The once-monolithic handset market is becoming a lot more interesting.
As growth slows in developed markets, players with strong presence in emerging markets may see more dependable gains. But macro-economic uncertainty has analysts and handset vendors forecasting anywhere from 4% to 10% overall growth for the year, a wide range with limited visibility into the crucial fourth quarter.
While the first quarter reflected an expected seasonal slump – about 12%, according to IDC – the spreading economic slowdown affecting the United States and, now, apparently Europe, may level the playing field in the market’s high-tier upgrade competition. (IDC pegged first quarter handset volumes at 292 million, down from the fourth quarter’s, holiday-inspired 331 million units.)
Where Nokia Corp. and Motorola Inc. once dominated the landscape, Samsung Electronics Co. Ltd. and LG Electronics Co. have surged with a multiplicity of high-end feature phones. First to market with spacious touchscreens after Apple Inc.’s iPhone bombshell, Samsung and LG appear to have stolen a march in the first half of the year.
Meanwhile, Motorola has plunged over a cliff, Sony Ericsson Mobile Communications’ once-hot trajectory has flattened and Apple is cutting prices on its iPhones in Europe, the region seeing the greatest deceleration in demand.
“Others” on the move
And in a reverse of the past two years’ trend, the “other” category – that is, all handset shipments beyond the top 5 – has started to grow. Though that category grew only 1% share in the first quarter of 2008 from the year-ago quarter, the category’s 19% share accounted for 55.7 million phones, far more than Samsung just shipped. A year ago, the “other” category was roughly on par with the No. 2 (then Motorola) vendor’s shipments. That spells opportunity for marquee brands such as Apple, Research In Motion Ltd. and HTC Corp. in the smartphone business, as well as for global wanna-bes such as the Chinese ZTE Corp. and Huawei, now making inroads in the handset space.
“There’s a lot going on in the ‘other’ category,” said Ramon Llamas, analyst at IDC. “That’s a category to watch.”
“The spring looks intriguing,” said analyst Tero Kuittinen, a RealMoney.com columnist. “In the first quarter, LG actually did what Apple was supposed to do: show sequential volume growth from the fourth quarter to first quarter on the back of an appealing, large-display phone selection.”
LG closes in on Moto
As mentioned, the most remarkable gains this quarter were posted by LG, which pulled within a point of Motorola’s market share on the strength of surging shipments – LG shipped 24.4 million units in the first quarter, up a whopping 55% over the year-ago quarter, while Motorola’s shipments declined nearly 40% year-on-year to 27.4 million.
Further, while Nokia and Samsung’s positions seemed assured for several quarters, Motorola, LG and Sony Ericsson are all separated by less than two points of share.
According to Llamas, the macro-economic environment may well up-end these industry-specific minor dramas.
However, Llamas added, “IDC (still) expects highly competitive pricing and innovative service plans will keep the overall market on track for the year.” IDC’s forecast for the overall market growth this year is 8.5% – right up the middle, Llamas said.
