Mobile phone market 'may not recover until 2010' - Emirates24|7

Mobile phone market 'may not recover until 2010'

Vendors shipped 1.18 billion mobile phones worldwide in 2008. (PATRICK CASTILLO)

Mobile phone market may not recover until this year, and also possibly not until 2010, if vendors and distributors grapple with clearing inventory in the first half of this year on weak end-user demand, according to industry tracker IDC.

"A combination of weak end-user demand, currency volatility and limited credit availability prevented the market from experiencing the usual seasonal increase in shipments," said Ramon Llamas, Senior Research Analyst with IDC's Mobile Devices Technology and Trends team.

"We expect the first half of 2009 to be very challenging as vendors and distributors grapple with clearing inventory. Should these conditions persist, the mobile phone market may not recover until later this year, and possibly not until 2010."

The unusual downturn in the fourth quarter of 2008 saw shipments of a total of 289 million units, 12.6 percent lower than the 330.8 million units shipped during the same period in 2007, according to IDC's Worldwide Mobile Phone Tracker. In 2008, vendors shipped 1.18 billion units worldwide, 3.5 per cent greater than the 1.14 billion units shipped during 2007.

The highlight of 2008 was the converged mobile devices segment (commonly referred to as smartphones) grew 22.5 per cent over 2007, clearly outpacing the rest of the industry.

"In mature markets, such as North America and Emea (Europe, Middle East, Africa), the converged mobile device segment grew 70.1 per cent and 25 per cent respectively in 2008," said Ryan Reith, Senior Research Analyst with IDC's Mobile Phone Tracker. "This segment is unique and unlike the rest of the market. Data attachment rates for these devices is well beyond that of traditional mobile phones, and the devices and services catering to this segment were more readily available than ever before in 2008. As long as operators are able to continue to subsidise these devices and developers continue to enhance applications, this segment will be a silver lining to an otherwise gloomy market."

With clear expectations that 2009 will be more difficult than 2008, handset vendors, chipset manufacturers and operators will all have to work in sync to rebuild consumer interest in mobile spending.

"Vendors are not taking this situation lightly, and are undertaking plans to run lean and maintain user interest," said Llamas. "Cost reduction and operational efficiency have become cornerstones to corporate strategy moving forward and, for some, that can include headcount reduction. At the same time, converged mobile devices and services will become primary targets for vendors to focus their resources. Most vendors have already signalled their intentions to concentrate on the hot converged mobile devices space by aligning with operating systems that fit their strategy. Services, meanwhile, have played only a small role in the overall market, but will see increased importance as vendors compete for the user experience."

The North America market suffered both sequential and year-over-year declines in the fourth quarter as economic conditions worsened. The Latin America mobile phone marketplace showed a slowdown in the quarter as falling currency exchange rates led to a decline in both consumer and commercial purchases. The Western Europe handset market was hard hit by the financial crisis and shrank in the final quarter of 2008 at a rate never seen before. While the previously buoyant market in Central and Eastern Europe, the Middle East and Africa did not show a major retrenchment against the last quarter of 2007, the shipments of Nokia was weak and sales of converged mobile devices contracted in relation to the total market.

As the Asia/Pacific market declined in the fourth quarter, device makers seeking a respite in the emerging market of China were left disappointed. Chinese consumers held off on mobile phone purchases for much of the quarter, largely due to the worsening economic climate, but also due to some anticipation of 3G promotions in 2009.

On the vendor front, Nokia gave early indications that the fourth quarter would be a challenging one due to the economic downturn, and by quarter's end its sales for devices and services had declined nearly 27 percent from the previous year. Samsung experienced lower sales than expected and saw its operating margin suffer. LG climbed into third place for the quarter and for the year, both milestones for the company. But, due to sales declines within key markets, its profit margins slid back down into the single digit for the first time since 2007.

 

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