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5 November 2007

 

Q3 cell-phone shipments of 285m led by Nokia in emerging entry-level GSM markets and Samsung in 3G

In third-quarter 2007, worldwide cell-phones shipments totalled 285 million units (up a modest 12% on 253.8m a year ago, but up as much as 10% sequentially on Q2’s 258 million), according to market research firm Strategy Analytics in its report ‘Q3/2007 Global Handset Market Share Update’. This was also up slightly on the firm’s forecast in August of 283 million units, after strong demand in emerging markets (especially Asia and Africa) has increased sales for all major handset vendors.

Nokia sold a record 111.7 million handsets, up 11% sequentially and 26% year-on-year, driving market share up from 34.9% to 39.2% (more than the next three biggest handset brands combined). Such growth is due to the strength of its entry-tier products and a strong lead in emerging markets including China and India (as it continues to outsell Motorola in the entry-tier GSM segment, according to analyst Bonny Joy).

With about 8 million new clients signing up for mobile telephony each month in India alone, cell-phone makers are competing for first-time buyers with low-priced handsets. Nokia has made this a key driver for unit, revenue, and profit maximization, says Strategy Analytics, whereas the competition has been shying away from the cost-intensive entry-tier segment. As the clear market leader in low-priced phones, Nokia reported its highest profit margin (22.2%) since Q4/2003. This compares with 12.3% for Samsung, 12.6% for Sony Ericsson and 8.3% for LG Electronics, while Motorola made another loss on handset operations.

Samsung continued its strong shipment growth for the second consecutive quarter (up 47% year-on-year from 28.9m to 42.6m - the highest growth among the top-five handset vendors). The Korean firm therefore retained the second place that it gained from Motorola in Q2, with its market share up year-on-year from 11.4% to 14.9%, particularly in 3G feature phones (where rival Sony Ericsson has also seen much success recently). Samsung’s key drivers were reduced marketing expenses and a focus on mature markets, built on a strong product mix in mid- and high-tier 3G product segments (in which Motorola is struggling). However, without significant product lines in broader entry-tier segments, Samsung’s quarterly revenue growth will continue to be volatile, and the pressure to realize a larger percentage of revenues from new (higher-tier products) will intensify in the short term, reckons Strategy Analytics.

Trailing Samsung for the second consecutive quarter, Motorola’s shipments have fallen 31% year-on-year from 53.7 million units to just 37.2 million. M arket share has fallen from 22.4% to just 13%. Due partly to a ramp-up in Razr 2 volumes, shipments are stabilizing as they bottom out. However, shipments, revenues and operating income are all far below year-ago levels. Continuing its goal of protecting profits by refusing to compete on price, Motorola is sacrificing large market share in emerging markets, specifically China. New 3G products are a small step forward, but much more is needed in early 2008 in design and feature appeal if Motorola is to seriously compete with Samsung and Sony Ericsson in higher product tiers, says Strategy Analytics. Motorola is now under threat by fourth-placed Sony Ericsson.

In Q3/2007, SonyEricsson experienced continued strong shipment growth of 31% year-on-year, from 19.8 million units to 25.9 million (rising from 7.8% to 9.1% market share). The firm’s distribution of sales was balanced across low- and higher-tier average selling prices (ASPs). However, rapidly declining ASPs are a sign that 3G shipments are not accelerating fast enough to offset declines due to increasing volumes of entry-tier products.

LG Electronics maintained its recent growth, shipping 21.9 million units (up 15% quarterly and 33% year-on-year, from 16.5 million). Market share rose from 6.5% to 7.7%. Efforts to improve its cost structure via a streamlined platform offering drove improving profits and enabled strong performance in emerging markets, in which Strong demand for entry-tier CDMA and GSM phones helped it grow at its quickest rate for 18 months . However, demonstrating the difficulties facing global competitors, LG failed to balance this success in 3G products segments, as its WCDMA volumes fell 32% sequentially in Q3.

Market share for other handset suppliers outside the top-five shrank further, from 18.3% a year ago to 16%, evidencing the continued consolidation on the main suppliers. But, as predicted by Strategy Analytics, Apple quadrupled shipments sequentially, to 1.1 million units (a 0.4% market share). The European launch of the iPhone in November will however be a critical test of whether Apple can leverage its hype outside the home USA market and prove that it is not just a ‘one-trick pony’, adds the market research firm.

For the holiday-sales-fuelled fourth quarter of 2007, the top cell-phone makers expect the market to grow more than 10% sequentially. Strategy Analytics forecasts 330 million units. However, d ue to the strong demand, at least four of the top five vendors have been suffering component-shortage issues (mostly in LCDs and front-end components), which may persist in the fourth quarter if growth continues at current rates, according to Strategy Analytics analyst Neil Mawston. Such component shortages could cut sales by about 5 million units in Q4. Nevertheless, the market research firm does not expect much ‘bleed-over’ into Q1/2008. “Our latest channel-checks indicate an easing of supply constraints toward the December-January timeframe,” Mawston adds.

Top five mobile phone vendors in Q3/2007
Vendor	Shipments Q3/06	Market share Q3/06	Shipments Q3/07	Market share Q3/07	Change in share year-on-year
Nokia	88.5m	34.9%	111.7m	39.2%	10.97%
Samsung	28.9m	11.4%	42.6m	14.9%	23.49%
Motorola	53.7m	21.2%	37.2m	13.1%	-61.83%
Sony Ericsson	19.8m	7.8%	25.9m	9.1%	14.29%
LG	16.5m	6.5%	21.9m	7.7%	15.58%
Others	46.4m	18.3%	45.7m	16.0%	-14.38%
Total	253.8m	100%	285m	100%

Chart credit: Strategy Analytics.

See related items:

Global cell phone shipments show slight increase, as Samsung grabs second largest vendor title from Motorola

Handset sales to grow 4% through to 2012

Inventory build-up trims mobile handset shipment growth to 12% in Q1/2007

North America handset shipments should reach 163m in 2007, with Motorola continuing to dominate

Search: Handset shipments Nokia Samsung 3G GSM

Visit: www.strategyanalytics.net