FRAMINGHAM, USA: The worldwide mobile phone market began 2009 with an expected sequential downturn, exacerbated by the challenges of the ongoing worldwide recession.

According to IDC's Worldwide Quarterly Mobile Phone Tracker, vendors shipped a total of 244.8 million units in the first quarter of 2009 (1Q09), approximately 15.8 percent lower than the 290.8 million units shipped during 1Q08. The first quarter of a new year is typically characterized by seasonally lower shipment volumes following a busy holiday quarter with channels clearing out excess inventory. But the 1Q09 decline was especially sharp due to weak end-user demand, currency volatility, and lack of credit for merchants as consumers and the supply chain adapt to the recession.

Ramon Llamas, senior research analyst, IDC's Mobile Devices Technology and Trends team, said: "That the worldwide mobile phone market started off 2009 with a year-over-year decline highlights just how much the economic recession has affected all industries, including the wireless market. The market continues to adapt to the new economic reality with both vendors and retailers exercising caution to remain profitable."

"In some cases, this has meant holding less inventory, or even reducing headcount. Fortunately, new features and demand for phones will help the market resist the financial pressure. We expect to see further year-over-year declines worldwide, even as some regions show signs of improvement."

As the overall market dropped 15.8 percent in 1Q09, converged mobile devices (commonly referred to as smartphones) continue to grow year on year at 4.0 percent. Growth within this segment was evident in Western Europe, North America, and Asia/Pacific (excluding Japan). Mobile operators have become progressively more open to raising subsidies within this segment as dependence on data revenue has increased as a result of reduced consumer demand for new handsets.

Ryan Reith, senior research analyst with IDC's Mobile Phone Tracker, said: "Creativity appears to be the key to success for large mobile operators during this tough time as changes to business practices from past years have become necessary. Some of the big operators in mature markets have shifted product portfolios, and some have smartphones accounting for as much as 50% of the entire handset offering. We believe this strategy will continue, along with an increase in devices that are media and messaging centric, to help operators maintain revenues."

Regional Analysis
Shipments of mobile phones into North America started the year slightly higher than the same quarter a year ago even as the economic recession bit deeper into the United States and started to impact Canada. Carriers' efforts to lure customers with unlimited plans and free device promotions helped offset a sharper decline, even in the face of slower subscriber growth.

Converged mobile devices at lower price points helped stimulate consumer interest in the midst of the economic recession, providing a needed boost to shipment volumes.

As expected, the Latin American mobile phone markets took a negative turn in 1Q09 as most of the economies in the region began to see slower economic growth. In addition, local currency devaluation drove prices higher on imported phones, reducing demand. This has not deterred future plans of enterprise customers, who have voiced interest in increasing spending on mobile devices in 2009.

Much of the Western European handset market was characterized by weaker consumer confidence and lower demand, while channels, already holding low inventory, were reluctant to re-stock. This set up challenging conditions for vendors in both the traditional mobile phone and converged mobile device spaces.