Electronics Production | May 17, 2006

Shift to 3G handsets accelerates

Shift to 3G Handsets Accelerates as European Mobile Phone Market Polarizes Around Top 3 Vendors in 1Q06, Says IDC.
According to IDC's Western European Quarterly Mobile Devices Market Tracker, the Western European mobile phone market (consisting of traditional mobile phones and converged devices) maintained double-digit growth in the opening quarter of 2006 as shipments increased by 11% year on year to reach 40.7 million units, compared to 36.8 million in the corresponding quarter of 2005.

"Although mounting saturation in subscriber growth across Europe is increasingly inhibiting handset shipment growth, the market in 1Q06 matched the growth rate exhibited in the opening quarter of 2005 despite a lack of impetus commonly provided by new handset launches," said Geoff Blaber, senior research analyst, European Mobile Devices at IDC. "Mounting consumer migration towards WCDMA devices driven by competitive service pricing and ASP declines, combined with highly aggressive handset subsidies across operator portfolios, was a key market performance driver in 1Q06."

However, despite relatively healthy unit volumes, intense vendor competition, ASP declines, and sustained scrutiny of handset portfolios and costs by mobile operators continued to have a negative impact on vendor profit margins. Furthermore, downsizing of portfolios meant the top 3 vendors accounted for almost 70% of all traditional mobile phones shipped, compared to 62% in 2005.

"Operators' scrutiny of handset portfolios is now beginning to significantly impact vendors without the capability and resources to meet stringent operator demands across multiple product lines with regard to software and hardware customization, UI, and form factor design. Such vendors need to focus R&D towards operator requirements by integrating such components to produce closely positioned products that serve very specific segments," said Andrew Brown, program manager, European Mobile Devices at IDC.

With increased carrier demand for highly customizable devices and higher ARPU (average revenue per user) driving solutions also meant that converged devices increased their proportion of the total market to 7% in 1Q06 from 5% in the opening quarter of 2005 as consumers continued to migrate predominantly towards S60 devices from high-end feature phones. However, converged device market growth of 43% year on year was disappointing due largely to portfolio tr

"Strong anticipated converged device growth in both consumer and enterprise segments, combined with the introduction of new form factors and technology improvements, particularly with regard to imaging, will drive a healthy renewal market in 2006. Consequently, IDC forecasts total mobile phone market growth of just under 10% with shipments expected to exceed 185 million units," said Jean-Philippe Bouchard, senior research analyst, European Mobile Devices at IDC.

Western European Mobile Phone Shipments, 1Q06

Vendor, Shipped handsets Q1 06, Share in Q1 06, Shipped handsets in Q1 05, Share in Q1 05, Growth.

Nokia, 13,8, 34%, 11,8, 32%, 17%
Motorola, 7,3, 18%, 5, 14%, 44%
Samsung, 7,1, 17%, 6, 16%, 19%
Sony Ericsson, 3,7, 9%, 3, 8%, 24%
BenQSiemens, 2,4, 6%, 2,9, 8%, -16%
Others, 6,3, 16%, 8,1, 22%, -22%
Total, 40.7, 100%, 36,8, 100%, 11%

Source, IDC 2006, handset shipments in million.

Notes: For comparative purposes BenQ Siemens' shipments in 1Q06 are placed alongside Siemens' branded shipments from 1Q05. BenQ acquired Siemens' Mobile Devices business in October 2005, with the first BenQ Siemens branded products appearing in 1Q06.

Vendor Highlights, 1Q06

Nokia - The Finnish vendor extended its market leadership, shipping a total of 13.9 million handsets in this year's first quarter, representing year-on-year growth of 17% and consolidating a market share of 34%. The 6230i and WCDMA 6280 were key contributors to shipments over the period and ASPs increased sequentially to €103 in contrast to the overall market trend.

Motorola - Motorola witnessed the most substantial year-on-year growth of all top 5 vendors in this year's first quarter, with shipments increasing by 44% and market share rising to 18% from 14% in the corresponding quarter of 2005. Despite additions to its feature phone lineup such as the PEBL and SLVR in 4Q05, the RAZR continued to drive shipments, meaning the handset has far exceeded average market life cycles.

Samsung - A year-on-year increase in shipments of 19% served to increase Samsung's market share to 17%. The vendor's mid to high-end handset lineup continued to expand in the first quarter as the Samsung portfolio steadily moves towards a wider range of higher-specification feature phones. The D600 and Z510 proved to be key factors in Samsung's growth.

Sony Ericsson - Sony Ericsson recorded another strong quarter with positive year-on-year growth of 24% and market share growing from 8% in the first quarter of 2005 to 9% in 2006. This is indicative of Sony Ericsson's development of its high-end portfolio with a focus on imaging, music, and 3G, with the K750i and extensive Walkman range witnessing substantial traction and the K600 series pushing WCDMA into the mass market by lowering BOM costs and price points.

BenQ Siemens - Shipments reached 2.4 million units in the first quarter, compared to 2.9 million units shipped in 1Q05 under the Siemens brand. Although 1Q06 was a transition period for BenQ Siemens as it seeks to reestablish itself in operator portfolios with a high-end product mix, the launch of its two first handsets in the quarter, the EF81 and S88, as well as the clearance of remaining Siemens brand inventory, will enable the vendor to grow unit volumes and seek a return to profitability by the timetabled yearend.
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