Sony Ericsson Predicts Slower Growth -- But For Whom?
By Eric Lin, Wed Oct 06 00:45:00 GMT 2004

Sony Ericsson President Miles Flint has predicted the growth of mobile handset sales will slow. Does he mean for his company, or for everyone?

Miles Flint, the new President of Sony Ericsson, has predicted that market growth for mobile phones will slow next year. His prediction isn't as bold or as drastic as it sounds. The market grew 21 percent between 2002 and 2003, and is predicted to grow at about 19 percent from 2003 to 2004, according to market analysts. If these numbers prove true, market growth is slowing, albeit at a very low rate. Even Flint adds that the growth curve for mobile phones is one "a lot of other industries would love to have."

The problem for Sony Ericsson is not a one or two percent drop in the market growth rate but rather a much more significant drop for its target segment. Most subscribers in developed countries have already replaced their handsets with new color models, most of them cameraphones. These are the models that Sony Ericsson has thrived on as its global market share has steadily climbed, bringing the Swedish Japanese conglomerate to profitability. Upgrades to 3G handsets could fuel grow in the upgrade market despite the likely slow in sales on current networks, however Flint feels that they will not contribute significantly in 2005, or even beyond.

While Nokia's focus on mass market phones may have been responsible for a disappointing quarter or two, it may serve the company well if emerging markets like China, India and Brazil begin to make up the majority of handset sales growth. Low end models will be the mainstay in markets like these, as well as less populated areas like Africa. Most of Sony Ericsson's models are not focused on low-end or entry level users, so it may miss out on initial sales in these markets. If current strategies remain consistent, Sony Ericsson's may see itself as a likely brand for these users when they upgrade, however current economics make this unlikely for many users in these markets.

Despite the coming shift to emerging markets, Flint doesn't feel that changing the company's focus from multimedia just to garner market share in the near term would be a wise move. Ignoring possible near-term gains, it seems Sony Ericsson is waiting for new features or new technology to mature in the marketplace. This will fuel another upgrade cycle, and if Sony Ericsson is ready with handsets worthy current reputation, it could be enough to grow its share in established as well as new markets down the line.