The global handset market in the third quarter of 2009

The third-quarter numbers for the global handset market are in, and it's time to start parsing the information. Research firms Strategy Analytics and IDC released separate, detaileds look at market share, shipment and growth information for the world's Tier 1 cell phone makers.

Global market share numbers:

Source: IDC

Global market share and shipment numbers:

Source: IDC

Vendor analysis:

          Nokia
--IDC: Nokia experienced continued pressure during 3Q09 in its Devices and Services group. The company reported a 20% decrease in revenue, ASP decline, and a shortage of components across its product portfolio. Even its tight hold on the converged mobile device category was loosened as the company cited a market share decrease from 41% to an estimated 35%. This did not keep Nokia from enhancing its services arm, acquiring cellity, Doplr, and assets from Plum Ventures.
--Strategy Analytics: Nokia shipped 108.5 million handsets worldwide in Q3 2009, down 8% from 117.8 million units in Q3 2008. Its growth rate underperformed the industry average for the fifth quarter in a row. Nokia's marketshare, at 37%, fell to its lowest level since Q1 2007 as a result of declining shipments across all major regions. The United States, the world's most important handset market, remains a particular weakspot. Nokia's smartphone shipments stagnated this quarter. At 16.4 million units, smartphone volumes fell 3% sequentially due to component shortages and competitive pressure from Apple, RIM and others. We estimate Nokia's global smartphone marketshare slid to a near-term low of 36% in Q3 2009, down from 40% in Q2 2009.

          Samsung
--IDC: Samsung reached a new record by shipping more than 60 million units in a single quarter. This puts the company well within reach of achieving its goal of shipping 200 million units in 2009. Driving growth was a combination of touchscreen-enabled and QWERTY messaging devices going into developed markets as well as key models within emerging markets. Looking to 4Q09, Samsung is poised to launch strategic converged mobile devices running on Android and Linux.
--Strategy Analytics: Samsung shipped a record 60.2 million handsets worldwide during the third quarter of 2009, up an above-average 16% from 51.8 million units a year earlier. Samsung's marketshare is at its highest level ever, surpassing the psychologically important 20% mark. This was the first time a vendor other than Nokia has shipped more than one-fifth of the world's handsets since Motorola's RAZR-heyday performance of 2006. The key to Samsung's growth has been an attractive portfolio of touchphones and an expanding retail presence across multiple regions.

          LG
--IDC: LG Electronics breached the 30 million unit mark for the first time in its history. Nearly half of those units sold for less than $100, making them handsome purchases for carriers. Still, the company was vulnerable in Korea and North America. Moreover, the lack of converged mobile devices and handsets for prepaid services prevented LG from capitalizing on growth opportunities in these segments. LG expects to launch Android and Windows converged mobile devices in 4Q09, while boosting its profile in India and China, improving its competitive position in the near term.
--Strategy Analytics: LG shipped an all-time-high 31.6 million handsets worldwide in Q3 2009, up 37% from a relatively weak 23.0 million units in Q3 2008. LG's marketshare remained flat with last quarter's record 11% share. The South Korean vendors Samsung and LG captured almost one-third of the entire global handset market between them. Handset operating margin for LG, at 8%, was down significantly from the year-ago 12% as a result of decreased shipments to key high-margin markets of North America and South Korea. Shipments to North America, LG's most valuable market, fell a disappointing 9% sequentially as the vendor continued to remain misaligned with the region's growing smartphone and prepaid segments. However, strong touchphone and QWERTY phone shipments to Western Europe and increased emerging market volumes helped to offset the weakness in North America and maintain LG's global share. LG unveiled an Android model and several Windows Mobile 6.5 devices during the quarter, in a move to develop its underperforming smartphone division.

          Sony Ericsson
--IDC: Sony Ericsson marked Hideki Komiyama's final quarter as president of the company. During his tenure, Sony Ericsson realized improved operational efficiencies and cost reduction to increase profitability. However, the lack of entry-level devices during the economic recession left the company vulnerable as its competitors were able to keep up with shifting demand. That trend appears to continue as a list of mid-range and high-end devices are set to launch in 4Q09 and Bert Nordberg, head of Ericsson Silicon Valley, assumes Komiyama's position.
--Strategy Analytics: Sony Ericsson shipped 14.1 million handsets worldwide in the third quarter of 2009, falling 45% annually from 25.7 million units during Q3 2008. Growth remained below the industry average for the seventh consecutive quarter, as the vendor's marketshare remained flat at 5%. Despite the weak performance, its 14 million units were enough to propel Sony Ericsson back into 4th position, marginally ahead of Motorola. Operating margin continued its sequential improvement over the 18% loss in the first half of the year, reaching minus 12% in Q3 2009, largely as a result of gross margin improvement. If Sony Ericsson can continue improving at this rate, bolstered by several promising new devices in Q4 2009, we estimate the vendor can return to profitability by Q3 2010.

          Motorola
--IDC: Motorola slipped to fifth place, but in the process the company reported progress in its restructuring campaign. In addition to reducing its operating losses for the second consecutive quarter, Motorola announced its much anticipated Android-powered converged mobile device, the CLIQ/DEXT, as well as its new DROID. The company announced that it would shift its resources towards converged mobile devices and away from traditional mobile phones in 2010, a move the company hopes will improve gross margins and reduce operating losses.
--Strategy Analytics: Motorola shipped 13.6 million handsets worldwide in Q3 2009, the lowest quarterly volume since Q1 2001. Shipments were down a huge 46% annually, while marketshare remained around the 5% level. Motorola's handset division continued to make financial losses in the third quarter, but we believe the future outlook is brightening. Motorola's cost base has been streamlined and its high-end handset portfolio has been strengthened. Motorola announced two Android smartphones, the Droid and the Cliq, and unveiled its complementary, social networking-focused MotoBlur service.

Handset market analysis:

Strategy Analytics said global handset shipments reached 291 million units worldwide in the third quarter, down 4 percent from 304 million units a year earlier. The firm said the rate of decline slowed in comparison with the previous quarter, bolstering our belief that the industry is edging toward recovery.

"The mobile phone market is showing the first signs of improvement since the onset of the economic crisis," said Ramon Llamas, senior research analyst with IDC's Mobile Devices Technology and Trends team. "During the third quarter, we saw a number of channels promoting older devices at significantly lower prices. For many, this was enough to spur demand and push volumes higher. Now that we have moved into the fourth quarter, vendors are setting the stage for further gains by launching their flagship devices to meet pent-up demand."

Annual global handset shipment growth: Q1 2007 to Q4 2009:

Source: Strategy Analytics

Annual global handset shipment growth by vendor in Q3 2009:

Source: Strategy Analytics

Regional analysis:

          North America
IDC said the North American market posted mixed results for 3Q09. The United States posted positive results, with converged mobile devices and prepaid handsets once again driving growth. Meanwhile, the Canadian mobile phone market declined for the third straight quarter despite double-digit converged mobile device growth. The tepid Canadian economy, shrinking traditional phone segment, and inventory clear out by the largest service providers led to the market's weaker three-month performance.

          Latin America
IDC said the Latin American mobile phone market did not experience a strong recovery in 3Q09 as expected. Longer replacement cycles, anemic user demand, and decreased handset subsidies in select countries all negatively impacted shipment volumes during the quarter. Challenges are expected still as Mexico, one of the key countries in Latin America, will experience a 'perfect storm' of tax increases for telco services, personal taxes, and value-added taxes, which will all negatively impact handset sales.

          Western Europe
IDC said the Western European market showed strong signs of recovery. For the first time this year, both traditional mobile phone and converged mobile device shipments increased year over year as well as sequentially. The price erosion from converged mobile devices and low-end handsets contributed to this vitality along with the new feature phones from LG and Samsung targeting mid-tier segments. In CEMA, the market continued to recover from the previous three months but was still depressed in comparison with a year ago. Nokia lost ground in converged mobile devices while LG gained on rivals with double-digit growth as total market volumes continued to decline.

          Asia Pacific
IDC said the third quarter was a weaker than anticipated in Asia/Pacific, with total shipments down slightly from a year ago. Key emerging markets, including China, India, and Indonesia, all posted slight declines, signaling that recovery may take longer than expected. Still, demand for converged mobile devices was strong, posting double-digit increases year over year.

For more:
- see this Strategy Analytics press release
- see this IDC press release
- see these numbers for the second quarter of 2009