Mobile phone sales fall as downturn bites

The economic downturn has hit sales of mobile phones in the third quarter, with cash strapped users holding onto their handsets for longer, and Gartner is warning that worse is to come.

The global slowdown affected sales in both rich and poor countries, though results varied around the world. Western Europe and Japan were hit hardest, with unit sales below those of a year earlier. Growth was strongest in the Asia-Pacific region as a whole, and sales went up in the Americas and Eastern Europe, the Middle East and Africa as well.

Handset sales worldwide grew 6 percent in the third quarter, less than half the 16 percent growth that took place in the third quarter of 2007, according to Gartner. Unit shipments of phones grew to more than 308.5 million in the quarter from 291.1 million in the third quarter of 2007.

The news will be yet more grim in 2009, when Gartner expects worldwide unit sales to decline between 1 percent and 4 percent from 2008, according to Gartner analyst Carolina Milanesi.

New users still flocked to cell phones in the third quarter, but sales of replacement phones were hit hard, the company said. For example, in the Asia-Pacific region, consumers on average were waiting eight months to replace their handsets, rather than just four months as they had previously. As a result, sales were flat or down in mature markets such as Taiwan, Korea and Australia.

Rising sales to first-time cell users in emerging markets, such as India and China, helped drive unit sales up 13.8 percent to 116.7 million units in Asia-Pacific. Emerging-market gains also drove up sales in Eastern Europe, the Middle East and Africa by 13.1 percent. Unit sales in Latin America rose 5.5 percent.

But sales in Japan fell 28 percent from a year earlier and were flat from the second quarter, and sales in Western Europe also were down, from 47.2 million to 43.5 million.

Despite general weakness in the market for high-end phones, sales of smart phones such as the Apple iPhone and new Research in Motion BlackBerry models drove growth in North America, which was up 4.5 percent in the quarter, according to Gartner.

Motorola suffered most among the major manufacturers, seeing its sales fall from nearly 38 million units to less than 25 million, and its market share drop to 8 percent from 13 percent. Sony Ericsson Mobile Communications also lost some market share, while Samsung Electronics benefited from their woes, raising its market share from 14.4 percent to 17.1 percent.

The economy also dampened sales by Nokia, Gartner said, though it gained market share to 38.2 percent and saw sales rise from about 110 million units to nearly 118 million. Samsung, the number-two vendor, increased its sales by 26.3 percent and its market share from 14.4 percent to 17.1 percent.

Sony Ericsson had the third-largest share but was essentially neck-and-neck with Motorola and LG Electronics, Gartner said.

Motorola, which has fallen from second place in recent years, is undergoing a reorganisation and is still trying to find a superstar product to follow the Razr flip phone.