IDC: 3Q Shipment Growth Drops to 3.2% in Mobile Phone Market

November 5, 2008 // Published as a news service by IHS

Mobile phone manufacturers shipped a total of 299.0 million handsets in 3Q 2008, up 3.2% from last year and down -0.4% over 2Q 2008.

The 3Q of the year has historically been a ramp-up quarter as manufacturers load their sales channels with handsets in preparation for the holiday season. This year has not witnessed a similar ramp-up, largely due to the current economic situation, IDC said.

"Handset vendors felt the pressures of the dismal economy in the third quarter of 2008, and as a result, shipments and revenues were down almost across the board," said Ryan Reith, senior research analyst with the IDC Quarterly Mobile Phone Tracker.

Reith noted the following two signs of hope from two major players during 3Q earnings:

• Apple reported a successful quarter and said it is on pace to surpass its initial 2008 shipment estimates.
• Nokia announced a positive outlook for 2008 despite a tough 3Q, Reith said. "This offers reassurance to all industry players as Nokia has been a clear leader in the mobile phone space for quite some time," he said.

Looking forward to the holiday season, mobile phone average selling prices have begun to drop, and marketing campaigns are ramping up. Competition for buyers will remain high as spending will be a concern to consumers. IDC said it expects tight economic conditions will make 2009 slower and more competitive as well.

"While the overall mobile phone market registered small growth compared to last year, the market for converged mobile devices (commonly known as smartphones) posted strong gains," said Ramon T. Llamas, senior research analyst with IDC Mobile Devices Technology and Trends.

"The worldwide release of the Apple iPhone 3G earlier this summer marked a major step not only for Apple, but also raised the profile of converged mobile devices as a whole," Llamas said.

"Add on top of that the attention generated by the Google-powered G1, and the converged mobile device suddenly finds itself as the device sought by both seasoned and first-time users."

In North America, new releases from Apple, Palm and Research In Motion, along with the release of the HTC G1, pushed the converged mobile device further into the public eye and into users' hands, IDC said.

Conversely, traditional mobile phones were not able to keep up the pace and showed a slight decline from a year ago. Even so, according to IDC, overall growth in the region remained sound heading into 4Q 2008.

In Latin America, the mobile phone market posted slower growth than expected, but the converged mobile device market made strides, especially with the official release of the Apple iPhone in key countries. Although the region is known as a key emerging market, that has not stopped carriers and vendors from trying to migrate users to higher-end devices and services, according to IDC.

The Europe, Middle East and Africa (EMEA) market posted mixed results, with continued downturn in Western Europe due to economic challenges but still strong growth from the converged mobile device market. In neighboring Central Europe, Middle East and Africa (CEMA), vendors showed no sign yet of a significant slowdown, IDC said.

While the financial crisis affected sales in Russia and Eastern Europe, emerging markets in general have so far proved resilient to a slowdown in the mobile arena, and this is particularly true of Africa, which is benefiting from lower oil and food prices, the company said.

The Asia/Pacific market registered mixed fortunes in 3Q 2008. Although there were signs of growth in emerging markets like China and Indonesia, other developed markets suffered during the quarter. In particular, the Australia market slumped due to a combination of 3Q seasonality and weak economic sentiment, while the high-end Korea market experienced a double-digit decrease as dueling operators eased away from an expensive subsidy war.

IDC reported the following for the top five mobile phone vendors:

• Nokia remained in the market leadership position, with shipments greater than the next three vendors' total volumes combined, but not even it was immune from challenging market conditions. Citing a decision not to compete against aggressive pricing strategies of other handset vendors, increased competition around the globe and a slower ramp-up of key devices during the quarter, Nokia posted a drop in overall revenue, profit and market share. Nokia is looking to its E71, N95 and its recently announced 5800 XpressMusic to gain attention during the holiday quarter.

• Samsung shipped more than 50 million units for the first time in its history. IDC said the company received a warm reception for its feature phones like its touchscreen-capable Instinct and entry-level devices like its C260 and B130. In the process, the company posted more than twice the growth of the overall market and realized almost 11% operating margin.

• Sony Ericsson took third place worldwide for the first time in its history, despite ongoing restructuring across the company and a net loss for the quarter. At the same time, Sony Ericsson's application service providers (ASPs) continued to sink. However, the company launched its XPeria X1 as well as its first 3G phone in North America with the TM506.

• Motorola ended up in fourth place, with its volumes still a fraction of what they used to be, according to IDC. The mobile devices division posted another quarter of operating loss. However, the company introduced several devices before the holiday quarter, including the Krave ZN3, several Rokr devices, Rapture VU30 and the Aura, which address consumer demand for touchscreen and multimedia handsets.

• LG Electronics slipped into the No. 5 spot during the quarter, citing unit shipment declines in key emerging markets as well as economic challenges in Europe. According to IDC, LG has been meeting consumer demand and taste for messaging, touchscreen and music devices, which have driven revenue growth from the same quarter a year ago as well as double digit operating margin. Key devices for LG during the quarter included the Secret and Viewty, while new devices like the Decoy and Dare continued to gain momentum.

For more information about IDC's Worldwide Quarterly Mobile Phone Tracker, go to the IDC web site.

Source: IDC.