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Electronics Production | October 24, 2007

How much did Nokia increase its mobile-phone unit shipments in Q3?

Nokia’s third-quarter gains were impressive, with its global mobile-handset shipments rising by a stunning 10.9 million units compared to the second quarter.
The Finnish mobile-handset sales leader increased its shipments to 111.7 million units in the third quarter, up 10.8 percent from 100.8 million in the second quarter. This gave the company a global market share of 39.5 percent, up from 37.9 percent in the second quarter, helping it to pad its market dominance.

“Nokia is capitalizing on the increasing popularity of multimedia- and business-oriented applications for mobile phones,” said Tina Teng, analyst, wireless communications, for iSuppli. “The company’s shipments of ‘convergence’ mobile phones that integrate multimedia and smart-phone features grew by 53.8 percent in the third quarter of 2007 compared to the same period in 2006.”

Nokia also remained the leader in terms of operating profit in the third quarter. The company’s mobile device business unit achieved an exceptionally-healthy 22.2 percent operating margin during the period. This compares to an average operating margin of 10.5 percent for the Top-5 mobile-handset suppliers in the third quarter.

The only disappointment in Nokia’s third-quarter results was its performance in the Americas region. Nokia in the third quarter suffered a unit-shipment decline of 12.7 percent in Latin America and of 1.7 percent in North America compared to the same period in 2006.

The attached table presents iSuppli’s estimate of third-quarter market share in the global mobile-handset market. Motorola’s market-share figures are considered preliminary until the company makes its official earnings announcement on Thursday, Oct. 25.

The strong results from Nokia came during a robust period for the global mobile-handset business and its leading players. Worldwide mobile phone shipments during the period amounted to 283 million units, up 6.4 percent from 266 million units in the second quarter and a 15.4 percent increase from 245.3 million units in the third quarter of 2006.

High first-time sales of phones in emerging markets and high replacement rates in Europe were the major factor driving the growth.

The Top-5 mobile handset suppliers benefited from the healthy growth, with all of these companies increasing their shipments during the third quarter compared to the second.

Combined shipments for these companies rose 9.6 percent during the third quarter compared to the second. At this margin of expansion, these companies outgrew the overall market and thus gained aggregate market share at the expense of the smaller suppliers.

While Nokia’s unit shipment gain was impressive, Samsung Electronics Co. Ltd. of South Korea actually posted a slightly larger increase on a percentage basis, helping the company to maintain the second rank in the industry.

Samsung’s global mobile-handset shipments rose to 42.6 million units in the third quarter, up 13.9 percent from 37.4 million in the second quarter. Compared to the third quarter of 2006, Samsung’s shipments rose by 38.8 percent, the highest rate of all the Top-5 mobile-handset makers.

This boosted Samsung’s market share to 15.1 percent, up from 14.1 percent in the second quarter, giving the company a 2.2 percentage point lead over No. 3 ranked Motorola Inc. of the United States. This is up from a 0.7-point gap in the second quarter.

“Samsung’s strong performance was due to impressive increases in shipments in the European and Americas regions,” Teng said. “The company’s shipments in Europe and the Americas rose by 28.1 percent and 26.6 percent respectively in the third quarter. This more than offset the 6 percent sequential decline in shipments in Asia during the same period.”

Samsung has chosen not to participate in the Ultra Low Cost Handset (ULCH) market and instead has put increased focus on high-end, high-margin 3G handsets. This strategy paid off, with the company boosting its average operating margin by $1 during the period.

The company in the third quarter yielded a 12.3 percent operating profit margin, up from 8.4 percent in the second quarter.

Based on iSuppli’s preliminary estimate of Motorola’s share, the company shipped 36.5 million mobile handsets during the third quarter, up 2.8 percent from 35.5 million in the second quarter. This lagged the handset market’s overall shipment growth rate of 6.4 percent, but kept Motorola’s market share fairly steady at around 13 percent. However, on a year-to-year basis, Motorola’s shipments plunged by 32.7 percent, making it the only company not to post an increase on an annual basis in the third quarter.

Motorola in the second quarter lost its long-time No. 2 ranking to Samsung. The company struggled to achieve an operating profit in the first and second quarters.

“Despite Motorola’s recent woes, there are signs the company is gradually regaining its footing in the global mobile handset market,” Teng said. “With its new product line coming out during the holiday season, Motorola should be able to achieve continued growth in shipment volume during the fourth quarter.”

LG was the clear leader in terms of volume-shipment percentage growth in the third quarter, with its sales rising by 14.7 percent sequentially. The company’s global mobile-phone shipments increased to 21.9 million during the third quarter, up from 19.1 million in the second quarter.

However, all the growth was driven by emerging markets such as the Middle East, Latin America, India and China, as was reflected in its Average Selling Price (ASP). Slow sales in North America and Europe resulted in LG’s mobile-handset ASP falling to $124, down 18.6 percent from $152.3 in the second quarter.

Despite a revenue decline of 7.9 percent measured in South Korean won, LG still managed to maintain its operating profit at 8.4 percent in the third quarter.

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