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Entry-level phones push recovery
Posted: 28-Jul-2005 [Source: IDC]

[IDC reports entry-level phones pushed the market into recovery in Q2. ]

Framingham, MA -- The worldwide mobile phone market showed signs of recovery from the first quarter of 2005 due to impressive shipments of entry-level mobile phones to both developing and mature markets. According to IDC's Worldwide Quarterly Mobile Phone Tracker, worldwide mobile phone shipments totaled 188.7 million units in the second quarter, increasing 7.3% sequentially and 16.3% from the same quarter one year ago.

Among the leading vendors, Nokia maintained its leadership, nearly doubling the shipments of its closest competitor and continuing its string of consecutive quarters with market share greater than thirty percent. U.S.-based Motorola finished the quarter solidly in second place, and combined with Nokia, the two represent half the market. In addition, Motorola improved its lead over Samsung by nearly ten million units. Samsung's growth was flat from the previous quarter, but the vendor nearly reached the halfway point of fifty million units in its quest to ship one hundred million units this year. Finishing fourth was LG Electronics, although only three hundred thousand units separate it from fifth place Sony Ericsson. Last quarter, 1.7 million units separated the two vendors.

"The emphasis on entry-level phones demonstrates that vendors are keying in on specific regional and customer needs. Although this helps volumes, it also puts downward pressure on average selling prices and vendor profitability," said Ramon Llamas, research analyst for IDC's Mobility Group. "Despite all the interest and excitement over cutting edge devices, there continues to be a demand for simple voice-only phones that appeal to broad customer segments, even in mature markets like North America."

Within developing markets, vendors are eager to supply phones to reach different customer segments. According to Aloysius Choong, research analyst for IDC Asia/Pacific, "Much has been made about the enormous potential of developing markets, but heavily-populated cities in these countries have already been largely tapped despite the relatively low penetration rates overall. Affordable handsets thus help sustain subscriber growth by reaching into the less-populated cities and rural regions." Similarly, regions like Latin America, the Middle East, and Africa have benefited from vendors' increased production of entry-level phones.

Vendor Highlights

* Nokia - On the strength of 60.8 million units, the Finnish giant saw 13.0% sequential growth and strong year-over-year growth of 33.9%. Early in the quarter Nokia launched its eye-catching multimedia N-Series phones along with 14 other models, all targeting different consumer tastes and usage models.

* Motorola - Reaching a new company record for quarterly shipments, the Schaumburg, Illinois-based company posted 18.1% sequential growth and year-over-year growth of 40.7%, the highest among the leading vendors. Motorola began shipping 15 new devices, several of which were slight variations on its tremendously popular RAZR platform.

* Samsung - The Korean-based company posted flat shipment levels, decreasing only 0.4% from the previous quarter, while growing 7.5% from a year ago. Samsung management believes that shipment and profit growth will come in the second half of 2005 on the strength of its premium devices.

* LG Electronics - With sequential growth of 9.0% and a year-over-year growth of 22.2%, LG Electronics maintained fourth place in global shipments. The company also announced its plans to license the Palm Operating System, showing interest in offering a converged mobile device offering, but stopped short of saying when shipments would begin.

* Sony Ericsson - The 50/50 venture had the largest sequential change of the top 5 vendors at 25.5%. Moreover, the company grew 13.5% from a year ago. The vendor expanded its portfolio with more high-end devices, including its Sony-branded Walkman phone. The company continues to close the distance between itself and LG Electronics.

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