Economic woes starting to bite into mobile phone sales

27 Aug 2008

Although global mobile phone sales are up 12pc, the rising prices of food and fuel are having an effect on consumer replacement cycles for these devices.

Sales of mobile phones in the mature markets of Western Europe and North America slightly recovered after a difficult start. Western Europe reached close to 42 million units, while North America surpassed 44 million units in the second quarter of 2008.

“The economic environment continued to negatively impact mobile phones sales in both mature and emerging markets,” said Carolina Milanesi, research director for mobile devices at Gartner, based in Egham, UK.

“Consumers in mature markets continued to favour mid-tier devices over high-end devices, while new subscribers continued to join mobile networks in emerging markets during the quarter.

“However, replacement sales remained weak, as consumers faced higher prices for fuel and food in addition to higher levels of inflation. Despite this, we remain positive that mobile phone sales in 2008 will reach 1.28 billion units.”

In terms of overall sales, Japanese vendors such as Sharp, Panasonic and Kyocera have historically been the closest to the top-five vendors in the worldwide rankings.

However, in the past couple of years, the Japanese market has become more saturated and Japanese vendors’ attempts to break into other markets have failed. This has weakened their role in the worldwide market. Players such as Research In Motion, Tianyu Technology and Gionee Communication of China have subsequently been filling the void.

Nokia sold 120.4 million mobile phones in the second quarter of 2008 and widened its lead to control 39.5pc of the global mobile phones market. Sales in the ultra low-cost segment remained strong, thanks to Nokia’s distribution strategy, economies of scale and brand power. However, competition is increasing in this segment and at the high end.

In July, Nokia applied strategic price cuts in its mid-tier portfolio, which put pressure on competitors such as Sony Ericsson and LG.

Samsung’s mobile phones sales into the channel reached 45.7 million units. Good inventory management, however pushed sales up and helped Samsung reach a market share of 15.2pc in the second quarter of 2008.

With mobile phone sales reaching 30.4 million units, Motorola’s worldwide market share dropped further in the second quarter of 2008, at 4.5pc year-on-year. Nevertheless, sales grew quarter-on-quarter and reached 30.4 million units.

LG’s positive momentum continued in the second quarter of 2008, with mobile phones sales amounting to 26.7 million units.

Sony Ericsson’s market share grew slightly in the second quarter of 2008 sequentially, with worldwide mobile phone sales reaching close to 23 million units. However, annual market share fell by 1.4 percentage points, preventing the vendor from advancing from its No 5 position in the worldwide mobile handset market.

“Our confidence in an improved performance by Sony Ericsson weakened further as recent product announcements were disappointing since they delivered similar current features and designs,” Milanesi said.

Sony Ericsson has gone form eyeing the No 3 position in the worldwide ranking to fighting to regain the No 4 spot in just a few quarters.

By John Kennedy

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years