Gartner: Worldwide Mobile Device Sales Grew 13.8 Percent in Second Quarter of 2010, But Competition Drove Prices Down

Worldwide mobile device sales to end users totalled 325.6 million units in the second quarter of 2010, a 13.8 percent increase from the same period in 2009, according to Gartner Inc. Smartphone sales to end users accounted for 19 percent of worldwide mobile device sales, an increase of 50.5 percent from the second quarter of 2009.

"Although the mobile communication devices market showed double-digit growth this quarter, average selling prices (ASPs) were lower than expected and margins fell,” said Carolina Milanesi, Research Vice President at Gartner. "We attribute the decline in ASPs to a stronger dollar, a depreciating euro, and intense competition that drove price adjustments and changes to the product mix.” Manufacturers such as LG and Samsung pursued market share in a low margin market but this approach proved risky, as shown by LG’s decline of 27.8 percent in ASP in the second quarter of 2010.

While new product introductions from Apple, HTC and Motorola, along with the drop in ASPs, drove strong sales of smartphones, shortages of components, such as active matrix organic LED (AMOLED) displays impaired sales volumes of some of the more popular new smartphones.

The second quarter also saw some movement in the top 10 mobile device manufacturer rankings. HTC made its debut in the top 10 worldwide ranking, holding the No.8 position with 139.1 percent growth year-on-year. This reflects the popularity of its Android portfolio but also a more aggressive branding strategy compared to the same period in 2009. "Crucially, as we predicted, the sudden growth in media tablets, such as the Apple iPad, did not appear to hold back smartphone sales. We believe that most tablet users still feel the need for a truly pocketable, yet highly capable, device for those situations when it's inconvenient to carry a device with a larger form factor,” said Milanesi.

In the smartphone operating system (OS) market, Android expanded rapidly in the second quarter of 2010, overtaking Apple’s iPhone OS to become the third most popular OS in the world. In the US, it also overtook RIM’s OS to become the No.1 smartphone OS in this region. "A non-exclusive strategy that produces products selling across many communication service providers (CSPs), and the backing of so many device manufacturers, which are bringing more attractive devices to market at several different price points, were among the factors that yielded its growth this quarter,” said Milanesi.

Smartphone sales to end users totaled 61.6 million units in the second quarter of 2010, a 50.5 percent increase from the same period in 2009. The top four smartphone OS vendors exhibited growth in the second quarter of 2010, and accounted for 91 percent of the worldwide smartphone OS market, up 6 percent year-on-year.

Gartner said CSPs will increasingly offer more affordable tiered data plans to users. Tiered data plans will make smartphones more accessible to different market segments and help make smartphones the dominant device category in mature markets. This means that total cost of ownership will be lower, and new users will face less of a barrier to entry.

"Launches of updated operating systems will help maintain strong growth in smartphones in the second half of 2010 and spur innovation,” said Milanesi. ”But we believe market share in the OS space will consolidate around a few key OS providers that have the most support from CSPs and developers, and strong brand awareness with consumers and enterprise customers.”

Additional information may be found in the Gartner report "Competitive Landscape: Mobile Devices, Worldwide, 2Q10," which is available on Gartner's website.

www.gartner.com