Press Release

Egham, UK, May 31, 2007 View All Press Releases

Gartner Says Strong Results in Asia/Pacific and Japan Drove Worldwide Mobile Phone Sales to 14 Percent Growth in the First Quarter of 2007

Sales of mobile phones in the first quarter of 2007 reached 257.4 million units, a 14 percent increase from the same period last year, according to Gartner, Inc. The growth was bolstered by strong demand from key countries in Asia/Pacific, such as China, as well as Japan.  Western Europe and North America registered the expected slow down after strong Christmas sales and saw only moderate growth over the same period in 2006.

“With part of the inventory that built up in 2006 cleared in the first quarter of 2007, we remain confident that sales will reach 1.15 billion units for 2007, a 16 percent increase from 2006,” said Carolina Milanesi, research director for mobile devices research at Gartner, based in Egham, UK. “Sales will come from continued growth in net new additions in regions such as Africa as well as increased replacement sales from key markets in emerging regions. Mature markets such as North America and Western Europe will also see replacement sales although at a lower rate than what we have been accustomed to in the past couple of years.”

Nokia sold close to 92 million mobile phones in the first quarter of 2007 (see Table 1) which resulted in a 35.7 percent market share worldwide, a 1.8 percentage point growth compared to the same period in 2006. Nokia’s sales were driven by its multimedia portfolio, which in the quarter accounted for around 8 million units sold into the channel. Nokia’s mid-tier range, which was strengthened at the end of 2006 with the 5200 and 5300, welcomed the addition of the Nokia 6300. The enterprise market looked promising during the first quarter, when close to 1 million Eseries devices were sold into the channel. Gartner expects Nokia will continue to take advantage of Motorola’s weakness in the quarters to come and maintain its solid performance as its portfolio expands with some interesting new additions such as the 2630 and the Navigator.

Table 1
Worldwide Mobile Terminal Sales to End-Users in 1Q07 (Thousands of Units)

Company

1Q07

 Sales

1Q07 Market

 Share (%)

1Q06

 Sales

1Q06 Market

 Share (%)

Nokia

91,974.1

35.7

76,246.9

33.9

Motorola

47,547.7

18.5

45,678.4

20.3

Samsung

32,057.8

12.5

28,128.1

12.5

Sony Ericsson

21,711.5

8.4

13,150.9

5.8

LG

15,966.7

6.2

14,554.7

6.5

Others

48,098.3

18.8

47,075.3

20.9

TOTAL

257,356.2

100.0

224,834.3

100.0

Note* This table includes integrated digital enhanced network (iDEN) terminals. It excludes original design manufacturers to original equipment manufacturer shipments and Code Division Multiple Access Wireless Local Loop (CDMA WLL)
Source: Gartner Dataquest (May 2007)

“Motorola had a very challenging start to the year,” said Ms Milanesi. Motorola sold 47.5 million units worldwide accounting for 18.5 percent market share, three points lower than in the fourth quarter of 2006 and a 1.8 percentage point drop year-on-year. In the second half of 2006, Motorola built considerable inventory in markets such as Asia/Pacific and Western Europe resulting in a much lower than expected sales into the channel (sell-in) in the first quarter of 2007. Due to aggressive pricing on some key products, however, sales to end-users (sell-through) were slightly better than sell-in as Motorola was able to reduce some inventory in Western Europe and Asia/Pacific. Motorola will continue to struggle in the second quarter of 2007 while the second half of the year looks more promising with new products including the Razr2 hitting the market. “The challenge for the company will be to make the Razr2 as successful as its predecessor,” added Ms Milanesi.

Samsung’s sales reached just over 32 million units in the first quarter of 2007 granting it a market share of 12.5 percent, unchanged from the same period in 2006. Samsung built some inventory in Asia/Pacific where a strong sell-in towards the end of the quarter failed to get through the channel by the end of March. Gartner said Samsung seems to have found the right recipe betting on rich features and ultra slim design. However, Samsung might soon run into the problem of having too many products that have a very similar look, where differentiation comes from the technology and the "loss of millimetres."

The favourable momentum that saw Sony Ericsson end 2006 on a high note continued in the first quarter of 2007, as sales reached 21.7 million units. Sony Ericsson registered strong growth in Asia/Pacific, Latin America as well as Western Europe benefiting from a portfolio that counted successful products in the high end (K800 W880) as well as the low and mid-tier products such as the W300 and W200 and the K310. As Sony Ericsson reinforces its mid and low-tiers, the vendor should see sales in emerging markets pick up in the coming quarters.

With seasonal factors boosting sales in Asia/Pacific, LG was able to slightly close the gap on Sony Ericsson with sales reaching 16 million units in the first quarter of 2007. The introduction of the LG Prada as well as new colours of the K800 Chocolate phone helped drive sales however it was not enough to avoid LG record a year-on-year decline, a 0.3 percentage point drop year-on-year. As Sony Ericsson brings to market additional high end and mid tier models, LG will have to excel itself to keep up with the competition.

Regional Analysis

In Asia/Pacific, handset sales grew substantially, reaching 90.4 million by the end of March, a 40 percent increase from the first quarter of 2006. “Consumers appeared to have more disposable income to spend on mobile phones during the Chinese New Year holiday period,” said Ann Liang, principal analyst for mobile devices research at Gartner, based in Taiwan. “In South Korea, handset sales in the first quarter were spurred by the ending of a ban on subsides. However, in mature markets such as Taiwan, Hong Kong and Australia, sales of replacement phones were slower than at the end of 2006.”

Sales of mobile phones in Eastern Europe, the Middle East and Africa reached 43.9 million units in the first quarter of 2007, a 6 percent increase from the first quarter of 2006. Demand in key markets in Eastern Europe such as Russia slowed down compared to the fourth quarter of 2006 although it was higher than in the same period in 2006. Sales in the Ukraine, a key market that generated considerable growth in 2006, were down both quarter-on-quarter and year-on-year. Users in Turkey, Saudi Arabia, South Africa and Egypt continued to show strong interest in buying new mobile phones and helped drive sales in the Middle East and Africa.

In Japan, sales to end users in the first quarter of 2007 were 14.7 million units, an increase of 16.6 percent from the first quarter of 2006 and an increase of 12.7 percent from the fourth quarter last year. “Generally the first quarter is the strongest quarter in Japan, as the school year ends in March and operators run extensive promotions,” said Nahoko Mitsuyama, principal analyst for mobile communications research at Gartner, based in Tokyo. “This quarter was no exception and 41 new models were introduced during the quarter.”

Sales of mobile handsets to end users in Latin America declined sequentially by nearly 10 million units, to close the quarter at 24.6 million units. Sales were down 29 percent compared with the fourth quarter and 2.4 percent year-on-year. “As growth in net additions has slowed over the past few quarters, it has affected handset sales,” said Tuong Nguyen, analyst for mobile devices research at Gartner, based in Arlington, Virginia. “Sales of upgrade and replacement phones struggled to offset the decline in sales to new subscribers. Net additions in Latin America in the first quarter of 2007 were the lowest seen in any quarter since the first quarter of 2005.

The North American handset market experienced its strongest first quarter since Gartner started tracking the market in 2001. Sales to end users hit 41 million units, up 2 percent from the first quarter last year. “AT&T and Verizon Wireless, the two largest operators in the region, continued to record their strongest quarters in terms of handset sales,” said Hugues De La Vergne, principal analyst for mobile devices research at Gartner, based in Dallas, Texas. “Net additions were down year-on-year as penetration rates moved toward saturation levels. Sales in the North American market were still driven by people upgrading their phones.”

In Western Europe, sales reached 42.9 million units, up 4 percent compared with the first quarter of 2006, as demand slowed after the boom of the Christmas period. “Growth in subscribers’ net new additions slowed down as penetration for many countries in the region is already over or very close to 100 percent,” Ms. Milanesi said. “More appealing products meant a healthy uptake of third-generation (3G) devices, which should certainly make operators feel more positive about this year’s expectations.”

 

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