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Egham, UK, August 12, 2009 — Worldwide mobile phone sales totalled 286.1 million units in the second quarter of 2009, a 6.1 per cent decrease from the second quarter of 2008, according to Gartner, Inc. Smartphone sales surpassed 40 million units, a 27 per cent increase from the same period last year, representing the fastest-growing segment of the mobile-devices market (see Table 2).

“Despite the challenging market, some devices sold well as consumers who would usually have purchased standard midrange devices either cut back to less expensive handsets or moved up the range to get more features for their money,” said Carolina Milanesi, research director at Gartner. “Touchscreen and qwerty devices remained a major driver for replacement sales and benefited manufacturers with strong, touch-focused midtier devices. However, the decline in average selling price (ASP) accelerated in the first half of the year and particularly affected manufacturers that focus on midtier and low-end devices, where margins are already slim.”

The recession continued to suppress replacement sales in both mature and emerging markets. The distribution channel has dealt with lower demand and financial pressure by using up 13.9 million units of existing stock before ordering more. Gartner expects the gap between sell-in to the channel and sell-through to customers will reduce in the second half of 2009 as the channel starts to restock.

Table 1
Worldwide Mobile Terminal Sales to End Users in 2Q09 (Thousands of Units)

Note: This table includes iDEN shipments but excludes ODM-to-OEM shipments.
Source: Gartner (August 2009)

Nokia maintained its leadership position, but its portfolio remained heavily skewed toward low-end devices. Its flagship high-end N97 smartphone met little enthusiasm at its launch in the second quarter of 2009 and has sold just 500,000 units in the channel since it started to ship in June, compared to Apple’s iPhone 3G S, which sold 1 million units in its first weekend. “The right high-end product and an increased focus on services and content are vital for Nokia if it wants to both revamp its brand and please investors with a more promising outlook in ASPs and margins,” said Ms Milanesi.

Samsung and LG both had a very strong second quarter of 2009 with sales of 55 million units and 30.5 million units, respectively. Samsung’s touchscreen devices, qwerty phones and smartphones drove sales in mature markets, and Gartner expects it will continue to gain market share in the second half of 2009 to close the gap with Nokia. Gartner expects LG to keep moving into lower-tier devices to drive growth in emerging markets and be well-positioned to take advantage of China’s 3G rollout as it can deliver good-value-for-money devices. Motorola’s sales of 15.9 million units were slightly better than expected, but its presence has rapidly concentrated on the Americas, and it has lost most of its share of the Western European market, where it sold fewer than 1 million units in the second quarter of 2009. Most operators and customers will be waiting for Motorola’s new Android-based products planned for the fourth quarter of 2009.

Sony Ericsson’s market share dropped 2.8 percentage points year-on-year in the second quarter of 2009 but its volume dropped 41 per cent. Although the market environment was challenging, Gartner attributes Sony Ericsson’s poor performance to its uncompetitive range of handsets. “Sony Ericsson has neglected to exploit key trends such as qwerty products for messaging and e-mail, internet browsing and navigation. If it wants to build the presence of its three new products announced this quarter in the channel and capture Christmas sales, the products need to come to market early in the fourth quarter of 2009,” Ms Milanesi added.

Table 2
Worldwide Smartphone Sales to End Users in 2Q09 (Thousands of Units)

Note: For HTC, Gartner counts only the company’s own-branded devices, including the G1.
Note: Totals may not add to 100.0 percent due to rounding.
Source: Gartner (August 2009)

“Smartphone sales were strong during the second quarter of 2009, with sales of 40.9 million units in line with Gartner’s forecast of 27 per cent year-on-year sales growth for 2009,” said Ms Milanesi. “Given the higher margins, smartphones offer the biggest opportunity for manufacturers. It is the fastest-growing market segment and the most resistant to declining ASPs.”

Apple’s expansion into a larger number of countries in the past year has produced a clear effect on sales volumes, as have the recent price adjustments on the 8GB 3G iPhone. Sales of 5.4 million units in the second quarter of 2009 indicated a 51 per cent growth in shipments and helped Apple maintain the No. 3 position in the smartphone market, where it has stayed since the third quarter of 2008. Apple brought its much-anticipated new device — the iPhone 3G S — to market at the end of the second quarter of 2009, but its full potential will only start to show in the sales figures in the second half of 2009.

At the high end of the smartphone market, HTC remained in the No. 4 position behind Apple, where it has been since the third quarter of 2008. It reported lower expectations for the second half of 2009 due to product delays and now expects 2009 revenue to decline by low- to mid-single digits year-on-year, far below its previous outlook of 10 per cent annual growth.

In the smartphone operating system (OS) market, Symbian held 51 per cent share, down from 57 per cent a year ago, while RIM and Apple grew their shares year-on-year. Android’s share was just under 2 per cent of the market and more Android-based devices will come to market in the fourth quarter of 2009, intensifying competition in the smartphone OS market, particularly for Symbian and Windows Mobile. Microsoft’s share continued to drop year-on-year to account for 9 per cent of the market in the second quarter of 2009.

“Microsoft licensees HTC and Samsung continued to add features to their own interfaces, on top of Windows Mobile, to create more competitive products and make up for the usability constraints of the Microsoft platform,” said Roberta Cozza, principal analyst at Gartner.

This quarter also saw the debut of the long-awaited Palm Pre based on the new web operating system. “This device attracted a lot of media attention but showed mixed results at the cash register as sales only reached 205,000 units,” said Ms Cozza. “Palm currently ranks tenth in the smartphone market and Gartner remains concerned about its ability to gain traction outside the US market, where its brand is less strong.”

“For the remainder of 2009, manufacturers must offer products with the features that consumers and operators are demanding most strongly — like touchscreens, focus on user interfaces and application/content ecosystems — and work hard to keep operators loyal,” concluded Ms Milanesi. “We expect competition to intensify in the second half of 2009. Mobile operators are likely to drive competition among manufacturers as they start selling e-book readers and mini-notebooks from other manufacturers to foster mobile broadband subscriptions. Operators are also starting to subsidise e-book readers and mini notebooks on contract and this means that there will be less subsidy available to drive sales of mobile phones and smartphones. In turn, operators will demand lower prices from phone manufacturers, which will be under even more pressure to deliver strong feature sets at the lowest possible price.”

Additional information is in the Gartner report Competitive Landscape: Mobile Devices, Worldwide, 2Q09.

Egham, UK., November 25, 2008 — 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)

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.

Mobile Phone Industry Expected to Resist Economic Downturn as Majority of Growth Will Come From Emerging Markets

Egham, UK, February 27, 2008 — Worldwide sales of mobile phones to end users surpassed 1.15 billion units in 2007, a 16 per cent increase from 2006 sales of 990.9 million, according to Gartner, Inc (see Table 1). Mobile phone sales at the end of the year were consistent with the yearly trend, as fourth quarter sales reached 330 million units.

“Emerging markets, especially China and India, provided much of the growth as many people bought their first phone,” said Carolina Milanesi, research director for mobile devices at Gartner, based in Egham, UK. “In mature markets, such as Japan and Western Europe, consumers’ appetite for feature-laden phones was met with new models packed with TV tuners, global positioning satellite (GPS) functions, touch screens and high-resolution cameras.”

“After another strong year, we expect the growth in sales of mobile devices to end users will decelerate in 2008 and fall to about 10 per cent growth as mature markets become more saturated,” added Ms Milanesi. “However, the global mobile devices market will remain relatively immune to a recession in the US and Western European economies as the majority of growth in 2008 will come from emerging markets. The mature Western Europe and North America markets are driven by operator contract terms and replacement cycles and will account for just 30 per cent of the global mobile devices market in 2008.”

Nokia achieved its long-term target of 40 per cent market share in the fourth quarter of 2007 when it sold slightly more than 133 million phones across the world (see Table 2). Despite some component shortages, Nokia increased its market share sequentially in all regions except North America, which remains a challenging market for the vendor. In emerging markets, products such as the 1110, the 1600 and the 2630 were in demand by consumers, while in mature markets such as Western Europe high-end phones like the N95, N82 and N73 were sought-after devices. In 2008, Nokia will need to continue to improve its portfolio, offering not only more applications and functions, but also novel designs and improved user interfaces.

In the fourth quarter of 2007, Samsung maintained second position, and although its market share slipped slightly, the gap widened between it and third-placed Motorola. Its success relied on its Ultra and Ultra II family of products. In 2008, Samsung needs to diversify its portfolio further with more form factors and colours so that single products stand out from the overall line-up.

The problems that beset Motorola in the third quarter of 2007 continued through the fourth quarter, and it recorded sales of 39 million phones across the world, taking 11.9 per cent of the market. It retained second place in terms of annual sales to end users in 2007, largely thanks to the inventory it disposed of in the first half of the year. Nevertheless, the extent of Motorola’s troubles can be seen in the 9.7 percentage-points market-share drop in its fourth quarter of 2007 result from the same period in 2006.

Sony Ericsson ended 2007 with another positive performance, growing its market share on a quarterly basis to 9.0 per cent from 8.7 per cent. Its Cyber-shot and Walkman products, such as the K850i, K610i, W910i, K550i and W300i, remained popular among consumers around the world. As Sony Ericsson widens its reach, adding features such as Wi-Fi and GPS, as well as more low-tier products, it will stay competitive in the coming quarters.

LG’s mobile phone sales totalled 23.5 million units in the fourth quarter of 2007, maintaining its 7.1 per cent market share despite the increase of more than three million in sales volumes. The success of the Viewty, the Venus and the Voyager helped LG gain brand awareness across the world as well as improve its margins. Ms Milanesi commented: “In 2008, LG will need to continue strengthening its high-end portfolio for mature markets as well as its mid tier. In the low tier, LG will increasingly be challenged by vendors such as ZTE, which has already been eroding its market share in key markets such as India.”

The market saw three new entrants into the top ten in the fourth quarter of 2007. These vendors included Research In Motion (RIM), ZTE and Apple. “On one hand, we have aggressive pricing and a focus on emerging markets (ZTE), and on the other, RIM with targeted functions and Apple with brand and design,” said Ms Milanesi.

“Phone manufacturers need to continuously adapt their portfolios to respond to operators’ demands for open platforms, lower pricing and more personalisation,” recommended Ms Milanesi. “They should also try to meet consumers’ desires for fashionable, easy-to-use phones.”

Regional Analysis

In Asia/Pacific, 112 million mobile devices were sold in the fourth quarter of 2007, representing 9.6 per cent growth over the previous quarter. Over the holiday season, operators and distributors offered a wide range of mobile phone options at reasonable prices, tempting new users to sign up to service plans. “Driving factors for growth in emerging markets in Asia/Pacific included huge numbers of new subscribers, lower-priced phones based on wideband code division multiple access (WCDMA) technology, as well as ultra-low-cost CDMA phones and low-cost global system for mobile (GSM) phones,” said Ann Liang, Gartner principal research analyst for mobile terminals, based in Taipei.

Sales in the Eastern Europe, Middle East and Africa region remained strong in the fourth quarter of 2007 and reached 61.8 million units. Mobile operators continued to add new subscribers to their networks, especially in Africa where countries such as Nigeria, Egypt, Algeria and South Africa saw healthy net new additions.

In Japan, sales to end users numbered 12.5 million units in the fourth quarter of 2007, a decrease of 3.6 per cent year-on-year. Strong sales in the early part of the year brought total sales in 2007 to a record high of 52.3 million units — more than in 2003, when many Japanese bought their first camera phones. “In 2007, music player functions and embedded TV-tuners with large, high-resolution displays persuaded users to replace their devices,” said Nahoko Mitsuyama, principal analyst for mobile communications research at Gartner, based in Tokyo.

In Latin America, sales reached 38.8 million units in the fourth quarter of 2007, a 12.5 per cent increase from the same period in 2006. “In December, the holiday season, along with accompanying promotions, meant sales hit a new record level,” said Tuong Nguyen, analyst for mobile terminals at Gartner, based in Arlington, Virginia.

The fourth quarter of 2007 was another record quarter in North America, as sales to end users continued at a rapid pace, reaching 49 million units, an increase of 9.2 per cent from the fourth quarter of 2006. “AT&T and Verizon Wireless continued to be the strongest performing operators, while Sprint Nextel lagged,” said Hughes De La Vergne, principal analyst for mobile terminals research at Gartner, based in Dallas, Texas. “Replacement devices continued to dominate sales and growth in new subscribers slowed down as penetration rates climbed.”

In the fourth quarter of 2007, mobile phone sales in Western Europe totalled 55 million units, up 2 per cent from the fourth quarter of 2006. Features such as music players, GPS and cameras proved to be significant attractions. In the same quarter, operators in Germany, the United Kingdom and France introduced Apple’s long-awaited iPhone to the market. Although sales have been small, this iconic device renewed consumers’ interest in high-end phones, which in most Western European markets are still heavily subsidised by operators.

More information is available in the Gartner report “Dataquest Insight: Market Share for Mobile Devices, 4Q07 and 2007”, available on gartner.com or through Holly Winter (contact details below).

In addition, trends in mobile and wireless markets will be further discussed at the co-located Gartner Enterprise Networking & Communications Summit and Wireless & Mobile Summit, 23-24 April at the Royal Lancaster Hotel, London, UK. For more information, please visit europe.gartner.com/en and europe.gartner.com/wireless and to register please contact Holly Winter at Gartner (contact details below).