Are Smartphones Immune to the Financial Crisis in Western Europe?
Published on: 3rd March 2009
The market for Western European converged mobile devices (commonly referred to as smartphones) experienced a good performance in the last quarter of 2008. According to IDC's European Mobile Phone Tracker, vendors shipped 9.3 million units, 25.9% higher than the 7.4 million shipped in 4Q07. For the full year 2008, vendors shipped 31.9 million units, 36.1% higher than the 23.5 million units shipped in 2007.
Over the past few quarters, converged mobile devices have been experiencing higher growth rates than the overall mobile phone market. While the overall market saw a record fall of 13.5% during the last quarter of 2008, the converged mobile devices grew.
Several new converged mobile devices were launched in Western Europe in the last quarter of 2008. Among the most popular were the BlackBerry Storm, BlackBerry Bold, T-Mobile G1 (the first Android OS device) and the HTC Touch HD. Some other devices launched on previous quarters ramped up for the sales season, becoming very popular as prices adjusted. Nokia E71, Samsung Omnia, Sony Ericsson X1, iPhone 3G, and Samsung Omnia contributed to boost the sales of this segment among consumers.
"The launch of iPhone 3G last year attracted consumer attention to this segment in Western Europe. Since then these devices have been seen as personal devices rather than just professional devices," said Francisco Jeronimo research manager with IDC's European Mobile Phone Devices and Trends. "The good performance of this segment is a very good sign of opportunities from which vendors and operators could profit in light of the slowdown in the overall mobile phones market. Every economic crisis culminates in lower consumer spending to some extent, but is this market fall a consequence of less money or simply because devices are no longer attractive enough to keep replacement rates high?"
"Mobile phone manufacturers have been focusing on the latest technology trends. Feature phones were the latest big wave and the tech-races started. Manufacturers ranked themselves with the highest megapixel cameras, the biggest displays, the latest processors, GPS-enabled devices, and so on and so forth. But are 12 megapixel cameras exciting enough to drive replacements when users are concerned about the economic situation? And from an operator's perspective, are those devices generating more revenues? During economic slowdowns operators and consumers become more conscious about what they purchase. Consumers are more careful when it comes to replacing their handsets. If a good value proposition is not presented, they postpone their buying decisions. On the other hand, operators need to drive replacements throughout handsets that allow new services and generate new revenues."
In mature markets like Western Europe, consumers find data access a key requirement on their devices, either for Internet access, push email, IM, social networking, PIM, or specific enterprise-related applications. Consequently converged devices that run high-level operating systems are replacing feature phones (running proprietary and closed operating systems). In the last quarter of 2008 datacentric devices grew 94% year on year, contrasting with the 21% decline of the voice-centric devices.
"We believe that feature phones will decline in the coming years and will be replaced by converged mobile devices. Manufacturers and operators are working closely to bring down the price of operating systems to be able to introduce more affordable converged mobile devices. The market is heading towards operating systems that allow third-party applications, can run independently of the operator's network, and can run several applications concurrently," said Jeronimo.
The current economic situation has proved that even the mobile phone market is not immune to recession. Nevertheless, in particularly difficult economic situations, vendors and operators can find good opportunities to increase their businesses. The converged mobile device (or smartphone) segment has shown that when the right needs are identified and valued-added products and services are presented, consumers will continue to replace their devices and maintain expenditure on communications when they perceive that value for money.
Converged mobile device growth is slowing annually, but still represents two-digit growth, in a clear contrast to the overall sector's negative growth. "This slight slowdown in smartphone growth is due factors other than purely economic reasons. As smartphone penetration increases, growth rates tend to be lower. On the other hand, the number of devices on the market is clearly low compared with traditional mobile devices. Traditionally, these devices were business-related and difficult to use for most end users without a specific need. Besides, prices are usually high for consumers without a clear need for such types of device," said Jeronimo.
From the operating system perspective, a newcomer was released in 4Q08 — the Android OS from Open Handset Alliance. The first device was launched by T-Mobile in the U.K. and manufactured by HTC. The expectations were high, it being the first Google phone, but the results were modest. "T-Mobile G1 was not a revolutionary device in terms of hardware, despite the good impressions users get when they use it," said Jeronimo. Even with a small market share of 0.3% among operating systems, the expectations are high for Android in 2009. Major vendors will release Android devices later this year, and the second device was unveiled by Vodafone at the World Mobile Congress 2009 in Barcelona last week — the HTC Magic. Currently the momentum is all about Android devices. "We believe Android OS will get an important share of the market in the converged mobile devices segment within the next three years. Android is getting the necessary support from operators and manufacturers to be a major OS in the upcoming years, bringing low to mid-price tier smartphones to the consumer."
Top Mobile Phone Vendors
- Nokia is well settled as the smartphone leader, with a market share of 53.6%. The E71, E51, E85, N95 and 5800 XpressMusic were the most shipped products during the quarter. In 2008, Nokia announced several partnerships (IBM, Microsoft) that will leverage its devices among enterprises and business professionals, where BlackBerry is well implemented.
- Research in Motion successful products gave it a 16.7% market share, twice that of the previous quarter. The company's experience in converged mobile devices makes RIM a key player in the prosumer market with its well-known BlackBerry devices. The new BlackBerry Storm and BlackBerry Bold contributed to the excellent performance in major Western European markets in 4Q08, particularly in the U.K., a major market for RIM in WE. The company shipped 3.8 million units in 2008, 85.6% higher than in 2007. It is also important to point out that RIM was the market leader in datacentric devices in 4Q08, with a market share of 35.2%.
- Apple shipments decreased by 50% in 4Q08 from the previous quarter, totaling one million units. However, Apple achieved 10.7% market share in the smartphone segment, making it the third biggest segment player in Western Europe. Despite the success of iPhone, Apple will face a challenging year if new products are not introduced. The main vendors are filling up the market with a full range of touchscreen devices, most of them with more and better features than iPhone.
- HTC increased shipments by 24.4% year on year in 4Q08 with 6.8% market share. Although shipments slipped by 15.2% from the previous quarter and were lower than in the first quarter, typically the weakest quarter of the year. The new products launched faced rising competition from BlackBerry and its South Korean rivals, LG and Samsung. In 2009, HTC will continue to be under pressure from its rivals, with the new Windows Mobile and Android devices coming to the market later this year. HTC will continue to focus on Android devices, a strategy to diversify its product mix.
- Samsung is the fifth major smartphone player, with a market share of 5.4%. Samsung shipped half a million units to Western Europe in 4Q08, 91% higher than in 4Q07. Samsung F480 and i900 Omnia were the main contributors. The Windows Mobile touchscreen device (i900 Omnia) was well accepted in the market, competing during the holiday season with iPhone. Operators without an agreement with Apple subsidized the device to directly compete with iPhone. Samsung is expected to increase market share in 2009 as several devices will be launched running Windows Mobile, Android, and LiMo (Linux).
Top Western European Mobile Phone Vendors, Shipments, and Market Share, 4Q08 (Units in Millions)
|Vendor||4Q08 Unit Shipments||4Q08 Market Share||4Q07 Unit Shipments||4Q07 Market Share||4Q08/4Q07 Change|
Top Western European Mobile Phone Vendors, Shipments, and Market Share, Full Year 2008 (Units in Millions)
|Vendor||2008 Unit Shipments||2008 Market Share||2007 Unit Shipments||2007 Market Share||2008/2007 Change|
Source: IDC European Quarterly Mobile Phone Tracker, February 24, 2009
Note: Vendor shipments are branded shipments and exclude OEM sales for all vendors.
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