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Autumn’s chill: Handset sales out in the cold

The handset market has been unseasonably chilly this fall.
Where the third quarter typically reflects a ramp-up for the holiday spending orgy, it appeared from the metrics that the togas may remain in the closet this quarter. Media coverage that typically revels in the ups and downs of the competitors has turned to the health of the overall market, though there’s no shortage of drama among the vendors.
Theories appear suspended in the icy air. Are handsets really immune to a global economic downturn? Or is the third-quarter slowdown in handset shipments the harbinger of a serious shutdown in consumer spending?
Estimates of handset shipment growth – ranging from 3.2% to 5.4%, depending on whose number one cites – establish that autumn’s chill came early this year.
IDC calculated that 299 million handsets were shipped in the third quarter, up only 3.2% over the year-ago quarter and down slightly sequentially, bucking the typical ramp-up pattern.
Strategy Analytics had 303 million handsets shipped, up 5% year-on-year, the slowest rate since 2002.
CCS Insights projected just over 301 million handsets shipped, for a 5.4% growth rate year-on-year.
Third-quarter, year-on-year growth in prior years has routinely reflected low, double-digit increases of as much as 20%, according to IDC.
While mature market growth had been slowing as those markets reached saturation, growth in emerging markets had sustained envious annual growth rates in the handset industry. Now, according to Strategy Analytics, emerging market handset sales are slowing too as consumer confidence founders. In mature markets, consumers appeared to be delaying their next purchase, lengthening the replacement cycle.

It’s the economy, smarty-pants
“Handset vendors felt the pressures of the dismal economy in the third quarter,” said analyst Ryan Reith at IDC. “As a result, shipments and revenues were down almost across the board.”
What began as a series of meltdowns in the financial sector in September quickly infected consumer confidence in October, choking off spending, which in turn now further threatens the economy, according to news reports.
Consumer confidence in the United States, as measured by the widely cited Conference Board, has fallen to a record low since its inception in 1967. Americans cite concerns over their jobs, and with good reason. The U.S. lost 159,000 jobs in September, the worst in five years, and employment is down for the ninth straight month, with more than three-quarters of a million jobs lost, according to the Labor Department.
Those concerns apparently led to cuts in consumer spending on a level not seen since 1980, according to data cited by The New York Times.

Bright spots and bald spots
Still, for those who love a horse race – where broken ankles lead to euthanasia – there was plenty of action in the quarter just over.
A new order in the top-tier handset rankings is forming, with Nokia Corp. holding its own with 5.5% growth in the quarter and maintaining better than 39% global market share. But Samsung Electronics Co. Ltd.’s shipments surged more than 21%, shipping nearly half as many handsets as Nokia, and securing it better than 17% market share. Sony Ericsson Mobile Communications’ shipments dropped nearly 1% from the year-ago quarter for 8.5% market share. But SEMC still managed to jump from fifth place to third by edging out Motorola Inc. and LG Electronics Co. Motorola’s year-on-year growth was measured at minus nearly 32%; Moto had 8.4% market share. And LG’s shipments grew 5% and its market share was flat at 7.6%.
(The foregoing metrics are courtesy of Strategy Analytics.)
In short, Samsung lifted off while Motorola fell from the sky.
Outside the top tier, however, thunder on the horizon: Apple Inc.’s iPhone sold 6.9 million units, in part due to its market expansion from six countries to more than 50 – with 20 more countries due to launch in the fourth quarter.
That positioned Apple as the sixth-largest handset vendor in the world for the quarter, according to Strategy Analytics, and third in size by revenue, behind Nokia and Samsung, according to Apple.


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