Aseries of profit warnings from Nokia, the world's largest mo- bile handset maker, and rival LG signal that the end of eight years of rapid expansion since 2001 is just round the corner. The Finnish mobile maker said that the slowdown only accelerated towards the end of 2008, led by lower than expected demand in key markets from emerging economies amidst the global credit crisis, which hit corporate customers hard. This has forced handset makers across the globe revise their growth outlook for the current year. Nokia, for instance, has warned of a lower industry-wide mobile device volumes in the fourth quarter of 2008, as against the previous estimate of approximately 330 million units, and expects the same to decline 5% or more in 2009 from 2008 levels. Nokia's arch rival Motorola, which is struggling with its ailing mobile device unit, too said that its fourth quarter results would miss Wall Street's expectations amidst warning of continuance of poor run in 2009 too. Korean mobile giant, Samsung too has painted a gloomy picture. In 2009, "the market could post a single-digit or even negative growth," said James Chung, a spokesman for Samsung, which dethroned Motorola to emerge as the number two mobile maker, globally, in 2007. And the barrage of bad news continues to keep flowing in with a host of players from mobile chipmakers like Intel, Qualcomm, and Salcomp, the world's largest handset charger maker, among others, echoing similar concerns.
The worldwide sales of mobile phones grew in single digit at 6% to touch 309 million units in the Q3 of 2008; in contrast, the sales grew at 16% in the corresponding quarter in 2007. The sales of smartphone, which is now the new rage among the consumers and has emerged as the savior of the handset makers, too have begun to show signs of weakness. According to the global research firm, Gartner, the global smartphone market in the third quarter of 2008 reached its weakest year-on-year growth, as sales to end-users totaled 36.5 million units in the third quarter of 2008, an 11.5% increase from the same period in 2007. The sales of smartphones are under pressure as service providers (operators) are reducing subsidies and trying to lock-in consumers for longer periods. This could further impact the growth in this segment. "Although leading mobile operators are subsidizing more smartphones, to reach lower prices they tie the device to two-year contracts with monthly data plan rates which remain too expensive for the mainstream user," said Roberta Cozza, Principal Analyst at Gartner.
The sales of other handsets have also been hit as first-time buyers in developing countries like India and China have postponed their purchase, while those looking to upgrade their handsets are waiting for prices to come down.
The mobile handset market, after its early days in the 1980s, experienced explosive growth during the late 1990s, driven by factors like falling handset prices, cheaper tariffs, changing lifestyles, and rising disposable incomes, notably in emerging economies like India, China, Brazil, Russia and South Africa. At the same time, falling call rates (tariffs) along with attractive schemes offered by mobile operators, who bundled handsets with lucrative call packages, led to strong surge in handset sales. Later, in the last few years, as manufacturers pushed mobile sets with multimedia features and lots of other facilities like Internet browsing, high-resolution cameras, music downloads, video and data transfer, movie downloads, and so on, the sales of such phones soared. Led by these, the total annual growth for the worldwide mobile handset market reached 15% in the second quarter of 2008. Four main factors characterize the phenomenal growth of the global handset market: the enlargement of subscriber bases, particularly in the emerging markets, the growing importance of data services, the fall in Average Revenue Per User (ARPU) in most countries, and market consolidation. Today, the five major handset makers share among them 80% of the market share.
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