, Mac, Services, and Wearable, Home and Accessories.

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Table 8: Apple Inc: Annual Financial Ratios

Key Ratios 2015 2016 2017 2018 2019

Growth Ratios

Sales Growth % 27.86 -7.73 6.30 15.86 -2.04

Operating Income Growth % 35.67 -15.73 2.20 15.57 -9.83

EBITDA Growth % 35.67 -15.73 2.20 15.57 -9.83

Net Income Growth % 35.14 -14.43 5.83 23.12 -7.18

EPS Growth % 42.83 -9.88 10.84 32.61 -2.65

Working Capital Growth % 72.50 217.78 -0.11 -44.63 270.55

Equity Ratios

EPS (Earnings per Share) USD 9.22 8.31 9.21 12.21 11.89

Dividend per Share USD 1.98 2.18 2.40 2.72 3.00

Dividend Cover Absolute 4.65 3.81 3.84 4.49 3.96

Book Value per Share USD 21.39 24.03 26.15 22.53 20.37

Profitability Ratios

Gross Margin % 40.06 39.08 38.47 38.34 37.82

Operating Margin % 30.48 27.84 26.76 26.69 24.57

Net Profit Margin % 22.85 21.19 21.09 22.41 21.24

Profit Markup % 66.83 64.14 62.52 62.19 60.82

PBT Margin (Profit Before Tax) % 31.03 28.46 27.96 27.45 25.27

Return on Equity % 44.74 35.62 36.07 55.56 61.06

Return on Capital Employed % 33.96 24.73 22.35 28.38 27.46

Return on Assets % 20.45 14.93 13.87 16.07 15.69

Return on Working Capital % 812.39 215.43 220.42 460.08 111.96

Operating Costs (% of Sales) % 69.52 72.16 73.24 73.31 75.43

Administration Costs (% of Sales) % 6.13 6.58 6.66 6.29 7.01

Liquidity Ratios

Current Ratio Absolute 1.11 1.35 1.28 1.13 1.54

Quick Ratio Absolute 1.08 1.33 1.23 1.10 1.50

Cash Ratio Absolute 0.52 0.85 0.74 0.57 0.95

Leverage Ratios

Debt to Equity Ratio Absolute 0.47 0.62 0.77 0.96 1.13

Net Debt to Equity Absolute 0.36 0.52 0.71 0.83 0.65

Debt to Capital Ratio Absolute 0.32 0.38 0.44 0.49 0.53

Efficiency Ratios

Asset Turnover Absolute 0.90 0.70 0.66 0.72 0.74

Fixed Asset Turnover Absolute 10.85 8.72 7.54 7.07 6.61

Inventory Turnover Absolute 62.82 58.64 40.37 37.17 40.13

Current Asset Turnover Absolute 2.96 2.20 1.95 2.04 1.77

Capital Employed Turnover Absolute 1.11 0.89 0.84 1.06 1.12

Working Capital Turnover Absolute 26.66 7.74 8.24 17.24 4.56

SOURCE: COMPANY FILINGS M A R K E T L I N E

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Table 9: Apple Inc: Key Employees

Name Job Title Board

Adrian Perica Vice President Corporate Development Senior Management

Albert Gore Jr. Director Non Executive Board

Andrea Jung Director Non Executive Board

Arthur D. Levinson Chairman Executive Board

Chiara Cipriani Director Video Services Senior Management

Craig Federighi Senior Vice President Software Engineering Senior Management

Dan Riccio Senior Vice President Hardware Engineering Senior Management

David Smoley Vice President Senior Management

Deirdre O'Brien Senior Vice President Retail and People Senior Management

Eddy Cue Senior Vice President Internet Software and

Services Senior Management

Frank Casanova Director Worldwide Product Marketing, Apple

Augmented Reality Senior Management

Gary Geaves Vice President Acoustics Role Senior Management

Ian Goodfellow Director AI and machine learning technologies Senior Management

Isabel Ge Mahe Managing Director Greater China Senior Management

Isabel Ge Mahe Vice President Senior Management

James A. Bell Director Non Executive Board

Jeff Williams Chief Operating Officer Senior Management

John Giannandrea Senior Vice President Machine Learning and

AI Strategy Senior Management

Johny Srouji Senior Vice President Hardware Technologies Senior Management

Jon Andrews Vice President Software Engineering Senior Management

Kaiann Drance Vice President Marketing Senior Management

Katherine Adams General Counsel Senior Management

Katherine Adams Secretary Senior Management

Katherine Adams Vice President Security Senior Management

Lisa Jackson Vice President Environment, Policy and Social

Initiatives Senior Management

Luca Maestri Chief Financial Officer Senior Management

Luca Maestri Senior Vice President Senior Management

Michael Schwekutsch Director Engineering, Special Project Group Senior Management

Molly Thompson Head Documentaries Senior Management

Paul Meade Vice President Hardware Engineering Senior Management

SOURCE: COMPANY FILINGS M A R K E T L I N E

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Table 10: Apple Inc: Key Employees Continued

Name Job Title Board

Philip W. Schiller Senior Vice President Worldwide Marketing Senior Management

Rebekah Horne Director Services and Music, Australasia Senior Management

Ronald D. Sugar Director Non Executive Board

Sabih Khan Senior Vice President Operations Senior Management

Sam Jadallah Head Smart Home Initiatives Senior Management

Soonho Ahn Global Head, Battery Developments Senior Management

Susan L. Wagner Director Non Executive Board

Timothy D. Cook Chief Executive Officer Executive Board

Timothy D. Cook Director Executive Board

Tor Myhren Vice President Marketing Communications Senior Management

SOURCE: COMPANY FILINGS M A R K E T L I N E

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8.2. Samsung Electronics Co Ltd.

8.2.1. Company Overview

Samsung Electronics Co Ltd (Samsung or "the company"), a part of the Samsung group, is a consumer electronics company. The company offers smartphones, tablets, wearables, virtual reality (VR), accessories, televisions (TVs), home theatre, headphones, wireless speakers, stereo shelf systems, laptops, desktops, printers, monitors, memory and storage devices, refrigerators, wall ovens, cooktops and hoods, microwaves, dishwashers, washers, dryers, and vacuums, among others. The company operates in Asia, the Americas, Europe, Middle East and Africa . Samsung is headquartered in Gyeonggi-do, Seoul, South Korea.

The company reported revenues of (Won) KRW1.8% over FY2017. In FY2018, the company’s operating margin was 24.2%, compared to an operating margin of 22.3% in FY2017. In FY2018, the company recorded a net margin of 18%, compared to a net margin of 17.3% in FY2017.The company reported revenues of KRW52,385,546.0 million for the first quarter ended March 2019, a decrease of 11.6% over the previous quarter.

8.2.2. Key Facts

Table 11: Samsung Electronics Co Ltd.: key facts

Head office: 129 Samsung-Ro, Yeongtong-Gu, Seoul , Republic of Korea (South Korea)

Number of Employees: 309630

Website: www.samsung.com

Financial year-end: December

Ticker: 005930

Stock exchange: Korea Stock Exchange

SOURCE: COMPANY WEBSITE M A R K E T L I N E

8.2.3. Business Description

Samsung Electronics Co Ltd (Samsung or "the company") is a information technology (IT) company. The company offers televisions (TVs), smartphones, tablets, personal computers (PCs), cameras, home appliances, long-term evolutions (LTE) systems, medical devices, semiconductors and light-emitting diode (LED) solutions. Samsung has operations in Asia, the Americas, Europe, Middle East and Africa.

As of December 2018, the company had 216 worldwide operation hubs, including 37 manufacturing sites, 52 sales offices, seven design centers, 37 R&D centers, 15 regional offices. The company classifies its business operations into four reportable segments: Information Technology and Mobile Communications (IM), Consumer Electronics (CE), Device Solutions and Harman.

The Information Technology and Mobile Communications segment includes the company's mobile communications and networks businesses. The segment offers mobile phones, communication systems, and computers. In FY2018, the Information Technology and Mobile Communications segment reported revenue of KRW106,668,318 million, which accounted for 37.2% of the company's total revenue.

The Consumer Electronics segment includes visual display, digital appliance and health and medical equipment business. The company's visual display business offers TVs and monitors. The digital appliance business offers refrigerators, washing machines and air-conditioners. The health and medical equipment business offers digital X-rays, diagnostic imaging devices, diagnostic ultrasound systems, digital radiography systems, mobile CT scanners and in-

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vitro diagnostics devices. In FY2018, the Consumer Electronics segment reported revenue of KRW42,107,405 million, which accounted for 15.6% of the company's total revenue.

The Device Solutions segment is comprised of the semiconductor business and display (DP) business. Under the semiconductor business, the company offers memory, foundry and system LSI products. In the display business, the company provides LCD and OLED panels. In FY2018, the Device Solutions segment reported revenue of KRW118,565,559 million, which accounted for 43.9% of the company's total revenue.

The Harman segment offers connected car systems, audio and visual products, enterprise automation solutions and connected services. In FY2018, the Harman segment reported revenue of KRW88,43,739 million, which accounted for 3.3% of the company's total revenue.

Geographically, the company classifies its operations into five segments: China, Korea, the Americas, Europe, and Asia and Africa. In FY2018, the Americas accounted for 33.5% of the company's total revenue, followed by Europe (17.6%); Asia and Africa (17.3%), China (17.7%); and Korea (13.9%).

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Table 12: Samsung Electronics Co Ltd.: Annual Financial Ratios

Key Ratios 2015 2016 2017 2018 2019

Growth Ratios

Sales Growth % -2.69 0.60 18.68 1.75 -5.48

Operating Income Growth % -3.14 17.27 88.17 10.09 -52.84

EBITDA Growth % -3.40 16.73 86.31 10.05 -50.59

Net Income Growth % -19.01 19.90 84.45 6.16 -51.00

EPS Growth % -13.71 19.01 86.24 7.00 -51.02

Working Capital Growth % 17.71 16.71 -7.98 32.34 11.35

Equity Ratios

EPS (Earnings per Share) KRW 2514.22 3155.65 5990.88 6460.73 3165.92

Dividend per Share KRW 420.00 570.00 850.00 1416.00 1416.00

Dividend Cover Absolute 5.99 5.54 7.05 4.56 2.24

Book Value per Share KRW 23690.73 26635.59 30423.62 35342.36 37528.03

Profitability Ratios

Gross Margin % 38.46 40.42 46.03 45.69 36.09

Operating Margin % 12.08 14.08 22.33 24.16 12.05

Net Profit Margin % 9.32 11.10 17.26 18.00 9.33

Profit Markup % 62.50 67.83 85.30 84.13 56.48

PBT Margin (Profit Before Tax) % 12.94 15.21 23.46 25.09 13.21

Return on Equity % 10.81 12.02 19.95 18.28 8.44

Return on Capital Employed % 12.65 13.70 22.80 21.79 9.62

Return on Assets % 7.91 8.89 14.66 13.69 6.22

Return on Working Capital % 32.62 32.78 67.02 55.75 23.61

Operating Costs (% of Sales) % 87.92 85.92 77.67 75.84 87.95

Administration Costs (% of Sales) % 17.98 18.45 16.26 13.41 14.52

Liquidity Ratios

Current Ratio Absolute 2.47 2.59 2.19 2.53 2.84

Quick Ratio Absolute 2.10 2.25 1.82 2.11 2.42

Cash Ratio Absolute 1.42 1.61 1.24 1.46 1.70

Leverage Ratios

Debt to Equity Ratio Absolute 0.01 0.01 0.01 0.02

Net Debt to Equity Absolute -0.06 -0.09 -0.06 -0.07 -0.03

Debt to Capital Ratio Absolute 0.01 0.01 0.01 0.02

Efficiency Ratios

Asset Turnover Absolute 0.85 0.80 0.85 0.76 0.67

Fixed Asset Turnover Absolute 2.40 2.27 2.36 2.15 1.96

Inventory Turnover Absolute 6.84 6.47 5.97 4.91 5.28

Current Asset Turnover Absolute 1.67 1.52 1.66 1.52 1.29

Capital Employed Turnover Absolute 1.05 0.97 1.02 0.90 0.80

Working Capital Turnover Absolute 2.70 2.33 3.00 2.31 1.96

SOURCE: COMPANY FILINGS M A R K E T L I N E

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Table 13: Samsung Electronics Co Ltd.: Key Employees

Name Job Title Board

Byung-Gook Park Director Non Executive Board

Choi Joo Ho General Director, Vietnam Senior Management

Curie Ahn Director Non Executive Board

Dong-Jin Koh Chief Executive Officer IT and Mobile

Communications Executive Board

Dong-Jin Koh Director Executive Board

Dong-Jin Koh President IT and Mobile Communications Executive Board

Eric Chou Director Marketing Senior Management

Han-Jo Kim Director Non Executive Board

Hyun-Suk Kim Chief Executive Officer Consumer Electronics Executive Board

Hyun-Suk Kim Director Executive Board

Hyun-Suk Kim President Consumer Electronics Executive Board

Jae-Wan Bahk Chairman Executive Board

Jared Pedersen Head Business to Business Channels,

Samsung New Zealand Senior Management

Jeong Kim Director Non Executive Board

Ki-Nam Kim Chief Executive Officer Device Solutions Executive Board

Ki-Nam Kim Director Executive Board

Ki-Nam Kim Head- Device Solutions Executive Board

Ki-Nam Kim President Device Solutions Executive Board

Ki-Nam Kim Vice Chairman Executive Board

Sangho Jo Manager Germany Operational Management

Sun-Uk Kim Director Non Executive Board

Tim Baxter Chief Executive Officer Samsung Electronics

North America Senior Management

Tim Baxter President Samsung Electronics North America Senior Management

SOURCE: COMPANY FILINGS M A R K E T L I N E

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8.3. Lenovo Group Limited

8.3.1. Company Overview

Lenovo Group Limited (Lenovo) is a provider of consumer, commercial, and enterprise technology. Its portfolio of product and services covers personal computers (PCs), servers, workstations, storage, smart televisions (TVs), and mobile products, including tablets, smartphones and applications. The company serves products to various industries including education, government, radio and television industry, transportation, energy, healthcare, internet, general industry and financial sector. Lenovo operates R&D centers in Yokohama, Japan; China; and Morrisville, Beijing, Shanghai, Wuhan and Shenzhen, North Carolina, the US. The company operates across Asia Pacific, Europe and the Americas. Lenovo is headquartered in Quarry Bay, Hong Kong.

The company reported revenues of (US Dollars) US$51,037.9 million for the fiscal year ended March 2019 (FY2019), an increase of 12.5% over FY2018. In FY2019, the company’s operating margin was 2.3%, compared to an operating margin of 0.9% in FY2018. The net profit of the company was US$650.1 million in FY2019, compared to a net loss of US$135.6 million in FY2018.

8.3.2. Key Facts

Table 14: Lenovo Group Limited: key facts

Head office: No. 6 Chuang Ye RoadHaidian District, Beijing, Beijing, China

Number of Employees: 57000

Website: www.lenovo.com

Financial year-end: March

Ticker: 992

Stock exchange: Hong Kong Stock Exchange

SOURCE: COMPANY WEBSITE M A R K E T L I N E

8.3.3. Business Description

Lenovo Group Limited (Lenovo) develops designs, manufactures and sells personal computers, tablet computers, servers, workstations, electronic storage devices, smartphones and IT management software. Lenovo has operations across Asia Pacific, Europe and the Americas. The company’s products finds application in various industries including government, education, manufacturing, radio and television industry, energy, transportation, medical, internet, financial sector and general industry.

The company classifies its products and services into operations into two segments: Intelligent Devices Group(IDG) and Data Center Group (DCG).

The company through Intelligent Devices Group (IDG), offers personal computers, tablets and smart devices to very small business (VSB), small office, home office (SOHO), and consumers. It also focuses on augmented reality (AR), virtual reality (VR), artificial intelligence (AI), Internet of Things (IoT), security and as-a-service solutions. The segment also provides smartphones, displays, speakers, chargers and home automation products. Brands include Thinkpad, ThinkBook, Motorola, Lenovo, Yoga and IdeaPad. IDG subsumed operations of PC and Smart Device and Mobile business segments. In FY2019, the segment reported US$45,013.4 million for FY2019, which contributed 88.2% towards the company's revenue.

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The company’s Data Center Group (DCG) segment provides servers, storage, networking, cloud and hyper converged solutions. It also offers implementation and support services for software solutions. In FY2019, the segment reported US$6,024.6 million for FY2019, which contributed 11.8% towards the company's revenue.

Geographically, the company operates in four regions namely: Americas ; Europe, the Middle East and Africa (EMEA); China and Asia-Pacific, which accounted for 32.2%, 24.5%, 24.2% and 19.1%, respectively, in FY2019.

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Table 15: Lenovo Group Limited: Annual Financial Ratios

Key Ratios 2014 2015 2016 2017 2018

Growth Ratios

Sales Growth % 19.60 -2.99 -4.18 5.38 12.54

Operating Income Growth % 5.37 -105.58 -42.48 204.56

EBITDA Growth % 18.42 -73.49 198.54 -24.86 99.50

Net Income Growth % 1.41 -115.46 -125.26

EPS Growth % -1.18 -115.03 -140.42

Working Capital Growth % 3042.48 43.90 24.06 9.55 -5.06

Equity Ratios

EPS (Earnings per Share) USD 0.08 -0.01 0.05 -0.02 0.05

Dividend per Share USD 0.03 0.03 0.03 0.03 0.04

Dividend Cover Absolute 2.25 -0.34 1.43 -0.50 1.40

Book Value per Share USD 0.37 0.27 0.37 0.38 0.37

Profitability Ratios

Gross Margin % 14.43 14.75 14.19 13.83 14.44

Operating Margin % 2.39 -0.14 1.56 0.85 2.31

Net Profit Margin % 1.79 -0.29 1.25 -0.30 1.27

Profit Markup % 16.87 17.30 16.53 16.05 16.88

PBT Margin (Profit Before Tax) % 2.10 -0.62 1.14 0.34 1.68

Return on Equity % 20.29 -4.27 13.20 -3.01 14.81

Return on Capital Employed % 11.14 -0.67 7.60 4.28 12.40

Return on Assets % 3.62 -0.49 2.06 -0.49 2.22

Operating Costs (% of Sales) % 97.61 100.14 98.44 99.15 97.69

Administration Costs (% of Sales) % 8.54 9.22 9.78 9.38 8.80

Liquidity Ratios

Current Ratio Absolute 0.89 0.82 0.81 0.80 0.82

Quick Ratio Absolute 0.72 0.66 0.66 0.61 0.66

Cash Ratio Absolute 0.17 0.13 0.16 0.10 0.13

Leverage Ratios

Debt to Equity Ratio Absolute 0.75 1.08 0.75 0.59 0.73

Net Debt to Equity Absolute 0.09 0.52 0.27 0.61 0.68

Debt to Capital Ratio Absolute 0.43 0.52 0.43 0.37 0.42

Efficiency Ratios

Asset Turnover Absolute 2.02 1.72 1.65 1.63 1.75

Fixed Asset Turnover Absolute 33.38 26.59 26.30 27.18 30.47

Inventory Turnover Absolute 14.01 13.69 13.60 11.87 12.09

Current Asset Turnover Absolute 3.20 3.15 3.09 2.97 3.14

Capital Employed Turnover Absolute 4.65 4.90 4.86 5.02 5.37

SOURCE: COMPANY FILINGS M A R K E T L I N E

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Table 16: Lenovo Group Limited: Key Employees

Name Job Title Board

Arthur Hu Chief Information Officer Senior Management

Arthur Hu Senior Vice President Senior Management

Gao Lan Senior Vice President Human Resources Senior Management

George HE Senior Vice President Lenovo Capital and

Incubator Group Senior Management

Gianfranco Lanci Chief Operating Officer Senior Management

Gianfranco Lanci Corporate President Senior Management

Gina Qiao Chief Marketing Officer Senior Management

Gina Qiao Chief Strategy Officer Senior Management

Gina Qiao Senior Vice President Senior Management

Gordon Robert Halyburton Orr Director Non Executive Board

John GORDON President Commercial Internet of Things Senior Management

John GORDON Vice President Senior Management

Kirk Skaugen Executive Vice President Senior Management

Kirk Skaugen President Data Center Group Senior Management

Laura Quatela Chief Legal Officer Senior Management

Laura Quatela Senior Vice President Senior Management

Nicholas C. Allen Director Non Executive Board

Nobuyuki Idei Director Non Executive Board

Sergio Buniac Chairman- Motorola Senior Management

Sergio Buniac Co-President - Mobile Business Group Senior Management

Sergio Buniac President Motorola Senior Management

Sergio Buniac Senior Vice President Mobile Business Group Senior Management

Shashank Sharma Director Executive Board

Shashank Sharma General Manager - Middle East, Turkey and

Africa Executive Board

William O. Grabe Director Non Executive Board

William Tudor Brown Director Non Executive Board

Wong Wai Ming Chief Financial Officer Senior Management

Wong Wai Ming Executive Vice President Senior Management

Woo Chin Wan Raymond Director Non Executive Board

Yang Chih-Yuan Jerry Director Non Executive Board

SOURCE: COMPANY FILINGS M A R K E T L I N E

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Table 17: Lenovo Group Limited: Key Employees Continued

Name Job Title Board

Yang Yuanqing Chairman Executive Board

Yang Yuanqing Chief Executive Officer Executive Board

Ye LAN General Manager Data Intelligence Business

Group Senior Management

Ye LAN Senior Vice President Senior Management

Yong Rui Chief Technology Officer Senior Management

Yong Rui Senior Vice President Senior Management

Zhao John Huan Director Non Executive Board

Zhu Linan Director Non Executive Board

SOURCE: COMPANY FILINGS M A R K E T L I N E

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8.4. LG Electronics, Inc.

8.4.1. Company Overview

LG Electronics, Inc. (LG Electronics or 'the company') is a consumer electronics company. The company develops, manufactures and sells refrigerators, washing machines, vacuum cleaners, cooking appliances, microwaves, mobile communication products, television (TV) sets, personal computers (PCs), in-vehicle infotainment products, and heating, ventilation and air conditioning (HVAC) products. It also provides audio and video products, camera modules, light emitting diode (LED), solar modules, information displays, water solution, solar energy systems, substrate and material, optics solution, automotive components and motor products. It has business presence across Europe, Asia, the Americas, the Middle East and Africa, and Commonwealth of Independent States (CIS). The company is headquartered in Seoul, South Korea.

The company reported revenues of (Won) KRW61,341,664 million for the fiscal year ended December 2018 (FY2018), a decrease of 0.1% over FY2017. In FY2018, the company’s operating margin was 4.2%, compared to an operating margin of 3.9% in FY2017. In FY2018, the company recorded a net margin of 2%, compared to a net margin of 2.8% in FY2017.

8.4.2. Key Facts

Table 18: LG Electronics, Inc.: key facts

Number of Employees: 72612

Website: www.lge.com

Financial year-end: December

Ticker: 066570

Stock exchange: Korea Stock Exchange

SOURCE: COMPANY WEBSITE M A R K E T L I N E

8.4.3. Business Description

LG Electronics, Inc. (LG Electronics or 'the company') is a manufacturer and marketer of electronic products, including mobile phones, TVs, air conditioners, refrigerators, washing machines and PCs. The company has presence in 140 locations across North America, South America, Europe, the Middle East and Africa, Asia and CIS.

LG Electronics operates through seven business segments: Home Entertainment (HE), Home Appliance and Air Solution (H&A), Mobile Communications (MC), Innotek, Vehicle Components (VC), Business-to-Business (B2B) and other segments.

The Home Entertainment segment manufactures and sells TVs, monitors, PCs, audio, video and other products. In FY2018, the Home Entertainment segment reported revenue of KRW16,197,607 million, which accounted for 26.4% of the company's total revenue.

The Home Appliance and Air Solution segment manufactures and sells washing machines, refrigerators, residential and commercial air conditioners, vacuum cleaners, microwaves, and other products. In FY2018, the Home Appliance and Air Solution segment reported revenue of KRW19,317,338 million, which accounted for 31.5% of the company's revenue.

Mobile Phones in the United States

Industry Profiles

The Mobile Communications segment offers mobile communications equipment. In FY2018, the Mobile Communications segment reported revenue of KRW7,978,762 million, which accounted for 13% of the company's revenue.

Through the Innotek segment, LG Electronics manufactures and sells camera modules, light emitting diode (LED), display and network, substrate and material, optics solution, automotive components and motor products. In FY2018, the Innotek segment reported revenue of KRW 7,278,287 million, which accounted for 11.9% of the company's revenue.

The Vehicle Components segment produces and sells automobile parts, in-car infotainment systems and electric compressors for automotive applications. In FY2018, the Vehicle Components segment reported revenue of KRW4,287,637 million, which accounted for 7% of the company's revenue.

The Business-to-Business segment offers solar modules, information displays and other products. In FY2018, the Business-to-Business segment reported revenue of KRW2,403,015 million, which accounted for 3.9% of the company's revenue.

The Others segment offers equipment, water solution and solar energy systems. In FY2018, the Others segment reported revenue of KRW 3,879,018 million, which accounted for 6.3% of the company's revenue.

Geographically, the company classifies its operations into eight segments: North America, Korea, Asia, Europe, South America, the Middle East and Africa, China, and Russia and Others. In FY2018, Korea accounted for 36.2% of the company's total revenues, followed by North America (24.9%); Europe (12.4%); Asia (10.3%); South America (6.2%); China (3.9%); the Middle East and Africa (3.5%); and Russia and Others (2.6%).

LG Electronics aims to introduce new products and bring improvement in the existing product line. In FY2018, the company invested KRW3,635,231 million on R&D, which accounted for 6% of the company’s revenue.

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Table 19: LG Electronics, Inc.: Annual Financial Ratios

Key Ratios 2015 2016 2017 2018 2019

Growth Ratios

Sales Growth % -4.29 -2.02 10.89 -0.09 1.57

Operating Income Growth % -31.74 0.41 89.47 9.02 -23.57

EBITDA Growth % -24.18 -1.42 64.74 6.94 -12.88

Net Income Growth % -68.85 -38.20 2144.79 -28.14 -97.48

EPS Growth % -79.13 21.49 1114.93 -25.61 -73.53

Working Capital Growth % -10.22 -22.98 33.08 34.33 -5.94

Equity Ratios

EPS (Earnings per Share) KRW 712.12 426.95 9584.12 6887.14 173.74

Dividend per Share KRW 400.00 400.00 400.00 750.00 750.00

Dividend Cover Absolute 1.78 1.07 23.96 9.18 0.23

Book Value per Share KRW 64568.41 66570.58 73441.21 79155.82 79582.43

Profitability Ratios

Gross Margin % 22.78 24.81 23.88 24.59 24.61

Operating Margin % 2.21 2.26 3.87 4.22 3.17

Net Profit Margin % 0.22 0.14 2.81 2.02 0.05

Profit Markup % 29.50 33.00 31.36 32.60 32.65

PBT Margin (Profit Before Tax) % 1.05 1.30 4.17 3.27 0.85

Return on Equity % 1.07 0.64 13.05 8.70 0.22

Return on Capital Employed % 5.79 5.67 10.02 9.52 7.27

Return on Assets % 0.34 0.21 4.36 2.90 0.07

Return on Working Capital % 77.11 100.53 143.12 116.16 94.38

Operating Costs (% of Sales) % 97.79 97.74 96.13 95.78 96.83

Administration Costs (% of Sales) % 19.12 20.95 18.72 18.91 19.04

Liquidity Ratios

Current Ratio Absolute 1.11 1.08 1.09 1.13 1.12

Quick Ratio Absolute 0.78 0.75 0.76 0.78 0.79

Cash Ratio Absolute 0.18 0.19 0.19 0.25 0.27

Leverage Ratios

Debt to Equity Ratio Absolute 0.68 0.67 0.69 0.74 0.77

Net Debt to Equity Absolute 0.53 0.47 0.46 0.47 0.45

Debt to Capital Ratio Absolute 0.41 0.40 0.41 0.43 0.43

Efficiency Ratios

Asset Turnover Absolute 1.54 1.49 1.55 1.43 1.40

Fixed Asset Turnover Absolute 5.37 5.11 5.33 4.88 4.48

Inventory Turnover Absolute 8.25 8.29 8.44 7.76 7.90

Current Asset Turnover Absolute 3.34 3.32 3.39 3.18 3.19

Capital Employed Turnover Absolute 2.62 2.50 2.59 2.26 2.29

Working Capital Turnover Absolute 34.93 44.43 37.02 27.53 29.73

SOURCE: COMPANY FILINGS M A R K E T L I N E

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Table 20: LG Electronics, Inc.: Key Employees

Name Job Title Board

Brian Kwon President Mobile Communications Company

and Home Entertainment Company Senior Management

Chul-Yong Park Chief Human Resources Officer Senior Management

Chul-Yong Park Senior Vice President Senior Management

Dae-Hyung Kim Director Non Executive Board

Do-Hyun Jung Chief Financial Officer Executive Board

Do-Hyun Jung Director Executive Board

Do-Hyun Jung President Executive Board

I.P. Park Chief Technology Officer Senior Management

I.P. Park President Senior Management

Jo Seong-jin Chief Executive Officer Executive Board

Jo Seong-jin Director Executive Board

Jo Seong-jin Vice Chairman Executive Board

Joon-Keun Choi Director Non Executive Board

Kim Jin-yong President Vehicle Component Solutions

Company Senior Management

Kwon Soon-hwang President Business to Business Company Senior Management

Sang-Goo Lee Director Non Executive Board

Song Dae-hyun President Home Appliance and Air Solution

Company Senior Management

Yong-Ho Baek Director Non Executive Board

Young-Soo Kwon Chairman Executive Board

SOURCE: COMPANY FILINGS M A R K E T L I N E

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9. Macroeconomic Indicators

9.1. Country data

Table 21: United States size of population (million), 2015–19

Year Population (million) % Growth

2015 321.4 0.8%

2016 323.8 0.8%

2017 326.3 0.8%

2018 328.9 0.8%

2019 331.4 0.8%

SOURCE: MARKETLINE M A R K E T L I N E

Table 22: United States gdp (constant 2005 prices, $ billion), 2015–19

Year Constant 2005 Prices, $ billion % Growth

2015 15,276.3 3.2%

2016 15,739.0 3.0%

2017 16,161.3 2.7%

2018 16,559.0 2.5%

2019 16,929.6 2.2%

SOURCE: MARKETLINE M A R K E T L I N E

Table 23: United States gdp (current prices, $ billion), 2015–19

Year Current Prices, $ billion % Growth

2015 18,313.5 5.1%

2016 19,223.8 5.0%

2017 20,145.1 4.8%

2018 21,077.3 4.6%

2019 21,993.9 4.3%

SOURCE: MARKETLINE M A R K E T L I N E

Table 24: United States inflation, 2015–19

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Year Inflation Rate (%)

2015 2.0%

2016 2.1%

2017 2.3%

2018 2.3%

2019 2.2%

SOURCE: MARKETLINE M A R K E T L I N E

Table 25: United States consumer price index (absolute), 2015–19

Year Consumer Price Index (2005 = 100)

2015 123.9

2016 126.4

2017 129.3

2018 132.2

2019 135.1

SOURCE: MARKETLINE M A R K E T L I N E

Table 26: United States exchange rate, 2015–19

Year Exchange rate (€/$)

2015 1.1095

2016 1.1068

2017 1.1320

2018 1.1810

2019 0.8929

SOURCE: MARKETLINE M A R K E T L I N E

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Appendix

Methodology

MarketLine Industry Profiles draw on extensive primary and secondary research, all aggregated, analyzed, cross- checked and presented in a consistent and accessible style.

Review of in-house databases – Created using 250,000+ industry interviews and consumer surveys and supported by analysis from industry experts using highly complex modeling & forecasting tools, MarketLine’s in-house databases provide the foundation for all related industry profiles

Preparatory research – We also maintain extensive in-house databases of news, analyst commentary, company profiles and macroeconomic & demographic information, which enable our researchers to build an accurate market overview

Definitions – Market definitions are standardized to allow comparison from country to country. The parameters of each definition are carefully reviewed at the start of the research process to ensure they match the requirements of both the market and our clients

Extensive secondary research activities ensure we are always fully up-to-date with the latest industry events and trends

MarketLine aggregates and analyzes a number of secondary information sources, including:

- National/Governmental statistics

- International data (official international sources)

- National and International trade associations

- Broker and analyst reports

- Company Annual Reports

- Business information libraries and databases

Modeling & forecasting tools – MarketLine has developed powerful tools that allow quantitative and qualitative data to be combined with related macroeconomic and demographic drivers to create market models and forecasts, which can then be refined according to specific competitive, regulatory and demand-related factors

Continuous quality control ensures that our processes and profiles remain focused, accurate and up-to-date

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Industry Profiles

9.2. Industry associations

9.2.1. GSMA

Floor 2, The Walbrook Building, 25 Walbrook, London, EC4N 8AF, GBR

Tel.: 44 207 356 0600

Fax: 44 20 7356 0601

www.gsma.com

9.2.2. CTIA - The Wireless Association

1400 16th Street, NW, Suite 600, Washington, DC 20036, USA

Tel.: 1 202 785 0081

Fax: 1 202 785 0721

www.ctia.org

9.2.3. The Consumer Electronics Association

1919 S. Eads St., Arlington, VA 22202, USA

Tel.: 1 703 907 7600

Fax: 1 703 907 7675

www.ce.org

9.3. Related MarketLine research

9.3.1. Industry Profile

Global Mobile Phones

Mobile Phones in Europe

Mobile Phones in Japan

Mobile Phones in Canada

Mobile Phones in Mexico

Mobile Phones in the United States

Industry Profiles

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