Cellphone sales beat expectations in ’03

By Lucas van Grinsven,

AMSTERDAM: - Global sales of mobile phones exceeded even the most bullish expectations in 2003 and market researchers said on Tuesday the handset industry will enjoy an even better 2004 as new, fancy models catch on.

Mobile phone sales to consumers topped 510 million units in 2003 and will exceed 560 million units in 2004, according to the big three research groups that track the world's biggest consumer electronics segment of mobile handsets: Gartner Dataquest, IDC and Strategy Analytics.

"It is an exceptionally strong market. It's much stronger than the handset makers themselves have indicated," said Gartner analyst Ben Wood.

Most handset makers said the total market was around 460 million units in 2003, while market researchers themselves had expected 500 million, up from around 420 million in 2002.

It is the first year since 2000 that handset demand rose more than 10 percent as the sector strove to cater to both emerging markets and choosier customers in rich economies.

Cellphone producers are now benefiting from booming emerging markets such as China, India, Brazil and Russia, where they sell relatively cheap handsets to first-time buyers, as well as from existing customers in the United States, Europe, Japan and South Korea, who are replacing old models.

Japan is leading this trend. Two years after the world's first third-generation mobile networks were launched there, consumers are now embracing services such as video conferencing on models with built-in cameras and large colour screens.

In North America and Western Europe, consumers are also ditching their old monochrome models for those with colour displays and cameras, but use less-advanced data services such as picture messaging because networks have not been upgraded.

Smartphones, which feature calendars, email, pictures, music and other services in one device, were one of the fastest growing new categories, IDC said. Worldwide shipments for 2003 rose 182 percent to 9.6 million devices.

PRICE PRESSURE

Strategy Analytics was the most bullish in its 2004 forecast, estimating shipments of 585 million units this year, but analysts said that most gains from record shipments are wiped out by fierce price pressure.

The world's top six vendors still take about 80 percent of the global market, but aggressive Asian rivals, many of which are based in China, put pressure on prices and are gaining market share, Strategy Analytics found.

The losers were market leader Nokia from Finland, whose 2003 market share slipped 0.3 percentage points to 34.8 percent, and U.S.-based number two Motorola, whose share dropped to 14.5 percent from 16.3 percent, Strategy Analytics said.

South Korea's Samsung Electronics gained one percentage point to 10.8 percent. Germany's Siemens closed the year at 8.4 percent, up from 8.2 percent as it had a stellar fourth quarter.

South Korea's LG and Japanese-Swedish joint venture Sony Ericsson battled for the number five spot as both closed 2003 with a 5.3 percent market share. LG however was the fastest grower in the top six, while Sony Ericsson just managed to hold on to last year's market share.

The vendors themselves have given different market shares which are usually higher than those of market research firms. One of the reasons is that they underplay the total size of the market, which gives them a relatively larger chunk.

Gartner said mobile phones continued to sell well, even after the peak Christmas holiday selling season.

"We're not seeing any let-up in demand. Over Chinese New Year (in late January) we continued to see strong sales to consumers. There is some seasonality and the first quarter is not going to be as strong as the fourth, but some manufacturers are still struggling to meet demand," Wood said.

Gartner's sales estimates are shipments to consumers, reflecting real end-demand, while Strategy Analytics and the manufacturers measure sales to their distributors.

Nokia shares slipped 0.2 percent to 16.66 euros at around 1450 GMT, slightly outperforming a 0.7 percent weaker European technology index. Motorola fell 0.9 percent to $16.30.

® Reuters