Koreans the Big Winners in Mobile Phone Sales

Posted by: Andy Reinhardt on July 30, 2009

The quarterly mobile phone sales and market share calculations are out today from researchers IDC and Strategy Analytics. As usual, the two firms—both of which measure “sell-in,” or deliveries of handsets into the channel, as opposed to “sell-through,” or purchases by consumers—have identical figures for unit sales from the top five vendors, Nokia, Samsung, LG, Motorola, and Sony Ericsson.

The only difference is in their estimates of sales by “others,” which include Apple, RIM, HTC, and dozens of smaller vendors. IDC estimates that the “others” sold 55.7 million units, while Strategy Analytics thinks they sold 59.1 million. This small variance results in slightly different estimates of the total market and the resulting shares of the top five and others.

The big takeaway is that the market as a whole is still hurting, down 8% year-over-year from the second quarter of 2008 (according to Strategy Analytics) to 273 million units, or down 10.8% (per IDC) to 269.6 million units. The researchers also have different forecasts for 2009 as a whole. IDC figures worldwide unit sales will fall 13% this year vs. 2008—an even more pessimistic outcome than many vendors are forecasting. (Nokia, for instance, still says it thinks industry sales will decline 10%.) Strategy Analytics is more upbeat, forecasting a 2009 decline of 7%.

That said, the second quarter wasn’t nearly as bad as the first, when unit sales plummeted 14%—the worst decline in the history of the mobile phone industry. Indeed, second quarter sales showed an unusually large sequential jump of 11% over the previous quarter, about twice the 5% average sequential growth rate logged in the past three years, according to Strategy Analytics. This clear improvement gives researchers cautious confidence that the worst of the mobile phone industry’s crisis may be past.

The other major highlight of both reports is the indomitable strength of Korean makers Samsung and LG, both of which reached historic market share highs in the second quarter. Nokia saw unit sales fall 15%, well more than the overall market decline, while Motorola and Sony Ericsson fell a sickening 47% and 43.4%, respectively. But Samsung's sales rose 14.2% and its global market share reached a historic high of somewhere between 19.2% and 19.4%. LG's sales rose 8% and its share hit a new high of 11%.

What are the Koreans doing so right? Strategy Analytics senior analyst Neil Mawston cites four major factors. First, they're simply delivering better product lineups, including lots of cutting-edge touchscreen and QWERTY keyboard phones. These strong portfolios are helping both companies profit handsomely from the relative U.S. weakness of rivals Nokia, Motorola, and Sony Ericsson.

Samsung and LG also have considerably beefed up their retail presence and distribution worldwide, and they've gained big exposure through sports sponsorships—of the Olympics, in the case of Samsung, and of Formula One auto racing for LG.

Last but certainly not least, both have benefited from the weakness of the Korean won against the dollar, which has helped them price handsets more aggressively in the U.S. market. Thanks to subsidies from operators, the end price that most customers pay for phones is relatively unrelated to their real cost. But "wholesale pricing is still critical," Mawston says, in influencing which phones the operators choose to stock and promote.

What about the current darling of the industry, Apple? Strategy Analytics says it sold 5.2 million iPhones in the second quarter, up an astonishing 626% year-over-year. Of course, that's off a tiny base—and one that was made smaller by a weak second quarter for Apple in 2008 as buyers held off purchases in anticipation of the iPhone 3G. Still, it's hard to argue with a product ramp as impressive as the iPhone's.

The numbers for July through September will provide a much clearer sense of whether there's really an industry turnaround under way or if this year's second quarter was merely a bounceback from the suppressed sales of the previous six months. But for the Koreans, at least, the trends lines are continuing to look mighty good.