Global Handset Market Returns to 10 Percent Growth in Q4 2009

Summary
Global handset shipments reached 324 million units worldwide in Q4 2009, surging 10% from 294 million units a year earlier. This was the handset market's first quarter of positive growth since Q3 2008, signaling an end to the industry's year-long recession. South Korean vendors Samsung and LG again shipped record volumes, while Motorola and Sony Ericsson edged their way back toward profitability. Nokia was a surprise package, registering better-than-expected sales as demand soared for its high-end smartphones. Apple maintained global share near its recent high of 3%. Full-year handset volumes reached 1.13 billion units in 2009, slipping 4% from 1.18 billion during 2008.
Analysis
1. Nokia shipped a huge 126.9 million handsets worldwide in Q4 2009, jumping 12% from 113.1 million units in Q4 2008. It was a solid performance and Nokia's best set of handset results since the first half of 2008. Shipments, turnover, average selling price and operating margin all exceeded expectations for the quarter. Nokia's handset volumes remained weak in North and South America, and Europe was a little soft, but this was offset by a storming performance in China, Asia and Africa.
Nokia's global smartphone shipments leapt 38% year-over-year, its best result in this high-value segment since the first half of 2008. We estimate Nokia was able to grow its share of the lucrative smartphone market to 39%, despite fierce competition from Apple, RIM and others. Nokia has outperformed in smartphones, but longer-term challenges still remain, including below-average share of the high-growth touchscreen market and a tiny presence in the influential US market.
2. Samsung shipped a record 69.0 million handsets worldwide during the fourth quarter of 2009, up an above-average 31% from 52.8 million units a year earlier. Samsung maintained its global marketshare at an impressive level of 21%. The company surpassed 200 million units during the full-year for the first time in its history. Touchphone models were the key to Samsung's high-end growth in 2009, but we expect the vendor to switch some of its focus to Bada / Android smartphones and the Samsung Apps initiative in 2010.
3. LG shipped an all-time-high 33.9 million handsets worldwide in Q4 2009, up 32% from 25.7 million units in Q4 2008. Its marketshare remained in double digits, at over 10%. The South Korean vendors Samsung and LG captured almost one-third of the entire global handset market between them.
Handset operating margin for LG slid to 2% in Q4 2009, down sharply from 9% in the previous quarter, as a result of lower ASPs and higher marketing expenses. LG's cost-control mechanisms still have room for improvement. Shipments to North America, South America, Europe, Africa and Asia were healthy, while sales in its home market of South Korea were a little soft.
4. SONY ERICSSON shipped 14.6 million handsets worldwide in Q4 2009, a largely expected 40% decline from 24.2 million units a year earlier. The vendor's marketshare dipped to well under 5%, the lowest level for seven years. Sony Ericsson shipped just 57 million units worldwide during full-year 2009, almost half its peak of 103 million in 2007, and the company's smallest annual total since 2005 when it sold 51 million handsets.
Sony Ericsson continues to refocus on value as much as volume. Operating margin, excluding restructuring charges, was minus 2% in Q4 2009, a tangible improvement over the past year's average of minus 12%. After slashing thousands of jobs and trimming production capacity across the globe, Sony Ericsson has rightly become a leaner organization and its chances of finally returning to profitability in the next 1 to 2 quarters have increased.
5. MOTOROLA shipped just 12.0 million handsets worldwide in Q4 2009, the lowest quarterly volume since Q1 2001. Motorola and Sony Ericsson have been the highest-profile casualties of the handset recession, each shedding 4 to 5 points of global marketshare over the past 18 months. Both firms developed inadequate 3G handset portfolios, enabling rivals like LG and Apple to seduce operators with more attractive offerings.
Motorola, like Sony Ericsson, has been feverishly cutting costs to restore profitability. The vendor is making progress, with a target to be profitable by Q4 2010. Motorola's operating margin for its handset division, excluding one-off charges, has improved from minus 20% in Q4 2008 to minus 6% in Q4 2009, the best showing since Q3 2007. Motorola's ASP rose 36% sequentially, to US$169 in Q4 2009, due to the launch of several high-end models such as the Droid and Cliq. Motorola is repositioning itself as a smartphone player, centered around the Android OS, and with its global smartphone marketshare almost doubling quarter-on-quarter to 4% in Q4 2009 the initiative has gotten off to a positive start.
APPLE shipped a record (but slightly lower-than-expected) 8.7 million smartphones worldwide in Q4 2009, almost doubling from 4.4 million units a year earlier. Its marketshare stood at 2.7% worldwide in Q4 2009. Key markets for the iPhone 3GS included the US, UK, France, Japan and South Korea. The HSDPA-enabled 3GS model has been the most important factor in driving Apple's surging growth. Since the 3GS launch in mid-2009, Apple's global smartphone marketshare has risen eight-fold in a little over 18 months. Apple unveiled the iPad multimedia tablet in January 2010, which will complement the iPhone. If the iPad takes off in H2 2010, mobile data usage is sure to ramp up and place more stress on AT&T's and other operators' increasingly popular 3G networks.
MARKET OVERVIEW
After four quarters of market contraction, vendors sold 324 million handsets worldwide during the holiday season of Q4 2009, rising 10% from 294 million units a year earlier. This was the handset market's first quarter of positive growth since Q3 2008, signaling an end to the industry's year-long recession. The higher handset sales were driven by a combination of better GDP growth, increasing consumer confidence, ongoing operator restocking and a steadily pipeline of high-profile handset launches from major brands such as Nokia and Samsung. Although the overall global handset outlook has improved, the regional picture remains mixed in parts, with some regions, such as South America and Eastern Europe, still showing signs of weakness.
Strategy Analytics forecasts 265 million handsets to be shipped worldwide in Q4 2009, growing 8% from 245 million units in Q1 2009 and continuing the industry's broadly upward trend into the new year.

Exhibit 1: Q4 2009 Global Handset Shipments and Market Share Estimates - Top 5 Vendors
Global Handset Shipments (Millions of Units) Q4 '08 2008 Q1'09 Q2 '09 Q3 '09 Q4 '09 2009
Nokia 113.1 468.4 93.2 103.2 108.5 126.9 431.8
Samsung 52.8 196.6 45.8 52.3 60.2 69.0 227.3
LG Electronics 25.7 100.8 22.6 29.8 31.6 33.9 117.9
Sony Ericsson 24.2 96.6 14.5 13.8 14.1 14.6 57.0
Motorola 19.2 100.1 14.7 14.8 13.6 12.0 55.1
Others 58.8 214.8 53.7 58.9 62.2 68.0 242.8
Total 293.8 1177.3 244.5 272.8 290.2 324.4 1131.9

Global Handset Marketshare % Q4 '08 2008 Q1'09 Q2 '09 Q3 '09 Q4 '09 2009
Nokia 38.5% 39.8% 38.1% 37.8% 37.4% 39.1% 38.1%
Samsung 18.0% 16.7% 18.7% 19.2% 20.7% 21.3% 20.1%
LG Electronics 8.7% 8.6% 9.2% 10.9% 10.9% 10.5% 10.4%
Sony Ericsson 8.2% 8.2% 5.9% 5.1% 4.9% 4.5% 5.0%
Motorola 6.5% 8.5% 6.0% 5.4% 4.7% 3.7% 4.9%
Others 20.0% 18.2% 22.0% 21.6% 21.4% 21.0% 21.5%
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Total Growth Year-over-Year -10.7% 4.9% -13.7% -8.2% -4.5% 10.4% -3.9%

Exhibit 2: Annual Global Handset Shipment Growth: Q1 2007 to Q4 2009

Exhibit 3: Annual Global Handset Shipment Growth by Vendor in Q4 2009

Contact Information:

The author of this Insight, Neil Mawston, can be reached at NMawston@strategyanalytics.com / +44 1908 423 628.

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