The worldwide mobile phone market experienced an unusual downturn in the normally robust fourth quarter of 2008 (4Q08). According to IDC's Worldwide Mobile Phone Tracker, vendors shipped a total of 289.0 million units, 12.6% lower than the 330.8 million units shipped during 4Q07. For the full year 2008, vendors shipped a total of 1.18 billion units worldwide, 3.5% greater than the 1.14 billion units shipped during 2007.
"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."
If there was one highlight in 2008 it was that the converged mobile devices
segment (commonly referred to as smartphones) grew 22.5% over 2007, clearly
outpacing the rest of the industry.
"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."
With clear expectations that 2009 will be more difficult than 2008, handset
vendors, chipset manufacturers, and operators will all have to work in sync to
rebuild consumer interest in mobile spending.
"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."
- The North America market suffered
both sequential and year-over-year declines in 4Q08 as economic conditions
worsened. The one bright spot was the converged mobile device market, which
posted double-digit growth. Driving this category forward were a combination
of positive factors, including strong consumer interest, growing popularity
of unlimited calling and data plans, and market leaders Research In Motion
and Apple keeping channels stocked with their devices.
- The Latin America mobile phone
marketplace showed a slowdown in 4Q08 as falling currency exchange rates led
to a decline in both consumer and commercial purchases. Converged mobile
device performance was largely flat compared to third quarter results as the
shipment numbers from the Apple iPhone launch in 3Q08 could not be sustained
for the final quarter of the year, and both Motorola and Palm posted poor
results. The traditional mobile phone market also experienced flat growth,
marking the first time that this segment did not post two consecutive
quarters of year-on-year growth.
- The Western Europe handset market
was hard hit by the financial crisis and shrank in the final quarter of 2008
at a rate never before seen. The traditional holiday campaigns and new
product launches were not enough to boost sales in comparison with the
previous year and almost all vendors experienced a significant slump in
sales. While the previously buoyant market in Central and Eastern Europe,
the Middle East and Africa did not show a major retrenchment against the
last quarter of 2007, the shipments of market leader Nokia were weak and
sales of converged mobile devices contracted in relation to the total
- As the Asia/Pacific market declined
in 4Q08, device makers seeking a respite in the emerging market of China
were left disappointed. Chinese consumers held off on mobile phone purchases
for much of the quarter, largely due to the worsening economic climate, but
also due to some anticipation of 3G promotions in 2009.
Top Five Mobile Phone Vendors
- Nokia gave early indications that
4Q08 would be a challenging quarter due to the economic downturn, and by
quarter's end its sales for devices and services had declined nearly 27%
from the previous year. In addition, Nokia took the step of reducing
headcount in order to lower overall costs. But during these difficult times,
Nokia spelled out the need to innovate and grow. To do this, Nokia will
continue to bring the Internet onto mobile devices while also developing
five interconnected services - maps, music, messaging, media, and games
- for its handsets.
- Samsung experienced lower sales than
expected due to the global recession and saw its operating margin suffer.
Despite these results, the company had strong demand for the products where
it had invested its resources, particularly touchscreen-enabled phones and
converged mobile devices in developed markets as well as mid-range camera
phones in emerging markets. These three product segments will continue to be
the company's key focus in 2009 along with improving cost competitiveness.
- LG Electronics climbed into third
place for the quarter and for the year, both milestones for the company.
But, due to sales declines within key markets, its profit margins slid back
down into the single digits for the first time since 4Q07. Looking ahead to
2009, the company will emphasize digital convergence on its handset
portfolio, and will launch ten new models, including an Android phone by
2Q09. In addition, its new low-tier platform will enable the company to
compete aggressively within low-end markets.
- Sony Ericsson slipped to fourth
place during the quarter, citing lower profitability due to ongoing
corporate restructuring, higher expenses related to sales, and a less
favorable product mix. Even with these negative results, the company made
significant investments to compete in the coming months, most notably
announcing its participation with the Open Handset Alliance (OHA) to build
its converged mobile device portfolio. Next, Sony Ericsson plans to build on
its expertise in music and imaging as well as harnessing the Internet to
bring more integrated mobile entertainment devices. Finally, Sony Ericsson
will expand its services arm now that it has launched its music service
PlayNow in Sweden.
- Motorola ended the quarter in fifth
place, posting another quarter of operating losses driven not only by the
global economic crisis, but also due to its ongoing restructuring and gaps
in its product portfolio. While this is the latest chapter in Motorola's
slide in the market, Co-CEO Sanjay Jha pointed out the progress made in
terms of cost reduction and platform rationalization, and spoke highly of
its converged mobile device innovation around Android. Moving forward,
Motorola will focus its efforts on mid-range and high end devices within the
Americas and China, a major departure from the company's strategy just two
Top Five Worldwide Mobile Phone
Vendors, Shipments, and Market Share, Q4 2008
(Units in Millions)
Top Five Worldwide Mobile Phone Vendors, Shipments, and
Market Share, Full Year 2008
(Units in Millions)
Source: IDC Worldwide Quarterly Mobile Phone Tracker, February 4, 2009
Note: Vendor shipments are branded shipments and exclude OEM sales for all