Worldwide Mobile Phone Sales Declined While Smartphones Grew in Second Quarter of 2009

Worldwide mobile phone sales totalled 286.1 million units in the second quarter of 2009, a 6.1 percent decrease from the second quarter of 2008, according to Gartner Inc. Smartphone sales surpassed 40 million units, a 27 percent increase from the same period last year, representing the fastest growing segment of the mobile devices market.

"Despite the challenging market, some devices sold well as consumers who would usually have purchased standard midrange devices either cut back to less expensive handsets or moved up the range to get more features for their money," said Carolina Milanesi, Research Director at Gartner. "Touchscreen and qwerty devices remained a major driver for replacement sales and benefited manufacturers with strong, touch-focused midtier devices. However, the decline in average selling price (ASP) accelerated in the first half of the year and particularly affected manufacturers that focus on midtier and low end devices, where margins are already slim."

The recession continued to suppress replacement sales in both mature and emerging markets. The distribution channel has dealt with lower demand and financial pressure by using up 13.9 million units of existing stock before ordering more. Gartner expects the gap between sell-in to the channel and sell-through to customers will reduce in the second half of 2009 as the channel starts to restock.

In 2Q09, mobile device sales to end users registered 7 percent growth over the previous quarter in Asia Pacific, with good demand coming in from markets like Australia, South Korea and China. Other markets including India remained slightly weak or flat compared to 1Q09. However, smartphone sales registered an impressive 21 percent growth sequentially in APAC as devices with touch user interface and qwerty keyboard remained a favourite among end users.

"Smartphone sales were strong during the second quarter of 2009, with sales of 40.9 million units in line with Gartner's forecast of 27 percent year-on-year sales growth for 2009," said Milanesi. "Given the higher margins, smartphones offer the biggest opportunity for manufacturers. It is the fastest growing market segment and the most resistant to declining ASPs."

"For the remainder of 2009, manufacturers must offer products with the features that consumers and operators are demanding most strongly — like touchscreens, focus on user interfaces and application/content ecosystems — and work hard to keep operators loyal," concluded Milanesi. "We expect competition to intensify in the second half of 2009. Mobile operators are likely to drive competition among manufacturers as they start selling e-book readers and mini-notebooks from other manufacturers to foster mobile broadband subscriptions. Operators are also starting to subsidise e-book readers and mini notebooks on contract and this means that there will be less subsidy available to drive sales of mobile phones and smartphones. In turn, operators will demand lower prices from phone manufacturers, which will be under even more pressure to deliver strong feature sets at the lowest possible price."

www.gartner.com