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Sun 9 Sep 2007 04:00 AM

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Cashing in on flash

With the rapid improvement in storage capabilities, flash memory-based portable MP3 players are stealing a march on their hard drive rivals in the Middle East consumer markets.

With Apple's all-conquering iPod dominating the market for hard drive-based MP3 players, rival vendors have turned to the increasingly dynamic flash memory market to claim a stake in the sector.

In the hustle for pole position, rival vendors have sought to cram more memory into increasingly compact devices. This trend has seen consumer demand explode for flash memory devices, which has led to OEM wholesale prices for flash memory chips falling to as little as US$25 for 2GB. Despite the greater storage capacity provided by hard drive MP3 players, flash memory has proven more cost-effective in models with a memory configuration of less than 4GB.

According to market research supplied by GfK Marketing, hard drive-based MP3 players in the UAE accounted for just 10% of all MP3 player sales in the final quarter of 2006 - a trend that has continued for much of 2007.

Observers have cited the compact size, durability and economic efficacy of flash-based memory as making it a logical choice for digital audio products.

"Most consumers use their MP3 players everyday," says Samsung Gulf's Makarand Phadke.

"This puts a higher premium on the durability of a particular product as the devices are more vulnerable to daily wear-and-tear. Flash memory has enabled vendors to develop products that weigh less and are more durable. The reduced cost of flash memory also aids price rationalisation and maintains healthier margins for channel players."

As a relatively new player in the market, Samsung aims to challenge Apple's hegemony with its recently launched flash-based K3, K5 and U3 models.

"Samsung has been trailing in the MP3 player market as consumers tended to favour products with larger storage capacities using hard disk drives," admits Phadke, who claims the initial lag in sales is to be expected. "We are confident we can quickly make significant gains in terms of market share with the release of our expanded product range."

Samsung's innovative K5 has been a huge hit in the region, thanks largely to its innovative design which incorporates a slide-out speaker system.

"The K5 enables users to enjoy their music individually or in a group without the need for cumbersome speaker accessories," Phadke claims.

The K3 and K5 models are also among the first Samsung digital audio players to feature the company's impressive OLED display technology.

"Samsung's use of flash memory and OLED displays has enabled it to rollout a product that combines class and quality, at an affordable price," claims Phadke. The entry-level K5 undercuts Apple's iPod nano on price and boasts additional features which Samsung claims guarantees its popularity among consumers.

While Phadke says Samsung has traditionally faced slim margins in the highly competitive flash memory market, the new products are priced to ensure greater returns for the company and it's partners.

"We have traditionally had to contend with 7% profit margins in this sector," he concedes. "Our objective in this market segment is to shift large volumes in order to maximise our returns."
The increasingly bare profit margins typically associated with the Middle East MP3 player market have forced other vendors such as Creative Labs to review their market strategies.

"Our response has been to revamp and reposition our products in the mid- to high-end sector, which is providing us with healthier margins," claims Leonard Yap, marketing manager of Creative Labs ME.

Yap claims that the premium sector of the market offers the greatest prospects in terms of growth.

"Consumers are becoming increasingly sophisticated in terms of their demands and buying patterns - they're opting for quality over economy," says Yap.

"We strive to distinguish our brand from entry-level competitors by emphasising the quality of our product portfolio and by ensuring competitive price points. Many of the major brands are recognised for their 'lifestyle accessories' ranges and Creative has to compete with the peer-acceptance of brands such as Apple and Sony."

Intense competition has even forced some entry-level vendors to abandon the market completely. Dubai-based Nikai is currently reevaluating its strategy for the sector.

"We are currently operating at a loss in the MP3 player market," says Amit Vardhan, Nikai's assistant general manager. "As a result, we are developing a range of products, that boast multimedia capabilities such as a portable DVD-MP3 player."

Nikai also reports that the rapid pace of technological development in the market, which has done so much to spur consumer interest, means that smaller brands are in danger of being swept aside by the major players.

"These factors have led consumers to expect improved performance for less money," says Vardhan. "That's spells bad news for smaller brands that do not have the resources to develop new technologies."

At present, the iPod's market dominance seems unassailable as the company leads the market in terms of sales, brand recognition, and aesthetic design.

However, Apple's switch to flash-based memory with its iPod nano could signify a power-shift in the global market for MP3 players. For example, if Samsung can leverage its expertise in the field of flash memory, it should succeed in establishing itself as a major force as both as a manufacturer and a brand in its own right.

The falling price of flash memory has opened the way for Chinese and Taiwanese OEM manufacturers to match the major players in terms of product quality and beat them on retail price. A likely scenario is that leading multinational companies will no longer be able to rely on customer loyalty and peer acceptance to maintain market leadership as consumers become more demanding in an increasingly dynamic market.

The Japanese consumer electronics giant is showcasing its latest range of Walkman-branded MP3 players at GITEX Technology Week. The company's latest NW-A800-series of video-capable Walkman MP3 players are available in three memory sizes (2GB, 4GB and 8GB) and weigh a mere 53g.

The Walkman Video MP3 player boasts a colour-rich two-inch QVGA (320 x 240 pixels) colour TFT LCD screen, which can display video footage both horizontally and vertically. Downloading video content is easy with a simple drag and drop mechanism - video playback supports the widely used MPEG-4 and high quality codec of AVC (H.264/AVC) Baseline profile formats, at up to 30 frames per second. File conversion, if needed, can be achieved via the supplied ImageConverter 3 software.

The NW-A800 also features Sony's unique Digital Sound Enhancement Engine (DSEE) and is powered by a lithium-ion rechargeable battery with an extended battery life providing 30 hours continuous music playback or eight hours continuous video playback.

Sony Middle East distribution partners: Jumbo Electronics.


The iPod easily lays claim to the title of electronics gadget of the new millennium.

However, with no shortage of companies looking to land the elusive killer blow on Apple's dominance in the MP3 player market, the company is relying on its tried-and-tested formula of combining sleek aesthetics with user-friendliness to keep ahead of its rivals.

The latest flash memory-based iPod nano features Apple's 'Click Wheel' navigation system and a smaller, thinner and lighter design than its predecessor. It is also available in a variety of coloured aluminium casings and memory configurations up to 8GB. The latest range sees Apple continue its use of flash memory from the iPod mini and shuffle ranges originally rolled-out in 2004.

Apple Middle East distribution partners: Arab Business Machine.

Samsung Electronics

South Korea's Samsung Electronics is aiming to become a major player in the flash-memory based MP3 player market as it continues to invest heavily in research and development of flash memory chips and OLED LCD displays.

Samsung Gulf's Makarande Phadke says the company plans to "leverage its dominance in LCD display and chip making to win [mp3 player] market share in the Middle East."

The company is also looking to establish itself as an innovator in the field, demonstrated by the release of its stereo speaker-equipped K5 player late last year and more recently, the mini-me U3 player, which boasts a retractable USB plug and weighs just 22.8 grams.

The U3 is available in five colours and features a four line LED screen that displays artist, song and album title information. The player also includes DNSe 3D audio technology and is available with up to 4GB of flash memory and 15 hours battery life.

Samsung Middle East distribution partners: Eros Electronics, SMB Distribution.

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