Nokia lead threatened by smartphone market growth

Second quarter 2009 handset market data from Gartner shows lead player Nokia coming under increasing pressure as the smartphone sector outperforms the market. Overall handset shipments were down 6.1 per cent year on year for Q209, at 286.1 million but smartphone sales increased by 27 per cent to reach almost 41 million.

While Nokia leads the market overall – and is still number one in the high-growth smartphone sector – it is losing market share across the board. The Finnish vendor’s handset portfolio is skewed towards the low end, where the market is contracting, and Gartner said that Nokia’s flagship smartphone – the long-awaited N97 which it was hoped would cement Nokia’s position in the high end – “met with little enthusiasm at its launch” earlier this year.

The N97 has sold 500,000 units since its June launch, Gartner said, compared to Apple’s 3G S iPhone, which shifted twice as many units in the first weekend of its availability alone. “The right high-end product and an increased focus on services and content are vital for Nokia if it wants to both revamp its brand and please investors with a more promising outlook in ASPs and margins,” said Carolina Milanesi, research director at Gartner.

Worldwide Smartphone Sales to End Users in 2Q09 (Thousands of Units)

Note: For HTC, Gartner counts only the company’s own-branded devices, including the G1.

Note: Totals may not add to 100.0 percent due to rounding.

Source: Gartner (August 2009)

As the table shows, Nokia’s share of the smartphone market has fallen by almost two and a half per cent in the year to June 2009, despite its shipments in the sector improving by more than 20 per cent. Strong performances from RIM, HTC and Apple especially, have cost the Finnish market leader. While it remains ahead by a large margin, the firm has work to do if it is to retain such a lead.

Movement at the high end of the smartphone market is reflected in the performance of the various handset operating systems. Symbian’s share is dwindling with Nokia’s, down to 51 per cent from 57 per cent in Q208. Microsoft also saw a drop – to nine per cent – while Apple and RIM’s bespoke operating systems grew. Android had just two per cent, but further product launches this year are expected to improve this figure at the expense of Symbian and Microsoft, Gartner said.

“For the remainder of 2009, manufacturers must offer products with the features that consumers and operators are demanding most strongly, like touchscreens, focus on user interfaces and application/content ecosystems and work hard to keep operators loyal,” said Milanesi. “Mobile operators are likely to drive competition among manufacturers as they start selling e-book readers and mini-notebooks from other manufacturers to foster mobile broadband subscriptions. Operators are also starting to subsidise e-book readers and mini notebooks on contract and this means that there will be less subsidy available to drive sales of mobile phones and smartphones. In turn, operators will demand lower prices from phone manufacturers, which will be under even more pressure to deliver strong feature sets at the lowest possible price,” she added.

Worldwide Mobile Terminal Sales to End Users in 2Q09 (Thousands of Units)

Note: This table includes iDEN shipments but excludes ODM-to-OEM shipments.

Source: Gartner (August 2009)