Worldwide sales of mobile phones to end-users reached more than 309
million units in the third quarter of 2008, a 6 per cent increase
compared to the third quarter of 2007, according to Gartner, Inc.
Growth dipped back into single figures, representing less than half the
16 per cent growth rate of the same period in 2007.
"The global economic downturn has triggered a
three-way battle between Sony Ericsson, Motorola and LG for the third
position in the worldwide mobile phone market, which has seen Sony
Ericsson emerge as the winner in the third quarter of 2008," said
Carolina Milanesi, research director for mobile devices at Gartner,
based in Egham, UK. "It has also affected sales in both mature
and emerging markets during the quarter. Replacement sales in
particular were affected, while first time users continued to see the
value of acquiring a mobile phone."
Nokia sold 118 million phones in the third quarter
of 2008 (see Table 1). It was the first quarter of the year in which
Nokia felt the negative effects of the current economic climate. Lower
replacement sales in mature and emerging markets impacted Nokia's
overall sales in the third quarter. Nokia suffered in what it called
the "converged devices" segment. However, analysts said Nokia should be
able to marginally improve its share in the fourth quarter of 2008 as
its new devices come to market, and the holiday season helps to
increase overall sales. Nokia remains best-positioned to deal with the current market conditions because of its economies of scale. Samsung had a very strong third quarter as sales increased 26.3 per
cent over the same period in 2007. It continued to take advantage of
the popularity of its touch-screen devices -- the Tocco and Omnia -- as
well as an enriched mid-tier device portfolio. Despite delivering a
strong sell-in, the vendor was also able to burn inventory from the
previous quarter. "Samsung is well positioned for the rest of 2008,"
said Ms Milanesi. "Although high-end products are under a lot of
pressure, Samsung's advantage is that its products appear to offer
better value for money than its competitors."
Table 1
Worldwide Mobile Terminal Sales to End-Users in 3Q08 (Thousands of Units)
|
Company |
3Q08 Sales |
3Q08 Market Share (%) |
3Q07 Sales |
3Q07 Market Share (%) |
|
Nokia |
117,978.9 |
38.2 |
110,117.8 |
37.8 |
|
Samsung |
52,891.6 |
17.1 |
41,876.0 |
14.4 |
|
Sony Ericsson |
24,847.7 |
8.1 |
25,391.6 |
8.7 |
|
Motorola |
24,633.4 |
8.0 |
37,865.2 |
13.0 |
|
LG |
24,069 |
7.8 |
20,499.1 |
7.0 |
|
Others |
64,111.6 |
20.8 |
55,332.5 |
19.1 |
|
Total |
308,533.0 |
100.0 |
291,142.2 |
100.0 |
Note* This table includes iDEN shipments, but excludes ODM to OEM shipments.
Source: Gartner (November 2008)
Sony Ericsson's rise to the third position during
the third quarter of 2008 had more to do with the issues that Motorola
and LG faced than Sony Ericsson's ability to turn around its business
after a few difficult quarters. Sony Ericsson continued to suffer from
the weakness in the high-end markets as well as the slowdown in
replacement cycles in Europe. Despite an aggressive price strategy in
Europe, the Middle East and Africa (EMEA), Sony Ericsson built some
inventory in Asia/Pacific during the quarter, which left a much smaller
gap between it and Motorola on sell-in numbers. There have been reports
of component shortages for the Xperia X1, Sony Ericsson's long-waited
Windows-Mobile-based touch-screen device, so sales are likely to be
challenged again. In addition, new products such as the Walkman W705
add to an already crowded music portfolio and might not be enough to
win more customers.
Motorola's worldwide share dropped further in the third quarter of 2008
as sales fell to 24.6 million units. With no inventory left to burn
from previous quarters and a portfolio that remains very weak, Motorola
slightly built inventory during the quarter. "The economic environment
is particularly difficult for Motorola because its lack of compelling
products and competitors' aggressive pricing called for price
adjustments that it cannot afford if it wants to please investors by
retaining margins," said Ms Milanesi. "We expect Motorola's issues to
continue well into 2009, and are puzzled by recent product
announcements like the Aura -- a $2,000 device -- that seem to totally
ignore current market dynamics."
LG's portfolio remains well-positioned to take advantage of the
seasonality in the fourth quarter of 2008 as its pricing is more suited
to the current economic climate. LG was able to burn some inventory it
built up in the second quarter of 2008, and sales to end users reached
24.1 million units. However, sales were negatively impacted by the loss
of a key contract in India, where LG valued profitability over market
share and walked away from a deal that offered a very low average
selling price. Sales in Western Europe and North America made up for
the weakness in emerging markets and limited the damage.
"All eyes were on Apple's performance during the quarter as it ramped
up the roll-out of its 3G iPhone from six to 51 countries, despite
building an inventory of just over 2 million units," said Ms Milanesi.
"Apple was able to return in the top ten vendors ranking at No. 7, just
under RIM. We expect that sell-in sales during the fourth quarter of
2008 will reflect this inventory level, especially given the current
economic environment."
Regional Analysis
Sales of mobile handsets in Asia/Pacific
increased despite economic pressure and weak consumer confidence, with
sales of 116.7 million units in the third quarter of 2008, a 13.8 per
cent increase year-on-year. However, replacement cycles increased from
four to eight months, resulting in either a decline or almost flat
sales in mature markets like Singapore, Hong Kong, Taiwan, Korea, and
Australia where operators are moving away from subsidies and pushing
for longer contract periods in an attempt to generate revenue. Sales in
emerging markets like India and China rose due to strong sales to
first-time buyers. "We expect the global economic decline and
associated drop in disposable incomes to make sales in the region
almost flat during the fourth quarter of 2008," said Anshul Gupta, principal research analyst for mobile terminals at Gartner, based in Mumbai, India.
Sales in Eastern Europe, the Middle East and Africa reached 57.8
million units in the third quarter of 2008, representing an increase of
13.1 per cent year-on-year. Several countries in Eastern Europe,
including Russia, Hungary, Ukraine and Romania, were hit hard by the
financial crisis toward the end of the quarter, but this did not
translate into a large downturn in the devices market. "Emerging
markets, especially in Africa, continued to display healthy growth," said Annette Zimmermann, senior research analyst for mobile devices at Gartner, based in Munich, Germany.
"We expect the continued economic pressure to have a negative impact on
handset sales in these regions in the fourth quarter of 2008, even
though consumers will benefit from lower food and energy prices."
In Japan, sales to end users reached 9.4 million units in the third quarter of 2008, a decrease of 28 per cent year-on-year. This was exactly the same volume of sales reached in the second quarter of 2008. "Consumers
showed little interest in upgrading their existing devices and when
they did, they tended to purchase standard models rather than high-end
ones with the latest functions," said Atsuro Sato, research analyst at Gartner, based in Tokyo, Japan.
Global economic uncertainties also affected sales of mobile handsets in
Latin America during the third quarter of 2008, with volumes growing
5.5 per cent year-on-year. "3G promotions have contributed to
subscriber growth, however equipment sales have been largely data cards
instead of handsets. SIM-only sales have also increased significantly
due to competition and regulation, such as Anatel in Brazil forcing
operators to sell unlocked phones," said Tuong Nguyen, principal
research analyst at Gartner, based in Arlington, Virginia, US.
The North American mobile handset market continued to grow. Sales to
end users were 47 million units in the third quarter of 2008, a 4.5 per
cent increase over the previous year. "Smartphones were a key driver of
growth in the market, with models from Research In Motion's (RIM's)
expanded portfolio and the 3G Apple iPhone proving especially popular,"
said Hughes De La Vergne, principal analyst for mobile terminals
research at Gartner, based in Dallas, Texas, US.
The market in Western Europe reached 43.5 million units in the third
quarter of 2008, but was below the 47.2 million units registered during
the same quarter in 2007. Replacement sales slowed as consumers dealt
with the higher cost of living and being locked into 18- or 24-month
contracts. These longer replacement cycles had a negative effect on
market performance and will continue to do so in the fourth quarter of
2008. "Holiday sales should help boost the market in the final quarter
of the year, but there are some signs that will worry vendors," said Ms
Milanesi. "In the UK, O2 and T-Mobile are offering consumers money off
their tariff if they postpone upgrading their handsets until January
2009. This is an attempt to reduce subsidy costs and defer them to a
new budget cycle, which is bad news for vendors and retailers."
Ms Milanesi concluded: "A combination of lower-than-forecast sales of
devices in the third quarter of 2008, limited availability of key
devices, and a general lack of compelling products leads us to believe
that annual growth in the mobile device market will be about 8 per cent
in 2008. It is too early to say how long the economic climate will
impact the devices market, but we expect market conditions to remain
challenging through at least the first half of 2009. We expect sales in
2009 to show a low single-digit growth contraction."
More information is available in the Gartner report "Dataquest Insight: Market Share for Mobile Devices, 3Q08", available on Gartner's website at http://www.gartner.com/DisplayDocument?ref=g_search&id=812815&subref=simplesearch.