[Second quarter global mobile phone sales numbers show double digit growth driven by high-end devices. ]

Framingham, MA -- The worldwide mobile phone market continued solid double-digit growth in the second quarter (2Q08) as competition in high-end devices heated up. According to IDC's Worldwide Mobile Phone Tracker, vendors shipped a total of 306.0 million units, an increase of 5.6% from the 289.7 million units shipped during the previous quarter and up 15.3% from the 265.4 million units shipped during 2Q07. Total shipments for the quarter were in line with IDC's expectations, even as vendors cited economic challenges and changing demands within key regions.

"Since the start of the year, vendors have been wary of the potential decrease in demand for mobile phones," says Ramon T. Llamas, senior research analyst with IDC's Mobile Devices Technology and Trends Team. "That has not stopped vendors from experimenting with and releasing a host of mid-range and high-end devices with GPS, touchscreen, and multimedia. This also goes for hotly contested emerging markets, where vendors are introducing phones that offer features in addition to voice telephony. Reception towards these devices has been warm, and as we head into the holiday quarter, demand for these and other devices will no doubt increase."

These design changes are escalating competition between devices in a new way. Converged mobile devices, also know to the industry as smartphones, have typically been the category of handsets incorporating higher-end features such as GPS and touchscreen. However, these features are quickly moving onto handsets further down the food chain – feature phones.

“Smartphones are still seeing growth rates hovering around 40.0% year-over-year, while the rest of the industry is growing at roughly 10.0%,” said Ryan Reith, senior research analyst with IDC’s Mobile Phone Tracker. “However, grouping ‘the rest of the handsets’ into one category is doing the industry no justice. The rise of the feature phone has created a battle at the high-end of the market, with the main difference between smartphone and feature phone being the high-level operating system. We expect the competition at the high-end will help drive growth within the market and help move volume to higher-end devices.”

Regional Analysis

* Despite rising food and oil prices, mobile phone growth in the emerging markets of Asia/Pacific continued to be robust. Nokia reported its highest-ever shipments in India amid subscriber increases in rural areas, while domestic phone makers benefited in China. Pre-empting the threat of the (then) imminent iPhone 3G, converged mobile device vendors in the region, including HP and MWG, also took the opportunity to launch their own offerings in 2Q08.

* Volumes in Europe, the Middle East and Africa (EMEA) rose modestly compared with the first quarter, and saw healthy growth from a year ago. In Western Europe, LG and Samsung increased market share with new line ups of medium and low-end products, while in the emerging markets of Middle East and Africa growth continued to be driven by sales of Nokia's entry level phones.

* In North America, mobile phone shipments experienced a healthy lift from last quarter, with vendors introducing a number of feature phones ahead of the much anticipated iPhone 3G. In many cases, these offered touchscreen, music, or GPS. At the same time, the converged mobile device market grew faster than the overall mobile phone market and accounted for nearly a fifth of total mobile phone shipments.

* In Latin America, mobile phone shipments continued to show positive growth. With the recent and continuous migration to newer networks and new services offered by carriers throughout the region, the main strategy for vendors and carriers in 2008 has been to promote and convince current users to migrate from low-end phones to more complex feature phones. In response, vendors launched a number of new models during the quarter.

Top Five Mobile Phone Vendors

Nokia posted solid growth of 21.0% from a year ago, although this is down from the 26% gains in the previous three quarters. Nokia managed impressive operating margins for the quarter and boosted market share 39.9% worldwide. The company's relentless focus on and ability to meet demand within emerging markets helped propel shipment volumes forward as nearly a third of its total volumes worldwide came from its 1200 and 1208 models. Meanwhile, Nokia's Nseries, Eseries, and feature phones generated the most revenue and profit for the company. Even with more than twenty new devices announced during the first half of the year, more models are expected in the second half.

Samsung maintained its position as the No. 2 handset vendor worldwide. Year-on-year growth of 22% was quite strong, even though it was slower than in recent quarters and meant a slight decline in volume from the previous quarter. Affecting the company's performance the most was a combination of greater competition for mid-range and high-end phones, economic slowdown, and weak 2Q demand. Compounding Samsung's challenges were increased marketing expenditures, which pushed its operating margins down to 12.8%. This, however, did not prevent the company from enjoying success with its own high-end devices, including the Soul, F480, and the launch of the M800.

Motorola weathered another quarter of challenges, with another top executive leaving the company, no new leader for its Mobile Devices division despite several names being rumored to take the position, and another quarter of operating losses. Still, Motorola recorded a slight increase in shipments from the previous quarter, enough to stay ahead of LG Electronics for the No. 3 spot worldwide. New to the company's portfolio were a series of feature phones, including the ROKR E8, two new MING devices, and several new 3G devices.

LG Electronics reinforced its position as the No. 4 mobile phone vendor worldwide with shipments reaching a new record high. Accompanying this were success in key emerging markets, well-managed costs, and a warm reception towards its premium models, including the Secret, Venus, and Viewty models. Taken together, LG enjoyed a slight improvement in its operating margin from the previous quarter. Looking ahead, the company hopes that stronger marketing and an ability to respond proactively to the market will insulate it from potential market-wide ASP declines later this year.

Sony Ericsson sustained another tough quarter, citing soft demand in Europe, increased price competition, and a product portfolio that did not meet expectations. But even its less favorable product mix did not prevent the company from announcing and shipping a number of new Cyber-shot and Walkman-branded handsets to the market. The company saw its operating margin and volume growth slip into negative territory. To combat this, CEO Hideki Komiyama announced plans to realign the company's operations and resources, which include reducing company headcount.

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