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July 22, 2010

Almost seven months of 2010 have past already, and most sales indicators in the wireless industry are now pointing towards a bounce-back year, with iSuppli forecasting sales of about 1.3 billion MIDs (mobile Internet devices).

The industry's biggest player, Nokia recently said that it expects sales to increase about 20 percent compared with last year.

The engine for much of this expected growth has come from the bottom and the top, with basic devices still making up a large percentage of overall device sales, and of course from the smartphone segment itself, which continues to catch the eye of wireless users in more developed countries and has shown the most dramatic growth rates across the segment.

Overall growth is also coming from niche markets, like connected tablets and non-traditional devices that employ embedded wireless modules for data connectivity to mobile networks.

The one segment that appears to be suffering is the once popular feature-phone market, which is being pressured by more capable MIDs and by increasingly less-expensive and feature-packed smartphones. This segment has mutated somewhat into the so-called “quick-messaging device” that has basically crafted a Qwerty keyboard onto feature phones in an attempt to target the booming messaging market where consumers don't quite need the power, or extra cost of a smartphone.

Overall, LG was about the only company in the top five largest handset makers to post a year-over-year increase in total sales, surging from almost 103 million in 2008, or 8.4 percent of the market, to over 122 million this year, or more than 10 percent of the market.

That growth also pushed LG past Motorola in worldwide sales, with analysts expecting potential for more growth ahead. LG, which plans to become the number 2 mobile phone maker by 2012 and expects a 20 percent year-over-year increase in unit sales for this year, is gaining significant traction, especially in the low-end touchscreen smartphone market where it already sold 20 million units in just two years.

The fact that LG plans to further lower the dependence on the North American market this year to show more interests in Europe and emerging markets like India, China and Africa could hurt Nokia where the handset giant has a strong presence.

iSuppli thinks that LG could take market share away from Nokia in some emerging markets since LG seems to be doing a better job than Nokia in terms of user interfaces and the overall mobile user experience. Additionally, LG's plans to launch smartphones with more affordable prices could also have a negative impact on Nokia's dominance in the smartphone market.

LG has also yet to benefit from a push with mobile devices powered by Google's Android operating system, and that once that kicks in it could see continued growth.

According to a report from Gartner, Nokia remained the wireless industry's No. 1 handset vendor worldwide for this year, but its lead over rivals continued to shrink nevertheless.

Nokia reportedly sold almost 441 million devices last year, which was down from the 472 million the company sold in 2008. Nokia's overall share of the handset market, which was down almost 1 percent year-over-year, dropped from almost 39 percent in 2008 to a little over 36.3 percent last year.

“Still dominating both the feature phone and smartphone markets, Nokia is likely to sustain its leaderships for quite some time, has been facing increased competition, especially from the pro-Android device makers like LG, Samsung, HTC as well as Apple, Palm and Research In Motion,” noted Julien Blin, principal analyst and CEO at JBB Research.

“Apple, which recently launched its highly anticipated iPhone 4 continues to have a strong showing in terms of iPhone sales and will remain one of Nokia's most serious competitors in the smartphone market, especially in the U.S., where Nokia captures less than a 10 percent market share, and even despite the extreme negative publicity the company have suffered regarding the iPhone's antenna issues,” added Blin.

Beyond the increased sales posted by Samsung and LG, Gartner's other category also saw a sales increase in 2009. While not listing specific sales, Gartner noted that the other category was bolstered by increased sales from Apple and its lone iPhone device.

Motorola and Sony Ericsson rounded out the top five handset vendors for the year, according to Gartner. Motorola saw its handset sales drop by almost 50 percent from 106.5 million in 2008 to 58.5 million in 2009, while Sony Ericsson maintained its No. 5 position despite a large drop in sales from 93 million in 2008 to almost 55 million last year.

According to various reports from a few research firms, the top five handset vendors account for somewhere in the neighborhood of about 80 percent of all device sales globally.

Most of the market share gains appeared to go to Samsung, which saw its device sales jump from almost 200 million in 2008, or a 16.4 percent market share, to almost 236 million last year, or a 19.6 percent market share.

“Samsung was the clear winner among the top five with market share growing by 3.2 percentage points from 2008,” Gartner noted in its report. “This achievement came as a result of improved channel relationships with distributors to extend its reach and better address the needs of individual markets as well as a rich mid-tier portfolio.”

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Source: iSuppli and Gartner.