The young ones

For years the ranking of global handset vendors was a fairly predictable exercise. Nokia was a number one, trailed by Motorola in second place and Samsung in third. Then Motorola’s persistent bout of ill health shook things up a bit, allowing Korean manufacturer Samsung to claim second position last year.

But 2007 will also be remembered as the year things got interesting in the gadget space for other reasons, other reasons being the three new entrants into the handset vendor top ten during the fourth quarter of 2007. The new pretenders are BlackBerry maker Research In Motion (RIM), Chinese manufacturer ZTE and Apple, and their entry to the charts is significant because they all play in particular niches.

Apple’s iPhone shipment figures, with just over 3.7 million units shifted to retailers in 2007, have not been large by industry standards. But in its short time in the mobile handset market, Apple has managed to capture subscribers’ attention by delivering a range of desirable, easy to use features and by changing the rules in a number of areas.

But Apples are not the only fruit, and BlackBerries also proved to be popular for the time of year, with RIM recently saying it expects fourth quarter net adds to be 15 to 20 per cent higher than the expected 1.82 million it previously forecast. RIM’s total BlackBerry subscriber base is now expected to hit approximately 14 million at the end of March, following strong growth in the New Year. “The seasonal slowdown in net subscriber account additions that we expected in the New Year did not occur and our focused execution with partners has continued to produce strong results within both enterprise and consumer segments,” said Jim Balsillie, co-CEO of RIM.

Meanwhile, in the low tier, ZTE continued its cut price assault, eroding other vendors’ market share in emerging markets. Carolina Milanesi, research director for mobile devices at Gartner, commented on the new competitors: “On one hand, we have aggressive pricing and a focus on emerging markets (ZTE), and on the other, RIM with targeted functions and Apple with brand and design.”

According to Gartner, worldwide sales of mobile phones surpassed 1.15 billion units in 2007, a 16 per cent increase from 2006, with fourth quarter sales reaching 330 million units. Emerging markets, especially China and India, provided much of the growth as many consumers bought their first phone. While in mature markets such as Japan and Western Europe, consumers’ appetite for feature phones was met with models packed with TV tuners, GPS functions, touch screens and high resolution cameras.

During the fourth quarter of 2007, Nokia achieved its long term target of 40 per cent market share, when it sold slightly more than 133 million phones worldwide. Despite some component shortages, the Finnish vendor increased its market share sequentially in all regions except North America, which remains a challenging market. In 2008, Nokia will need to continue to improve its portfolio, offering not only more applications and functions, but also novel designs and improved user interfaces, Gartner said.

Korean vendor Samsung maintained second position with 13.4 per cent of the market, and although its share slipped slightly, the gap widened between it and third placed Motorola as the US handset manufacturer’s problems continued.

In the final three months of 2007, Moto recorded sales of 39 million phones, taking 11.9 per cent of the market. It retained second place in terms of annual sales to end users in 2007, largely thanks to the inventory it disposed of in the first half of the year. Nevertheless, the extent of Motorola’s troubles can be seen in the 9.7 per cent market share drop in its fourth quarter result.

Competition for the fourth spot is also getting tight, with another positive performance from Sony Ericsson, growing its market share to 9 per cent on the back of the persistent popularity of its Cyber-shot and Walkman products. However, LG maintained its 7.1 per cent market share, with the success of the Viewty, the Venus and the Voyager helping LG gain brand awareness across the world as well as improve its margins.

“Phone manufacturers need to continuously adapt their portfolios to respond to operators’ demands for open platforms, lower pricing and more personalisation,” said Milanesi. “They should also try to meet consumers’ desires for fashionable, easy-to-use phones.”

The driving factors for growth in emerging markets are huge numbers of new subscribers coupled with ultra low cost and cheaper handsets across the GSM, CDMA and WCDMA product categories. In Asia Pacific, 112 million mobile devices were sold in the fourth quarter of 2007, representing 9.6 per cent growth over the previous quarter. Fourth quarter sales in the Eastern Europe, Middle East and Africa region also remained strong, reaching 61.8 million units, with a significant growth spurt noticeable in Africa. Latin America also experienced healthy growth in the holiday season, with sales reached 38.8 million units, up 12.5 per cent from the same period in 2006.

The fourth quarter of 2007 was also a record quarter in North America, as sales topped 49 million units, an increase of 9.2 per cent year on year, with replacement devices continuing to dominate sales. But growth in the saturated Western European market is slowing, with unit sales totalling 55 million, up 2 per cent from the fourth quarter of 2006. However, the introduction of the iPhone has renewed consumers’ interest in high end phones and features such as music players, GPS and cameras proved to be significant attractions.

“After another strong year, we expect the growth in sales of mobile devices to end users will decelerate in 2008 and fall to about 10 per cent growth as mature markets become more saturated,” said Milanesi. “However, the global mobile devices market will remain relatively immune to a recession in the US and Western European economies as the majority of growth in 2008 will come from emerging markets.”