Emerging Markets Continue To Drive Handset Sales
By Carlo Longino, Wed May 25 18:45:00 GMT 2005

One research firm says handset sales set a record in the first quarter, but another's report on sales in Western Europe shows it's still emerging markets that are responsible for much of the growth.

Gartner's latest quarterly handset sales figures are out, with the firm saying a record 180.6 million devices shipped in the first quarter, nearly 20 percent more than in the same quarter last year. Another firm, Strategy Analytics, also reported this week that sales in Western Europe were off 8 percent from last year, saying that an upgrade cycle to advanced 2G phones is drawing to a close.

These figures generally concur with Gartner's findings that replacement sales in the area and also in North America were "buoyant", but hot sales in Eastern Europe, the Middle East and Africa and Latin America really bolstered global sales. This isn't too surprising -- the slowing upgrade cycle in mature markets has been apparent for a while, as has the booming growth in emerging markets.

It's also been made clear by reports on 3G subscribers from the likes of Vodafone, which said yesterday it had attracted 2.1 million 3G users on handsets since its launch several months back. Just as it's important for operators to move users over to 3G networks for an ARPU boost, handset vendors are looking to spark another upgrade cycle.

Looking at specific manufacturers, the trends aren't too exciting. Nokia remains the clear market share leader, showing gains from its position last year, while Motorola and Samsung continue to tussle over the second and third spots. Moto remains 3.5 points ahead of Samsung, whose brief overtaking of its rival is beginning to look like an anomaly rather than an indication of a serious change. The challenge for Motorola, though, is to continue the momentum its hot RAZR V3 handset has generated.

Further down the list, LG continues to make inroads and gain share, with Gartner citing a strong performance in North America with its CDMA phones, and Strategy Analytics saying its 3G models are selling well in Europe. Siemens, on the other hand, has lost 2.5 points of share over the last year, and is now down to just 5.5%. Given the uncertainty surrounding the company's handset business, the loss isn't surprising at all.

Garter analyst Ben Wood says the dynamics of the market are making for tough going for vendors, with shrinking margins due to the increasing number of devices sold in price-sensitive markets, as well as the tough competition in mature ones. He expects smaller manufacturers to feel the pinch, and that some will get bought out -- but the pains won't completely escape the big boys, as Siemens' struggles illustrate.