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25 April 2007


Handset shipment growth slows to 10% year-on-year

Mobile phone vendors shipped 256.4 million units in first-quarter 2007, according to IDC’s Worldwide Quarterly Mobile Phone Tracker. This is 13.8% down on the previous quarter’s record shipments, although the decline was expected due to market seasonality.

However, it is also the first quarter of slower year-on-year growth in the mobile phone market: just 10% up on Q1/2006’s 233 million units, which is significantly lower than the year-on-year growth of more than 20% in each quarter of 2006. This reflects IDC's expectation that, as more subscribers are added to the network, fewer new subscribers are left to be added. So, mobile phone shipments are increasingly moving from being new handsets for first-time users to replacement handsets for seasoned users; overall growth will continue, but at a slower rate.

“The increase in worldwide phone shipments was driven, in part, by new subscribers in emerging markets and, in part, by replacement sales in mature markets,” says Ramon Llamas, research analyst with IDC's Mobile Devices Technology and Trends group. “Since basic voice connectivity and affordability are often the key components of demand in emerging markets, device vendors, appropriately, seek to supply low-cost handsets in these markets, which, in turn, has the unfortunate effect of dragging down device average selling prices (ASPs),” Llamas adds. “To stem the decline in ASPs, device vendors are taking steps to rationalize platforms, improve supply chain logistics, and relocate production to low-cost regions.”

“While rankings did not change among the top five vendors, some interesting trends have begun to unfold,” says Ryan Reith, research analyst for IDC’s Worldwide Mobile Phone Tracker. “Samsung was able to benefit from Motorola’s misfortunes by recording a positive sequential growth in the first quarter, which is uncommon given the effects of seasonality on this industry. While Motorola announced plans to revamp growth, the sudden shift in momentum demonstrates how competitive this industry is and how innovation on product development is essential.”

Shipment figures for individual top-five mobile phone vendors are detailed below.

Nokia shipped 91.1 million units in Q1/2007 (up 21.3% year-on-year). Shipments into the Middle East, Africa, and China were up from the holiday quarter while shipments in Asia/Pacific held steady. Nokia was able to maintain its device ASPs at €89, stemming the decline it saw in 2006. In the converged mobile device space, Nokia reported record shipments of 11.8 million units, citing the success of the N73, N70, and the newly launched E65.

Motorola shifted its focus towards recovery after shipping 45.4 million units (down 1.5% year-on-year) and experiencing operating losses for the quarter. With a restructured management team and clear objectives in place, Motorola’s mobile device team aims to reverse its fortunes by the end of the year. Motorola hopes that the new devices it has announced or launched during the quarter will pave the way for success later this year.

Samsung bucked the trend of other leading vendors by posting shipment growth not only year-on-year (20%) but also sequentially (to a record 34.8 million units). Fueling this was strong sales of its ‘Ultra Edition’ handsets, particularly its D900 model, as well as its E250 handset. Like other vendors, Samsung has kept a close eye on maintaining its double-digit profitability, even while becoming more active within emerging markets.

Sony Ericsson registered the largest year-on-year growth among the leading vendors (63.9%, to 21.8 million units), citing improvement in Europe, Asia/Pacific, and Latin America with its low- and mid-tier product portfolio. While it enjoyed double-digit profitability, its strategy to move into lower-tier devices put downward pressure on average selling prices. To address its presence in emerging markets, Sony Ericsson has partnerships with Asian manufacturers Foxconn and Flextronics, as well as an agreement with French manufacturer Sagem to provide entry-level devices. Meanwhile, it has announced more Walkman and Cybershot devices, with some models available for the mid-tier.

LG Electronics posted an expected seasonal sequential decline in shipments as well as flat growth from the same quarter a year ago, with a total of 15.8 million units shipped. Improvements from its product mix and WCDMA growth helped boost operating margins further, which is a significant improvement on its negative profitability of a year ago. Having enjoyed success from its Black Label Chocolate series, the firm hopes for similar success with more premium devices, including its Shine and digital multimedia broadcast devices.

Other vendors outside the top five accounted for 47.5 million shipments, down 11.9% year-on-year, evidencing increased consolidation in the industry.

See related item:

Inventory build-up trims mobile handset shipment growth to 12% in Q1/2007