Mobile Phone Sales Surge

Replacement demand in mature markets, in addition to higher-than-expected growth in emerging markets, saw mobile phone unit sales rise by 20.5 percent in 2003, according to a study published by Gartner.

Worldwide unit sales reached 520 million in 2003. The strength of the pick-up in sales, after a sluggish 2002, was amazing, Gartner principal analyst Ben Wood says. "In the mature markets, a lot of people last bought phones in 2000 or 2001, and so we're reaching the sweet spot for replacement. People want smaller, sexier, color products," he says.

People also want options such as cameras in their phones, and new purchases are as much about fashion as technology, Wood says.

In emerging markets, just having a phone is a status sign, and so the markets are more cost driven but are still growing fast, he says.

Market Share Slips

Nokia lost a little of its market share, slipping to 34.7 percent from 35.1 percent, "but it's still spectacularly successful," says Wood.

"Every competitor is out to beat Nokia," Wood says. "They operate in every area of the market and face competition at all ends. Nokia is also to be applauded for its innovation, as it often leads the market with new technologies."

Motorola also saw its share fall, to 14.5 percent from 16.9 percent, while Samsung Electronics' share grew to 10.5 percent from 9.7 percent. Siemens' share rose from 8.0 percent to 8.4 percent. Sony Ericsson Mobile Communications followed at 5.1 percent, down from 5.4 percent in 2002, almost matched by LG Electronics' 5.0 percent share. LG's share has grown markedly from only 3.2 percent in 2002.

Supply and Demand

Motorola lost share in 2003 due to problems with delivering products on time, but sales have shown signs of picking up since the beginning of 2004, Gartner says.

The majority of Siemens' sales have been in low-tier, low-cost, and low-margin products, which are ideally suited to cost-conscious emerging markets, Gartner says.

All manufacturers are having to take bets on what technologies to add to their phones, because it isn't clear what the market will want, Wood says. There is a possibility that the primary function of mobile devices will shift, so that they become gaming devices or music devices with phone functions, rather than primarily a phone, he says.

Growth is set to continue in 2004, with the first quarter already looking strong, Gartner says. The research company estimates that 580 million units will be sold this year.