Three handset vendors duke it out for third place

As the credit crunch hits global mobile phone sales hard, the battle for third place has turned into a three way fight between Sony Ericsson, Motorola and LG.

Swedish-Japanese joint venture Sony Ericsson gained the edge in the third quarter, with 24.8 million devices shipped, giving it a market share of 8.1 per cent.

But the company’s success was more down to obstacles hampering Moto and LG than Sony Ericsson’s own abilities, with yet more Walkman devices adding to an already crowded portfolio, and reported shortages of parts for the Xperia X1.

Despite its problems, Motorola wasn’t far behind, grabbing 8 per cent of the market in the third quarter with 24.6 million shipments. But industry analyst Gartner notes the company is still struggling with a lack of compelling products and competitors’ aggressive pricing, which Moto cannot afford to meet.

Also with its eye on third place is LG, with a portfolio well positioned to take advantage of the seasonality in the fourth quarter and pricing more suited to the current economic climate. The Korean vendor took 7.8 per cent market share in the third quarter, with 24 million units shifted.

Things at the top of the handset league were much the same during the third quarter, with Nokia building its market share to 38.2 per cent on a year on year basis, but still feeling the effects of the credit crunch sequentially. The company sold 118 million phones, and while it is feeling the bite from lower replacement sales in mature and emerging markets, its economies of scale leave it well suited to adjust to market conditions.

Second placed Samsung had a very strong third quarter as sales increased to 52.8 million devices or 17.1 per cent of the market, with Gartner noting the popularity of its touch screen devices – the Tocco and Omnia – as well as an enriched mid tier device portfolio.

“All eyes were on Apple’s performance during the quarter as it ramped up the roll-out of its 3G iPhone from six to 51 countries, despite building an inventory of just over 2 million units,” said Carolina Milanesi, research director for mobile devices at Gartner. “Apple was able to return in the top ten vendors ranking at No. 7, just under RIM. We expect that sell-in sales during the fourth quarter of 2008 will reflect this inventory level, especially given the current economic environment.”

Total worldwide sales of mobile phones reached more than 309 million units in the third quarter of 2008, a 6 per cent increase compared to the third quarter of 2007, Gartner said.

“A combination of lower-than-forecast sales of devices in the third quarter of 2008, limited availability of key devices, and a general lack of compelling products leads us to believe that annual growth in the mobile device market will be about 8 per cent in 2008,” said Milanesi. “It is too early to say how long the economic climate will impact the devices market, but we expect market conditions to remain challenging through at least the first half of 2009. We expect sales in 2009 to show a low single-digit growth contraction.”

On a region by region basis, sales of mobile handsets in Asia Pacific increased despite economic pressure and weak consumer confidence, with sales of 116.7 million units in the third quarter of 2008, a 13.8 per cent increase year on year.

In Eastern Europe, the Middle East and Africa, handset sales reached 57.8 million units, representing an increase of 13.1 per cent year on year, with Africa displaying healthy growth.

In Japan, sales dropped to 9.4 million units, a decrease of 28 per cent year on year, with consumers showing little interest in upgrading their existing devices.

Latin American handset volumes grew 5.5 per cent year on year, while North American mobile handset sales were 47 million units, up 4.5 per cent over the previous year.

The market in Western Europe reached 43.5 million units, below the 47.2 million units registered during the same quarter in 2007, as replacement sales slowed and consumers found themselves locked into an 18 or 24 month contract.