289.0 million handsets were shipped during the quarter

Feb 5, 2009 08:37 GMT  ·  By

According to a recent IDC report, the global mobile phone market has seen an unexpected drop during the fourth quarter of last year. IDC's Worldwide Mobile Phone Tracker states that a total of 289.0 million units were shipped in Q4 2008, which is 12.6 percent lower than the fourth quarter of 2007, with 330.8 million units moved. At the same time, 1.18 billion units were shipped worldwide during the entire year 2008, 3.5 percent higher compared to 1.14 billion units a year before.

“The fourth quarter was the perfect storm of factors to produce this result,” said Ramon Llamas, senior research analyst with IDC's Mobile Devices Technology and Trends team. “A combination of weak end-user demand, currency volatility, and limited credit availability prevented the market from experiencing the usual seasonal increase in shipments. We expect the first half of 2009 to be very challenging as vendors and distributors grapple with clearing inventory. Should these conditions persist, the mobile phone market may not recover until later this year, and possibly not until 2010.”

When it comes to the total shipments of mobile phones during 2008, the segment that comes forth is that of smartphones, or converged mobile devices, which saw a 22.5 percent growth during 2007, outpacing the rest of the market, and registering an even more impressive rise last year.

“In mature markets, such as North America and EMEA (Europe, Middle East, Africa), the converged mobile device segment grew 70.1% and 25.0% respectively in 2008,” said Ryan Reith, senior research analyst with IDC's Mobile Phone Tracker. “This segment is unique and unlike the rest of the market. Data attachment rates for these devices is well beyond that of traditional mobile phones, and the devices and services catering to this segment were more readily available than ever before in 2008. As long as operators are able to continue to subsidize these devices, and developers continue to enhance applications, then this segment will be a silver lining to an otherwise gloomy market.”

The entire industry expects 2009 to be even more difficult than the previous year, and handset vendors and chipset manufacturers, as well as operators, are all in a position where they have to focus more on regaining the consumer interest in the mobile phone area.

“Vendors are not taking this situation lightly, and are undertaking plans to run lean and maintain user interest,” added Llamas. “Cost reduction and operational efficiency have become cornerstones to corporate strategy moving forward and, for some, that can include headcount reduction. At the same time, converged mobile devices and services will become primary targets for vendors to focus their resources. Most vendors have already signaled their intentions to concentrate on the hot converged mobile devices space by aligning with operating systems that fit their strategy. Services, meanwhile, have played only a small role in the overall market, but will see increased importance as vendors compete for the user experience.”

IDC has also made a regional analysis of the market, showing that the market shrunk in almost all geographies. Both sequential and year-over-year drops were registered in North America in Q4 2008, the smartphone segment being the only one that posted double-digit growth. In Latin America the market saw a slowdown during the quarter, the performance of the entire market remaining flat compared to the previous quarter.

The financial turmoil influenced the Western European market greatly, as the sales went down dramatically in the quarter. At the same time, Central and Eastern Europe, the Middle East and Africa haven't seen a great slump compared to the final quarter of the previous year. The Asia/Pacific market also saw a decline during the quarter, and sales on the Chinese market were rather poor, both due to the economic downturn and to the fact that 2009 is expected to bring 3G promotions in the area.

The mobile phone market was led by five major handset vendors, namely Nokia, Samsung, LG Electronics, Sony Ericsson and Motorola. Nokia has seen a drop in sales of around 27 percent during the fourth quarter of 2008, yet it managed to maintain a focus on innovation and growth. Samsung has also seen a decline in its sales, yet the touchscreen-enabled phones and smartphones in developed markets along with mid-range camera phones in emerging markets were in demand, and the maker announced a focus on these segments during 2009.

LG Electronics managed to gain a good position during Q4 2008, and was placed third for the entire year as well. In 2009, the company expects to launch ten new models in the digital convergence area, including an Android handset in the second quarter. Sony Ericsson went down to the fourth place during the final quarter of last year and posted negative results for the time frame. Motorola announced another quarter of losses but it has high hopes for the future, especially given its focus on an Android-powered smartphone.