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Global Mobile Handset Highlights
- The market was worth $131 billion in revenues in 2009
- In total 1.034 billion new handsets were shipped in the year
- Despite falling back somewhat Nokia held a 41% share of total shipped units and revenue
- Apple took second place in value with an 11% share
- Samsung and LG were in 2nd and 3rd position in terms of unit shipments
- The market declined in a similar way to most ITC categories, taking a massive hit in Q4 2008
- The recovery is well under way with both volume (20%) and value (8%) reaching positive ground for the first time in Q4 2009
- Success can be found in expanding to under-penetrated markets and in selling ever-increasingly sophisticated smartphones to wealthy consumers
For more on smart phone and handset shares and forecasts see here and here,
I wanted to celebrate the week of the World Mobile Congress (WMC) taking place in Barcelona this week by sharing my research into the handset market. In particular I wanted to see how badly affected it had been by the recession last year, how it compared with other ITC sub markets and how well its suppliers have been doing.
The market itself is staggering in its sheer size, with in excess of 1 billion units shipped in 2009 and vendor revenues standing at $139 billion. That means that one in 7 of the world’s population received a new mobile phone last year. Just as the world’s health industry is dealing with an ageing population in the West and the challenge of expanding medical care to all in the East, so the world’s mobile phone industry is trying to sell ever more complicated and expensive smartphones in the West and expand phone usage to all in the East. In market terms this breaks down to arguments about volume and value products, emerging and emerged countries, road warriors and the pone ladies of Calcutta.
The Recession Had A Stronger Effect On Handset Revenue Than Units
In the middle of 2008 it was possible to imagine that the mobile handset market would be recession proof; after all it had experienced annual growth rates of around 20% in both units and revenue for 5 years solid and telecoms could be used to keep in touch with people when travel becomes too expensive. We wouldn’t hold to those arguments now. In fact growth rates plummeted in a very similar way to the PC and other hardware markets. The sudden crash in Q3 2008 was caused by the credit crunch of course, with the consequent loss of confidence hacking into the market.
My research suggests that the world handset market dropped 12% in revenue from $159 billion in 2008; units however were less affected, dropping by just 1% from 1.043 billion in 2008 (see Figure 1 for the historical quarterly growth). By definition therefore the average product lost value – in fact by 11% if you take my unit and revenue totals to declare the average price. This is not to say of course that a single phone’s price dropped by that amount, especially as a strong recent feature of the market has been the growth of (more expensive) smartphones such as Apple’s iPhone and RIM’s Blackberry.
Nokia’s Massive Lead As Handset Supplier Was Reduced In The Recession
Nokia held a 41% share in the world handset market in terms of revenue ($57.3 billion) and unit shipments (432 million). However it suffered a 23% decline in revenue and an 8% decline in unit shipments. The rapid rise of Apple displaced other vendors in terms of value, with its $15.7 billion (increased as a result of its recent restatement) gaining it an 11% share. The significant success it has had with its ‘Apps’ has other vendors desperately seeking to come up with meaningful alternatives. Apple’s deliberate movement towards vertically integrated business models (Apps on iPhones and now iPads, iTune downloads only on iPods, etc.) might be beaten through collaboration, especially if users start to feel uncomfortable about getting everything from a single source. Samsung held an 8.5% share of revenues (much less than its unit share), followed by Sony Ericsson (6.8%), LG (6.4%) and NEC (5.6%). RIM’s Blackberry sales have been increasing, but with a ‘smartphone only’ strategy, it clearly lags behind Apple in market success at the moment.
In terms of unit shares the South Korean suppliers Samsung (21%) and LG (11%) were in 2nd and 3rd places respectively. At the WMC there was much discussion about Chinese and Indian competition. While this will undoubtedly grow, at the moment ZTE in 7th position in unit shipments is the only Chinese vendor with a significant position on the world stage.
The quarterly unit shipments of the four leading handset suppliers are shown in Figure 3. It shows well the decline in shipments in Q4 2008 and Q1 2009 and the recovery all but Sony Ericsson have made since then. However the recovery in unit shipments outstripped that of revenues and has put much pressure on profitability throughout the last year.
The World Handset Market Follows A Familiar Pattern Through Downturn And Recovery
The handset market had been enjoying stronger growth than other ITC categories in the period leading up to the recession in Q4 2008. In fact the microprocessor market was the only segment of the industry that might have given us warning of the crisis to come. Perhaps because spending on handsets is more discretionary that that on Telecom Services or PCs, the drop in revenue growth was slightly worse than both (see Figure 4). Recovery however has also been faster; like the microprocessor market, mobile handset revenues reached positive territory before the year-end.
Some Conclusions – Volume And Value Approaches Will Succeed
I’ve read some of the comments coming out of the WMC this week. Much of it has been analysis of the influx of Apps, the success of Apple (who still chooses not to attend), the increasing competition for Nokia and a number of new alliances and collaborations. Of course the market remains special; it involves a marriage between Telecom and handset suppliers and is highly regulated, leading to a more open and collaborative industry than many. The handset market is Global, with increasing competition from Indian and Chinese suppliers for the established Korean volume and US and Japanese value players. I’m particularly interested in the development of smartphones, since they have the ability to become the leading client device type in coming years, if desktop virtualisation continues apace. However I’m not convinced that the restriction of choice Apple is pursuing will be of value to customers in the long run. While vertical integration is one way of ‘getting things done’, more open business models are needed if we’re going to avoid the pitfalls. But I’m also interested in the development of volume strategies in that they expand the percentage of the connected population and will play a role in improving the lives of poorer countries.
Did you attend the WMC? How do you see the development of the handset market in coming quarters? Please let me know by commenting on this article.
Filed under: Mobile Phone Handset Tagged: | Apple, Blackberry, LG, Market-Share, microprocessor, Nokia, Palm, PC, revenue, RIM, Samsung, smartphone, Sony Ericsson, Telecom Service, unit shipment, ZTE
