According to IDC's latest EMEA Mobile Phone Tracker, the first quarter of 2007 witnessed total mobile phone shipments (including traditional mobile phones and converged devices) of 89 million units, representing year-on-year growth of 9%, which is up from around 82 million units in 1Q06.
Performance in the EMEA mobile phone market in 1Q07 not only mirrored the performance in the final quarter of 2006 but is also indicative of how IDC expects the mobile phone market to perform in 2007. ASPs for traditional mobile phones continued to decline, while vendors attempted to offset other factors, such as lengthening post-pay contract terms, increasing saturation of the subscriber base, and handset portfolio rationalization, by lowering costs and increasing smart-phone portfolios to try and protect ASPs and minimize the impact on margins.
"An increasing emphasis on fast growing, developing markets in CEMA (Central and Eastern Europe, Middle East, and Africa), as well as in other regions, has resulted in a shift in the handset product mix to midrange and low-end handsets, which has served to erode the ASP, while in Western Europe price reductions continued to be a tactical necessity for most vendors to ensure viable economies of scale," said Jean Philippe Bouchard, senior research analyst, European Mobile Devices.
Indicative of developments in the market, Sony Ericsson and Sagem Communication (SAFRAN Group) announced a key partnership in 1Q07, concerning entry-level GSM, GPRS, and EDGE mobile phones. As part of the licensing agreement, Sagem Communication will license certain hardware and software technologies, related to mobile phone platforms, to Sony Ericsson. As part of the ODM agreement Sagem Communication will provide Sony Ericsson with a number of Sony Ericsson branded mobile phones. In addition, the two companies will conduct joint development activities.
"In order for vendors to be successful, it will become increasingly critical not only to balance mobile device portfolios and product mix, but also to identify where synergies exist with other manufacturers in order to lower costs. It will also be important to focus on strategic areas within the portfolio, such as smart phones, in order to gain market share while at the same time protecting margins. This will remain the key challenge throughout 2007 and may help to slow rapid consolidation in the mobile device market, highlighted by the polarization of market share among the top 4 vendors," said Andrew Brown, program manager, European Mobile Devices and Computing.
"In CEMA, the richer markets in the region are now almost all mature, leaving growth to the poorer countries in the Middle East and Africa. This is, above all, benefiting Nokia, which is by far the strongest brand in the entry segments, and in 1Q the company outsold all other brands in CEMA by a ratio of at least five to one. Motorola fell back, forming a closely spaced second group with Samsung and Sony Ericsson. Nokia also does well in the upper-price segments, while the middle-price brackets are relatively small and less significant," said Simon Baker, program manager, Mobile Phones, IDC CEMA.
Vendor Highlights, 1Q07
Performances among the top 5 vendors were mixed, with Sony Ericsson recording the strongest growth in EMEA, while Nokia continued to record healthy growth and dominate in terms of overall market share. However, Motorola continued to struggle with its portfolio and LG and Samsung gained on portfolio refreshes and new handset designs. The mobile phone market is becoming increasingly polarized, with the top 4 vendors representing 86% of the market in 1Q07.
Nokia maintained clear leadership of the EMEA mobile phone market as market share increased to 44%, with growth of 22%. Large numbers of converged device shipments were maintained due to lowering prices on the existing portfolio, mainly on the Nokia N80 (with update for N80i) and core sales of the N73, ahead of sell-in of the new converged device portfolio, with a new enterprise device lineup (E65, E61i, and E90) and the announcement of the Nokia N76, N77, and N93i. Importantly, 1Q07 also witnessed the first shipments of the long awaited N95. Nokia also refreshed its core handset portfolio with the introduction of the 6300 and the music-enabled 5070 and 5700. In keeping with the focus on fashion brands, the vendor also expanded its L'Amour range with the 7373 handset (with Giambattista Valli accessories).
Samsung moved into second position overall, growing by 13%. The vendor was buoyed by strong sales of Ultra Edition handsets, which lowered in price ahead of competition from other vendors and ahead of heavy advertising throughout Europe for the Ultra Edition II handsets range, which will start shipping in volume in 2Q07. Samsung continued to rely on core handsets such as the D900 and E250 to make up large volumes in EMEA. Samsung expects to ramp volumes in developed markets by continuing to extend its position in WCDMA and HSDPA handsets.
Motorola slipped to third in the market for 1Q07 and has taken action to maintain a robust performance in the competitive climate by streamlining the product portfolio, as evidenced by the discontinuation of six legacy products during the quarter, reducing its workforce, increasing supply chain efficiencies by using alternate silicon providers, and continuing to introduce more devices based on Linux/Java. Motorola is also looking to strengthen its converged device portfolio by introducing the 3G Motorola Q and the UIQ based RIZR Z8, in order to protect margins and shift the product mix away from a higher prepaid mix.
Sony Ericsson recorded the highest growth of the top 5, with shipments growing year on year at 51%, the sixth successive quarter of double-digit growth. Consequently, the vendor increased market share to 12% compared to 9% last year, putting significant pressure on Motorola and also on Samsung. Sony Ericsson captured market share through low and midtier products such as the W300 and W200 Walkman phones and the K310 camera phone without undermining profitability. Margins improved year on year despite the increased proportion of mid and low-tier products in the line-up as Sony Ericsson continues to focus on controlling cost and maintaining margins while growing market share.
LG Electronics grew by 27%, with the Korean vendor starting to benefit from strengthening its regional marketing teams gaining some success with high-end feature phones with the Prada (KE850) phone and LG Shine (KE970). At the same time the vendor also increased its presence by refreshing its LG Chocolate handset (KG800) with the LG Chocolate Platinum, which helped the vendor to a stronger performance sequentially.
EMEA Mobile Phone Shipments 1Q07
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