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IDC reports mobile phone shipments slowing compared to previous quarters
Posted: 20-Apr-2007 [Source: IDC]

[IDC's recent Worldwide Quarterly Mobile Phone Tracker shows no change in rank among the top five vendors: Nokia, Motorola, Samsung, Sony Ericsson and LG. Although the worldwide mobile phone market continues to grow, shipments were 13.8% lower than the record shipments in the previous quarter. Decline due to seasonality of the market.]

The worldwide mobile phone market demonstrated continued growth during the first quarter of 2007. According to IDC's Worldwide Quarterly Mobile Phone Tracker, vendors shipped 256.4 million units, a year-on-year increase of 10.0% for the first quarter of 2007. However, the shipments were 13.8% lower than the record shipments in the previous quarter; the decline was expected owing to the seasonality of the market.

The first quarter of 2007 marks the first quarter of slower growth in the mobile phone market, a significant change from the growth exhibited each quarter during all of 2006. Year-on-year growth during each of those quarters topped 20%, significantly higher than the 10.0% growth posted at the start of 2007. This reflects IDC's expectation that as more subscribers are added to the network, fewer new subscribers are left to be added. Consequently, mobile phone shipments increasingly move from being new handsets for first-time users to replacement handsets for seasoned users, and overall growth will continue, but at a slower rate.

"The increase in worldwide phone shipments was driven, in part, by new subscribers in emerging markets and, in part, by replacement sales in mature markets," notes Ramon Llamas, research analyst with IDC's Mobile Devices Technology and Trends group. "Since basic voice connectivity and affordability are often the key components of demand in emerging markets, device vendors, appropriately, seek to supply low-cost handsets in these markets, which, in turn, has the unfortunate effect of dragging down device ASPs. To stem the decline in ASPs, device vendors are taking steps to rationalize platforms, improve supply chain logistics, and relocate production to low-cost regions."

"While rankings did not change among the top five vendors, some interesting trends have begun to unfold," says Ryan Reith, research analyst for IDC's Worldwide Mobile Phone Tracker. "Samsung was able to benefit from Motorola's misfortunes by recording a positive sequential growth in the first quarter, which is uncommon given the effects of seasonality on this industry. While Motorola announced plans to revamp growth, the sudden shift in momentum demonstrates how competitive this industry is and how innovation on product development is essential."

Top Five Mobile Phone Vendors

Nokia shipped 91.1 million units in 1Q07, citing continued success in key regions. Shipments into the Middle East, Africa, and China were up from the holiday quarter while shipments in Asia/Pacific held steady. Nokia was able to maintain its device ASPs at 89 Euros, stemming the decline it witnessed in 2006. In the converged mobile device space, Nokia reported a record shipment of 11.8 million units, citing success from the N73, N70, and the newly launched E65.

Motorola shifted its focus towards recovery after shipping 45.4 million units and experiencing operating losses for the quarter. With a restructured management team and clear objectives in place, the Motorola mobile device team aims to reverse its fortunes before the end of the year. Motorola hopes that the new devices it has announced or launched during the quarter will pave the way for success later this year.

Samsung bucked the trend of other leading vendors by posting both a sequential and year-over-year increase in shipments, and reached a new record level of shipments at 34.8 million units. Fueling the company's success was strong sales of its "Ultra Edition" handsets, particularly its D900 model, as well as its E250 handset. Like other vendors, Samsung has kept a close eye on maintaining its double-digit profitability, even while becoming more active within emerging markets.

Sony Ericsson registered the largest year-on-year growth among the leading vendors during the quarter, citing improvement in Europe, Asia/Pacific, and Latin America with its low- and mid-tier product portfolio. While the company enjoyed double-digit profitability, its strategy to move into lower-tier devices nonetheless put downward pressure on average selling prices. In an effort to address its presence in emerging markets, Sony Ericsson noted its partnerships with Asian manufacturers Foxconn and Flextronics, as well as its agreement with French manufacturer Sagem to provide entry-level devices. At the same time, the company announced more Walkman and Cybershot devices, with some models available for the mid-tier.

LG Electronics posted an expected seasonal sequential decrease in shipments as well as flat growth from the same quarter a year ago with a total of 15.8 million units shipped. Improvements from its product mix and WCDMA growth helped boost operating margins further this quarter, a significant improvements in the negative profitability the company posted the same quarter a year ago. Having enjoyed success from its iconic Black Label Chocolate series, the company hopes for similar success with more premium devices, including its Shine and digital multimedia broadcast devices.

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