Weak Economy Could Sap Handset Growth

HELSINKI — A weakening global economy will blunt cellphone market sales growth this year, research firm Gartner said on Wednesday.

Gartner said it expects market growth to slow to 11 percent from 16 percent last year, while in U.S. dollar terms growth would slow to 9 percent from 11 percent.

The world’s top cellphone maker Nokia (NYSE: NOK) has forecast the market will fall this year in euro terms.

The euro reached record highs above 1.60 against the U.S. dollar earlier this year, but was trading at 1.475 dollars on Wednesday, roughly the level where it started 2008.

“We are starting to see impact of the economy,” said Gartner analyst Carolina Milanesi, adding increased competition and the weaker economy would also hurt average selling prices.

“In addition, mobile phone manufacturers will be put under pressure to maintain healthy margins while they intend to further break through in the emerging markets to increase sales,” she said.

Milanesi said she expects cellphone sales in Western Europe in 2008 to be roughly on last year’s level, underpinned by strong growth in the second half on the back of attractive new models reaching the market.

Cellphone sales in this key region for phone makers like Nokia and Sony Ericsson fell 16 percent year-on-year in the first quarter and 8 percent in the second quarter.

“It’s a little bit (of weakness) in every country, with the exception of Germany and France, where we are seeing strong markets,” Milanesi said.


Handset vendors sold 304.7 million mobile phones globally in April-June, with strong demand in emerging markets lifting sales 11.8 percent from a year earlier, Gartner said.

Handset sales volumes in emerging markets surpassed developed markets in 2005 and last year 63 percent of phones were sold in these developing markets, according to Strategy Analytics.

The main gainer from surging sales in emerging markets was Nokia, whose market share rose to 39.5 percent in the second quarter from 36.7 percent in the same quarter the previous year, the research firm said.

South Korea’s Samsung had 15.2 percent of the total market in the quarter, compared with 10 percent for struggling U.S. vendor Motorola (NYSE: MOT).

Sony Ericsson’s market share fell to 7.5 percent, dented by the fall in the western European market. LG Electronics’ market share rose to 8.8 percent.

Gartner said Motorola and Samsung sold more phones in the quarter than they shipped, reducing inventories; while Nokia, Sony Ericsson and LG Electronics built up some inventory.

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