Samsung Passes Motorola, Gartner Says
By Carlo Longino, Wed Dec 01 20:00:00 GMT 2004

The research firm's third-quarter handset sales figures are out, indicating the South Korean company took more of the market than rival Motorola for the first time as total sales set a new record.

Gartner says a record 167 million handsets were sold in the third quarter, a 26 percent increase over last year. While Nokia's market share climbed back above the psychologically important 30 percent level, the real story is that the numbers are the first to say Samsung has overtaken Motorola for second place, a shift observers have been predicting for some time, and one Gartner's calling ahead of other firms.

Samsung took 13.8 percent of the market in the quarter, an increase of 1.7 points over the previous quarter, and more than 2.5 points from last year's third quarter. Motorola's share is slipping -- down from 15.8 percent last quarter and 14.7 last year. The figures look to confirm what some analysts were thinking after the company's third-quarter earnings release, speculating it was sacrificing volume to protect margins. Samsung's figures are again a study in contrasts: its volumes are growing while margins shrink.

The pressure on Samsung is coming from the price cuts enacted earlier in the year by Nokia in a move -- that appears to be working -- to bolster its sales and boost its share. But while Nokia's price cuts will help, it still must revitalize its handset lineup to ensure continued gains.

Rounding out the top six vendors brings few other surprises. Siemens has lost 1.5 points of share over the last year and is down to 7.6 percent, though it's rebounded from last quarter. LG had a strong third quarter, taking 6.7 percent of the market, and putting a little space between it and number-six Sony Ericsson, which took 6.4 percent. Both companies' market share is up more than a point over last year's third quarter.

The only remaining question is how the strong sales will affect the fourth quarter, typically a very strong one for vendors. Replacement sales remained strong in Western Europe, while carriers in North America continued to add new subscribers and sell them new handsets. Japan was the only area of the world not to see growth over last year's third quarter, with sales off nearly 13 percent.

Sales in emerging markets remained strong as well. Separately, Nokia said it would invest up to $150 million along with its suppliers over four years to build a handset factory in India in a move likely intended to lower its costs of selling devices in the country. LG and Samsung have also previously announced plans to build in India, looking to position themselves to best take advantage of the country's runaway growth.