A sequential dip in shipments by Motorola Inc. and Sony Ericsson Mobile Communications between the fourth quarter and the first quarter spelled t-r-a-c-t-i-o-n for numerous second-tier handset makers, particularly in emerging markets.
The opportunity for greater volumes among those outside the elite top tier is fairly rare.
The category of “other” – that is, the 60-odd handset original equipment manufacturers that battle for the 20% market share left over after the top-tier giants take 80% – has grown for the first time in at least two years by one estimate. The top-tier share two years ago was 85% and growing.
Market research firm iSuppli Corp. reported last week that the “other” category had captured more than 20% global market share in the first quarter, up from more than 18% in the fourth-quarter 2007. Strategy Analytics also showed the “other” category expanding slightly, but only by .2%.
Motorola’s contraction in emerging markets was a major factor in allowing local OEMs to surge into the breach, according to analyst Tina Teng at iSuppli. This was particularly true in China and India, she said.
Everyone has a chance in emerging markets
“It’s not just that Motorola lost share,” Teng added. “It’s because in those emerging markets, growth is so swift that everyone got a chance to grow.”
If Motorola stabilizes its volume shipments in those two markets, Teng said, that will exert extreme pressure on local OEMs.
“Somebody has to lose,” the analyst said of the red-hot, global competition in handsets.
The data among various market research firms, obviously, is not uniform, but reflected similar dynamics. In IDC’s case, the “other” category shrank slightly, but far less than the total market’s seasonal contraction from the go-go fourth quarter to the typically tepid first quarter.
Where global handset shipment volumes in first quarter shrank about 13% from the holiday-blowout fourth quarter, the “other” category shrank only 10%, according to Ramon Llamas, IDC analyst. Motorola’s and Sony Ericsson’s volumes declined to a much greater degree than the overall market – the two OEMs’ shipments were down 33% and 28%, respectively, Llamas said.
That indeed left far more crumbs on the table for the 60-odd second-tier OEMs, the analyst said.
The list
While withholding proprietary shipment volumes for IDC’s clients, Llamas offered the names of the leading second-tier vendors, in order: No. 6 is Research In Motion Ltd.; No. 7 Sharp; No. 8 Sagem; No. 9 Kyocera Corp.; and No. 10 Haier.
The gap between Sony Ericsson in the No. 5 position and RIM at No. 6 is huge, Llamas said. (iSuppli pegged SEMC’s volume in first quarter at 22.3 million, while RIM shipped about 4.4 million devices.) And the gap between the top 10 and the next 20-25 vendors is similar in proportion if not in actual numbers, Llamas said.
“It astounds me that RIM, a company that focuses solely on smartphones, can achieve the No. 6 ranking,” Llamas said.
The fundamental market achievements that separate the top tier from the second tier – with RIM a notable exception to the rule – is several-fold, according to Llamas.
“A global footprint is your dream” as a second-tier vendor, the analyst said. “The next goal is a regional, or multi-regional footprint – for example, the Asia-Pacific region, the U.S., or Europe.”
The next goal is to place your products with multiple carriers, the primary point of distribution in many markets. And to get SKUs in the target carrier’s portfolio, vendors must compete effectively on price and specifications exclusive to the carrier including hard buttons for revenue-generating services and custom software that promotes the carrier.
“What’s keeping the ‘others’ afloat?” Llamas asked rhetorically. “Niches.”
RIM and Palm Inc., for example, have traditionally tackled the enterprise space with smartphones and now are expanding to include the so-called “prosumer.” Fashionable designs and colors/materials/finishes (CMF) have aided that transition, he said.
Meanwhile, a number of Japanese vendors – Mitsubishi and Sanyo, for example – have succumbed in the past year to the fierce competition in their domestic upgrade markets. While Sharp and Kyocera have footholds today in the top 10, their domestic competitors such as Panasonic, NEC and Fujitsu may well displace them in the future.
“The Japanese vendors are all at the mercy of NTT DoCoMo,” Llamas said.
