After an expected post-holiday slump in handset shipments in the first quarter of the year, the worldwide mobile phone market grew at a respectable pace in the second quarter, with most vendors citing success in emerging markets. According to IDC's Worldwide Quarterly Mobile Phone Tracker, vendors shipped a total of 272.7 million units worldwide in Q2 '07, about 6.9% more than the quarter earlier, and 16.5% more than the same quarter a year ago.
While year-over-year growth increased compared to that of first quarter, it is still significantly lower than the 22% growth seen in 2006. The slower growth can be attributed to the high market penetration rate in more mature regions, which limits growth primarily to replacements. Much of the growth in unit volumes derives from emerging markets where new subscribers are being added at a clipped pace.
Among the top vendors, Samsung beat Motorola for the number two spot in global market share after four years of stable rankings. Following a slow first quarter, Motorola announced a dismal performance in handset shipments in the second quarter. This news came days after Samsung's announcement of its fourth straight quarter of record shipments.
"While the shift in the industry vendor rankings is certainly of importance, perhaps, the big story of the quarter was Apple's debut as a mobile phone vendor with its launch of the iPhone," says Shiv K. Bakhshi, Ph.D., director of worldwide mobile device research at IDC. "Even though limited in the number of units shipped, the iPhone is likely to have a disproportionately large impact on the industry. For one, it has pushed the envelope on industrial design and user interfaces for all vendors. For another, it could forever alter the structural relationship between device vendors and mobile operators who have traditionally controlled the mobile environment, especially in the US. Equally important, the unparalleled hype surrounding the iPhone could lift mobile devices out of a utilitarian frame of reference and place them squarely in the fashion frame of reference, potentially raising ASPs for the entire industry. For the present, however, it seems at least to have raised the profile for all converged mobile devices."
"Following multiple quarters of increased growth, Samsung was able to benefit from Motorola's recent stumble," says Ryan Reith, research analyst with IDC's Worldwide Mobile Phone Tracker. "Samsung's Ultra Edition line of handsets has allowed the company to provide a wide range of handset selections for the upper-tier of the market while maintaining characteristic design. This platform approach has been beneficial for Samsung and the vendor plans to further expand on this business practice," Reith adds.
Top Five Mobile Phone Vendors
Nokiaonce again demonstrated its market leadership during the second quarter, with total shipments equaling more than those of the next three vendors combined. Much of Nokia's growth was attributed to its shipment growth within Europe and Asia, but still showed some signs of struggle in North America. At the same time, Nokia enjoyed leadership within the converged mobile device space, with a record shipment of 13.9 million units shipped, thanks in large part to its heavily promoted Nseries and Eseries devices.
Samsungsustained its upward trajectory for the fourth quarter in a row, and shipped a new record unit volume for a single quarter. With 37.4 million units shipped, Samsung wrested the No. 2 spot from Motorola. While Samsung pointed out the success of its Ultra Edition phones and recent release of its Ultra Special devices, the company also enjoyed an increase in volumes going into emerging markets.
Motorolawas the only vendor to post a year-on-year decrease among the leading vendors, and by the end of the second quarter, the company slipped to third place, citing ongoing shipment challenges in Asia, the Middle East, Africa, and to lesser extent, Europe. Motorola is seeking to reverse its fortunes by installing a new management team, refreshing its product portfolio, lowering inventory and reducing its workforce, but expects to face more challenges before recovering. On the positive side, the company crossed a milestone having shipped its 100 millionth RAZR phone.
Sony Ericssonremained the clear number four vendor during the second quarter, and took honors for having the largest year-over-year shipment increase among the leading vendors. Sony Ericsson's Walkman line of phones accounted for a third of its shipments in the second quarter, and the company announced two new Walkman-branded handsets, the W960 and the W910, both expected to ship later this year. In addition, Sony Ericsson announced plans to establish its own research and development site in Chennai, India, a move that will no doubt aid its manufacturing agreements with partners Flextronics and Foxconn, which already have locations in India.
LG Electronics, having reached a new record shipment level this quarter, remained firmly in fifth place during the second quarter, and despite its improvements, closed the gap with Sony Ericsson only slightly. LG Electronics' also reported a marked increase in its operating margin. A year ago, LG Electronics' operating margin hovered just above zero, but in a year's time, LG was able to push it above the 10% mark, an accomplishment attributed to its high-end devices like the Chocolate and the enV.
Top Five Vendors, Worldwide Mobile Phone Market, Q2 2007 (Units in Millions)
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