When the going gets tough – the tough get going

Mobile phone sales are affected by economy slowdown – Gartner
by: Jerry Liao

Most of the people I talked to are saying that the year 2009 will be one of the toughest times the business industry will face. Some companies are saying that they will be happy if they could just maintain their 2008 sales performance for 2009. In other words, a zero growth for 2009 is already acceptable to most.

What particular sector of the tech industry will be affected by the slowdown? I would say all, particularly the consumer products. Budgets of the consuming public will be the tightest during this crunch that is why people will only buy the so-called “necessities” rather than the “luxuries”.

How do you think this worldwide problem would affect the mobile phone industry? Here’s what Gartner has to say:

Worldwide sales of mobile phones to end-users reached more than 309 million units in the third quarter of 2008, a 6 per cent increase compared to the third quarter of 2007, according to Gartner, Inc. Growth dipped back into single figures, representing less than half the 16 per cent growth rate of the same period in 2007.

Nokia sold 118 million phones in the third quarter of 2008. It was the first quarter of the year in which Nokia felt the negative effects of the current economic climate. Nokia suffered in what it called the “converged devices” segment. However, analysts said Nokia should be able to marginally improve its share in the fourth quarter of 2008 as its new devices come to market, and the holiday season helps to increase overall sales.

Samsung had a very strong third quarter as sales increased 26.3 per cent over the same period in 2007. It continued to take advantage of the popularity of its touch-screen devices — the Tocco and Omnia — as well as an enriched mid-tier device portfolio.

Sony Ericsson’s rise to the third position during the third quarter of 2008 had more to do with the issues that Motorola and LG faced than Sony Ericsson’s ability to turn around its business after a few difficult quarters. Sony Ericsson built some inventory in Asia/Pacific during the quarter, which left a much smaller gap between it and Motorola on sell-in numbers. There have been reports of component shortages for the Xperia X1, Sony Ericsson’s long-waited Windows-Mobile-based touch-screen device, so sales are likely to be challenged again.

Motorola’s worldwide share dropped further in the third quarter of 2008 as sales fell to 24.6 million units. With no inventory left to burn from previous quarters and a portfolio that remains very weak, Motorola slightly built inventory during the quarter.

LG’s portfolio remains well-positioned to take advantage of the seasonality in the fourth quarter of 2008 as its pricing is more suited to the current economic climate. LG was able to burn some inventory it built up in the second quarter of 2008, and sales to end users reached 24.1 million units.

Sales of mobile handsets in Asia/Pacific increased despite economic pressure and weak consumer confidence, with sales of 116.7 million units in the third quarter of 2008, a 13.8 per cent increase year-on-year. However, replacement cycles increased from four to eight months, resulting in either a decline or almost flat sales in mature markets like Singapore, Hong Kong, Taiwan, Korea, and Australia where operators are moving away from subsidies and pushing for longer contract periods in an attempt to generate revenue.

In my previous articles, I predicted that the growth of the mobile phone business will happen in the low-end phones, and I will boldly say that 2009 will be that year. The more affordable but function rich phones will make a killing during this hard times.

Mobile and telecom companies should become more innovative in their pricing schemes and promotions if they want to maintain or improve their numbers.

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