Worldwide shipments of mobile phones jumped almost 30 percent in the first quarter over the same period last year, market researcher IDC says. The sales were driven by demand for handsets with features such as color screens and cameras, according to IDC.
Some 152.7 million units were shipped during the quarter, representing a healthy start for the 595 million units IDC expects to be shipped by the end of this year.
Shipments dropped sequentially in the quarter, dipping 5.9 percent compared with fourth-quarter 2003 shipments. But IDC says that this is due to seasonal factors--consumer demand was partially sated after booming holiday sales.
The nearly 30 percent year-over-year growth paints a more sanguine picture, IDC says, showing demand for both converged and feature-packed devices. In fact, converged devices, or smart phones, saw an 85.8 percent growth in shipments compared with the first quarter of 2003, although they posted a sequential decrease of 5.5 percent.
Full of Features
Consumer cravings for new midrange offerings such as camera phones and color screens also served to boost shipments by vendors like Motorola and Sony Ericsson Mobile Communications, which saw year-over-year increases of 51.5 percent and 63 percent, respectively.
"Despite some carriers' greater dialogue about 3G in recent months, consumers are looking to what is here and now," says IDC analyst Alex Slawsby. What's mostly here and now are phones with 2.5G features like digital cameras and jazzed-up ring tones, which are enticing consumers to either upgrade or replace their phones to gain the greater functionality of sleeker designs, he says.
Demand for these midrange offerings came to the detriment of market leader Nokia, which ended up losing market share in the quarter because its product line concentrated on entry-level phones. Although Nokia still leads the pack, with 29.3 percent of the mobile phone shipments in the quarter, its share decreased 4.8 percent from the first quarter of last year, and slipped 19.2 percent sequentially. The vendor hopes to regain share through price cuts and the introduction of 40 new handsets this year, IDC says.
"Nokia has had a strategy for many years of delivering products to meet mass-market demand. It is not an innovator--it's never the first one to bring in new display technology or new cameras, for example," Slawsby says. However, he adds that it would be foolish to rule the Finnish handset maker out as it introduces new, updated products.
Catching Up?
Nokia still has to deal with Motorola, though, which came in at number two, shipping 16.6 percent of mobile phones during the quarter. And the company plans to keep up momentum with a range of new phones concentrating on mobile music, broadband, and productivity offerings, IDC says.
"Motorola has its act together, and Samsung is seen as a premium brand, so they will exert continuing pressure on Nokia," Slawsby says.
Samsung came in third in terms of mobile phone units shipped, after seeing an 88 percent increase in shipments over last year. Samsung landed 13.1 percent of the market share, thanks to premium products like camcorder phones.
Meanwhile, Siemens came in fourth, posting a 1 percent drop in market share from last year to 8.4 percent. Fifth place went to Sony Ericsson; that company managed to catapult itself away from its number-six position in the previous quarter due to the success of its entry-level and midrange products, IDC says.
With the mobile phone market expected to keep up robust growth--IDC predicts there will be 1.5 billion wireless subscribers by the end of this year--competition in the sector should be fierce.
What's more, IDC predicts that the market will continue to expand through 2008, reaching an all-replacement sales cycle by the end of the decade with over 800 million phones shipped annually.
In the near term, shipments will continue to be driven by demand for 2.5G phones, according to Slawsby, as a compelling case for the adoption of 3G handsets has yet to be made.
"3G is still a nebulous concept, and consumers are looking through the high-bandwidth hype for what's real," Slawsby says.
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