Mobile Phones Sales up 17% in First Quarter

The previous high for mobile phone sales was 153.7 million units in the first quarter of 2004. Gartner analysts said mobile phone sales grew in all regions.

“In the mature markets of Western Europe and North America replacement sales ensured a buoyant performance,” said Ben Wood, research vice president for mobile terminals research at Gartner. “The Asia/Pacific region reflected seasonal trends by virtue of strong sales associated with Chinese New Year and other festivals.” In addition, rapid growth in emerging markets, notably Eastern Europe, Middle East and Africa and Latin America, further bolstered global sales, he said.

Nokia’s market share grew (see Table 1) despite poor performance in North America. “The company did particularly well in Asia/Pacific, especially in mainland China where aggressive pricing, significant investments in marketing and its distribution network delivered sales of more than 5.6 million units,” said Ann Liang, principal analyst for mobile terminals in Asia Pacific at Gartner.

Table 1Worldwide Mobile Terminal Sales to End-Users in 1Q05(Thousands of Units)                          1Q05 Sales   1Q05     1Q04 Sales   1Q04Company                                Market                Market                                      Share (%)             Share (%)------------------------- ---------- ---------- ---------- ----------Nokia                      54,943.1       30.4   44,259.1       28.8Motorola                   30,293.6       16.8   25,111.0       16.3Samsung                    24,099.0       13.3   19,362.5       12.6LG                         11,138.6        6.2    8,210.0        5.3Siemens                     9,942.7        5.5   12,285.8        8.0Sony Ericsson               9,900.0        5.5    8,638.6        5.6Others                     40,293.0       22.3   35,879.9       23.4Total                     180,610.0      100.0  153,746.9      100.0------------------------- ---------- ---------- ---------- ----------Note: This table excludes ODM to OEM shipments.Source: Gartner Dataquest (May 2005)

Motorola continued its strong performance with global mobile phone sales of 30.3 million units. Gartner analysts said the company’s success was based on a strengthening brand (built largely on the success of its RAZR V3 phone) and improved relationships with network operators.

“Motorola must now work hard in 2005 to grow its market share further without sacrificing margins too dramatically, particularly given its commitment to supply ultra low-tier products,” Mr. Wood said.

Samsung increased its sales, doing especially well in Western Europe. Samsung also recorded strong sales in Russia, while price reductions helped it elsewhere in the region. Rival LG did well in North America thanks to sales of its code division multiple access (CDMA) phones.

Siemens had a difficult quarter, as its market share slipped to its lowest level since 1999. “The uncertainty about the future of Siemens’ business has hurt it as network operators and key channels lose confidence in the company and its products,” Mr. Wood said.

Based on the first quarter results, Gartner has increased its estimates for worldwide sales. Gartner now projects worldwide mobile phone sales in 2005 will approach 750 million units, a 13 percent increase from 2004. Gartner had previously forecast sales of 720 million units.

“More phones are being sold, but profit margins are shrinking,” Mr. Wood said. “This is because consumers in emerging markets want cheap handsets, and competition in more-developed markets keeps prices low. Smaller manufacturers will feel the pressure, and many of them are already struggling to stay profitable. We expect some of them to be bought out, and a few will choose to leave the mobile phone market completely.”

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