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Mobile phone market continues to exhibit strong growth
Posted: 30-Jul-2004 [Source: IDC]

[Worldwide mobile phone shipments rose in Q2 by 2.5% over Q1 with Asian manufacturers LG and Samsung continuing to lead the competitive charge.]

Framingham, Mass. -- After an expected seasonal drop during the first quarter of the year, the worldwide market for mobile phones returned to growth in the second quarter of 2004 on the strength of renewed consumer demand for mid-range handsets featuring color screens and cameras. According to IDC's Worldwide Mobile Phone QView, worldwide mobile phone shipments in 2Q04 increased 2.5% over the first quarter and rose 36.7% year-over-year to 163.7 million units.

LG and Samsung both continued to execute strategies of rapid technological innovation, form factor flexibility, and brand excitement throughout the first half of the year. In contrast, the product strategy for vendors such as Nokia and Siemens remained fairly conservative, failing to match the aggressiveness of its counterparts.

Despite managing to stabilize shipments through pricing and product mix adjustments, Nokia continued to trail overall mobile phone market growth in the second quarter of 2004. With a market share lead several points smaller than just a year ago, Nokia must dramatically increase the amount of innovation it drives down through its product line to its volume handsets if it is to protect its position again further weakness. Similarly, Siemens' sequential drop in shipments puts its number 4 spot up for grabs, with Siemens, Sony Ericsson, and LG Electronics all within reaching distance of the position.

"During the second quarter of 2004, Samsung and LG demonstrated an ability to execute on a clear plan to improve their market share by injecting creativity into their mid-range products. Conversely, Nokia and Siemens continued to pursue conservative strategies formulated prior to today's increasingly competitive market environment," said David Linsalata, analyst in IDC's Mobile Devices program. "In the face of aggressive competition for market share, these vendors must closely monitor consumer demand and prove their commitment by delivering the technologies and features in demand by mass-market consumers."

Vendor Highlights

* Nokia -- Despite continuing to lead the worldwide mobile phone market with 27.7% market share, Nokia's slow growth compared to the overall market resulted in a drop in market share for the second consecutive quarter. Initial attempts at stabilizing shipments, however, do appear to be affecting change, as the company posted a year-on-year increase of 11.8% and a sequential growth of 1.6%.

* Motorola -- Although the success of a rejuvenated product line helped Motorola achieve a 52.4% year-on-year increase in shipments, the number 2 vendor still experienced a sequential drop of 4.7% during the second quarter of 2004. With number 3 Samsung close behind and gaining, the success of Motorola's new business and consumer-focused mobile phones are critical to its continued success in the market.

* Samsung -- Despite fierce competition in the U.S. market, Samsung posted impressive 76.0% year-on-year growth worldwide and a corresponding 1.3% increase in market share to 13.9%. With a number of new models planned for launch in the third quarter, Samsung is well-positioned to continue advancing on Motorola's number 2 spot.

* Siemens -- After a dramatic sequential drop of 18.8%, Siemens experienced a corresponding market share decrease of 1.7%. Although shipments did increase 28.4% year-on-year, Siemens must return to positive growth in order to protect its position as the number 4 vendor worldwide.

* Sony Ericsson -- Thanks to a strong shipment increase of 55.0% year-on-year and 18.2% sequentially, Sony Ericsson raised its market share 0.8% from the previous quarter to 6.4%, tying Siemens for the number 4 spot in the market. With a number of innovative new products scheduled for release in the latter half of the year, Sony Ericsson's recent surge may help the vendor claim the number 4 spot for its own.

* LG Electronics -- With market-leading year-on-year growth of 87.0% and sequential growth of 13.6%, LG increased its market share 0.6% to 6.1% of the worldwide mobile phone market. Separated from Sony Ericsson by just over 500 thousand units through the first half of 2004, LG is within striking distance of its perennial competitor.

Top 5 Vendors, Worldwide Mobile Phone Shipments and Market Share, 2Q 2004 (Preliminary)

1 Nokia 45,400,000 27.7% 2 Motorola 24,100,000 14.7% 3 Samsung 22,700,000 13.9% 4 Siemens 10,400,000 6.4% 4 Sony Ericsson 10,400,000 6.4% 5 LG Electronics 9,940,000 6.1% Other 40,800,000 24.9% Total 163,700,000 100.0%

Notes: Vendor shipments are branded shipments and exclude OEM sales for all vendors.

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